REGULATION WATCH- FRA drafting new regulations for IPO bookbuilding process: A Financial Regulatory Authority (FRA) committee is looking at new regulations to govern the bookbuilding process during IPOs, including the pricing and allocation of shares, unnamed sources tell Al Mal. The committee’s recommendation will pass through the FRA’s board of directors and head, Mohamed Omran.

What stipulations are investment banks looking at under these regs? The proposed regulations would create an app of sorts IPO managers would be required to use to record the allocation of shares during the bookbuilding process. The FRA would have exclusive to these records, granting it oversight over the process. The regulations would also require investors to pay up front for 10-25% of the shares they request during the bookbuilding process, and brokerages would be held responsible for paying for any allocated shares that investors back down from paying for. Foreign investors and others participating in Egypt’s delivery-versus-payment (DVP) mechanism would be exempt from this requirement. The committee is also looking at how oversubscription rates are calculated and share prices are set.

The sources don’t say it, but it is clear that the potential changes are a direct outgrowth of the flap over Sarwa Capital’s IPO this past fall. The IPO has been at the heart of the FRA’s ongoing dispute with Beltone Financial, which managed the consumer- and structured-finance player’s EGX debut. The FRA has leveled accusations of misconduct against Beltone’s investment banking and brokerage arms, with many of the accusations centering on the exact issues the committee is looking to address in the proposed regulations.