FRA criminalizes publishing recommendations regarding listed shares on social media

CAIRO - 5 December 2021: Egypt’s Financial Regulatory Authority(FRA)  has approved a legislative proposal that includes prohibiting and criminalizing the publication of recommendations and advice related to securities listed on the Egyptian Stock Exchange (EGX) on social media.

The legislative proposal comes with the aim of deterring people who issue and publish misleading recommendations and advice to manipulate small investors.

Reports of monitoring trading operations on the securities listed on the Egyptian Stock Exchange revealed the presence of many pages on social networking sites dealing on securities listed on theEGX  , according to the Chairman of the Financial Supervisory Authority,  Mohamed Omran.

Many individuals provide statements, information, advice and recommendations about the securities listed in the stock exchange and publish them on those pages, with the intent of guiding the investment decisions of individuals to achieve personal benefit and harm small investors.

The authority noted that these pages include many dealers in the EGX, and that the recommendations published on them actually affect the trends of the shares listed on the stock exchange, according to Omran.

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

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

The proposal was specifically specified in publishing or assisting in the dissemination of misleading or unaudited news, as well as publishing news related to the imminent change of the price of a security in order to affect its prices and dealing with it, and publishing false or misleading information about the market with the intention of moving the prices of orders and execution towards a certain direction. 

The Chairman of the Authority confirmed that the Board of Directors of the International Organization of Capital Markets Supervisory Bodies (IOSCO) had taken care of, at its meeting in the middle of this year, the issue of possible manipulation through electronic platforms, after highlighting the sharp price fluctuations of some small-value shares in the global financial markets during January 2021.

The Board of Directors of the International Organization of Regulatory Bodies also discussed the evolving role of social media in stock markets, and discussed the possibility that social media and other unregulated electronic platforms could become means of disseminating misleading information about companies.

The Chairman of the Authority stressed 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 Article 258 of the Executive Regulations of the Capital Market Law No. 95 of 1992.