FRA criminalizes publication of recommendations for listed stocks on social media

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The Financial Regulatory Authority (FRA) – Logo

CAIRO – December 5, 2021: The Egyptian Financial Regulatory Authority (FRA) has approved a legislative proposal that includes the prohibition and criminalization of the publication of recommendations and advice related to securities listed on the Egyptian Stock Exchange (EGX) on social networks.

The legislative proposal aims to deter people who make and publish misleading recommendations and advice to manipulate small investors.

The monitoring reports of trading operations on securities listed on the Egyptian Stock Exchange have revealed the presence of numerous pages on social media sites dealing with securities listed on EGX, according to the Chairman of the Financial Supervisory Authority, Mohamed. Omran.

Many people provide statements, information, advice, and recommendations about publicly traded securities and post them on these pages, with the aim of guiding people’s investment decisions for personal benefit and harm. to small investors.

The authority noted that these pages include many EGX dealers, and that the recommendations posted there actually affect the trends in publicly traded stocks, according to Omran.

These recommendations affect the decisions of many investors and often lead to moving and modifying the prices of the securities for which the recommendations are made, which falls under the category of price manipulation of the securities.

These violations were prohibited in accordance with the provisions of Article 321 of the Executive Regulations of Law No. 95 of 1992 on the Capital Market.

The proposal was specifically aimed at publishing or assisting in the dissemination of misleading or unaudited information, as well as the publication of information relating to an imminent change in the price of a security in order to affect its prices and deal with it, and publishing false or misleading market information for the purpose of shifting order and execution prices in a certain direction.

The President of the Authority confirmed that the Board of Directors of the International Organization of Capital Markets Supervisory Bodies (IOSCO) had addressed, at its meeting in mid-this year, the issue of possible manipulations via electronic platforms, after highlighting the sharp fluctuations in the prices of certain low-value stocks on the global financial markets in January 2021.

The Board of Directors of the International Organization of Regulators also discussed the evolving role of social media in stock markets and the potential for social media and other unregulated electronic platforms to become avenues for disseminate misleading information about companies.

The Chairman of the Authority underlined the need to limit the issuance of recommendations and advice regarding shares listed on the Egyptian Stock Exchange to qualified persons who have obtained a license to do so from the Authority, as stipulated in the article. 258 of the Executive Regulations of the Authority Capital Market Law No. 95 of 1992.

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