EFSA takes measures to prevent capital flight and control panic

Ahram Online, Sunday 20 Feb 2011

Accused ex-ministers prevented from selling shares as new trade measures are introduced by the Egyptian Financial Supervisory Authority (EFSA)

The Egyptian Financial Supervisory Authority (EFSA) announced on Saturday that it would take firm action against ex-ministers and politicians accused of corruption and wasting public money whose bank accounts have been frozen and who are already banned from travelling abroad. In a statement, the EFSA said it would prevent the accused from disposing of their shares in the Egyptian Stock Exchange.

"The main aim of the authority’s decision to postpone the resumption of the bourse's activity was to ensure necessary measures were taken to ban those figures from taking any action with regard to their shares in the stock," the statement reads.

On Thursday, Cairo's Criminal Court upheld a decision by prosecutor-general Abdel-Megid Mahmoud to freeze the bank accounts of former ministers and senior officials.

These included former tourism minister Zoheir Garana, former housing minister Ahmed el-Maghrabi, former trade and industry minister Rachid Mohammed Rachid, former NDP secretary Ahmed Ezz and former interior minister Habib El-Adly.

The EFSA added that it has already given orders for listed companies to report any trades by ex-officials who are now under investigation. It has also ordered companies to disclose their financial and operating positions for the period in which the stock market was suspended.

The Authority has, according to the statement, asked local as well as international custodians and foreign funds to prevent the settlement of any operations in favour of former officials currently under investigation.

The EFSA had also briefed regulators and the money laundering unit at the Central Bank on the names of offshore foreign funds to make the necessary inquiries.

The attorney general was also briefed on all operations valued at more than LE 5 million bought or sold during the week prior to the suspension of trading.

EFSA has banned the conversion of International certificates traded in the London Stock Exchange by any of the officials under investigation, as well as forbidding the conversion of GDRs during the period when trade was suspended.

The authority said it had taken some precautionary measures to prevent panic and a possible dive in the first hours of the stock market reopening on Sunday.

The resumption of the stock market, closed since 28 January amid the political turmoil in Egypt, was delayed many times, first because of the escalation of the revolution, and later due to large sit-ins in the banking sector.

A statement on Monday from the Egyptian Exchange said the stock market will not reopen as scheduled "until work is back to normal in the banking sector".

New measures will include reducing the trading time to three hours from 10:30 am to 1:30 am and cancelling the posting of the normal pre-session exploratory prices before trade opens.

Trading on stocks will be carried on within the pre-set price range, to be halted for a half hour in case of a 5 per cent change in value. A 10 per cent change in value will warrant a fixing of the price of that stock until the end of the session.

A new price range will be set for the EGX 100 whereby trading will halt for a half hour if there is a 5 per cent change, and for as long as decreed by the chairman in case of a 10 per cent change .

The minimum capital requirement for brokerage firms has been reduced from 10 per cent to 5 per cent.

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