FRA signals crackdown on meme stocks
Sending Egyptian stonks to the moon is about to get harder: Investors could face criminal charges for sharing share tips on social media under proposed amendments to the Capital Markets Act put forward by the Financial Regulatory Authority (FRA) yesterday. Fines and prison sentences of between three and 10 years would be handed out to people found guilty of breaking the rules, the regulator said in a statement yesterday.
Preempting r/egxbets: The rules are designed to crack down on social media groups where people share advice and recommendations on stock trading, which FRA boss Mohamed Omran accused of being forums for market manipulation.
We’re not 100% sure right now where the line would be: The statement says that the rules would be aimed at people who share false or misleading information with the intent to manipulate retail investors while also declaring that anyone without a license is banned from making recommendations, factual or otherwise.
But the FRA makes clear that so-called meme stocks are motivating its thinking, making direct reference to the infamous Gamestop short squeeze this past January, which saw a group of small-time investors collaborate on Reddit to send the ailing retailer’s share price through the roof.
What’s next on the stonks changes? The FRA says the amendments are being sent on to the “relevant authorities” for review.
The FRA also introduced new rules for companies being liquidated: Listed companies undergoing liquidations can only be traded on Sundays and Wednesdays after the FRA amended trading regs. That has the effect of reversing yesterday’s activities in state-owned Egyptian Iron and Steel’s shares seeing as the company is being liquidated, the authority said in a bourse filing (pdf).
The liquidation of Egyptian Iron and Steel: Over the summer the company officially stopped operations as a prelude to its liquidation. The company has appointed accountant and former liquidation advisor for the state-owned Metallurgical Industries Holding Company Mostafa Hassan to wind up the company. The liquidation process is expected to take up to two years.