Regulatory Alerts2014-01-01
Circular No. 4 of 2014 Regarding the Purchase of Subscription Rights on Behalf of Brokerage Firm Clients
The Egyptian Financial Regulatory Authority mandates that securities brokerage firms must fully inform clients about the nature, trading windows, and forfeiture conditions of subscription rights before executing purchase orders on their behalf. To ensure compliance, firms are required to obtain a signed client declaration confirming awareness of these terms, verbally inform telephone clients through recorded calls, or display mandatory warnings on electronic trading platforms prior to order submission. This directive aims to prevent client losses resulting from uninformed purchases or failure to trade rights within their valid periods.
Circular
No. (4) for the year 2014 dated 05/05/2014
Regarding the Purchase of Subscription Rights
For the Account of Brokerage Firm Clients
Article: Securities Brokerage Firms
In light of the Authority's mandate to work towards the safety and stability of non-banking financial markets, as stipulated in Article Four of Law No. (10) of 2009 regulating supervision over non-banking financial markets and instruments. And whereas the Authority has observed in several cases that purchasers of subscription rights were unaware of the nature of these rights. Therefore, the Authority emphasizes the necessity for securities brokerage firms, when executing or placing their clients' orders to purchase subscription rights, to comply with the following:
First: Informing the client about the nature of the subscription right and the forfeiture of purchased rights in case the client fails to dispose of them during their trading period, while clarifying the start and end dates during which these rights may be sold, as well as the forfeiture of subscription rights purchased (or part thereof) in case the client does not participate in the rights offering for the additional shares during the offering period.
Second: The client shall be informed through one of the following methods:
- The client signing a declaration submitting the purchase request - once per security - confirming their awareness of the contents of Item First.
- In case the client issues purchase orders via telephone, they shall be informed of the contents of Item First during the recorded phone call requesting the purchase of these rights.
- In case the client issues purchase orders via the international information network (Internet), a message displaying the contents of Item First must appear on the company's electronic trading website.
Hesham Ibrahim
Head of the Central Administration
for the Affairs of the Authority's Presidency
Headquarters: Smart Village, Building 15 - Unit 84
Km 28, Cairo/Alexandria Desert Road
Giza Governorate, Postal Code: 12577
Telephone: 020 2557 0040 - Fax: 020 2557 0041
Email: info@efsa.gov.eg
Website: www.efsa.gov.eg