Foreign Securities Trading Ban Is To Limit Investors’ Losses: EFSA
Published Thursday, 07 June 2012 13:38 | Written by Amwal Al Ghad
Egypt's financial watchdog, the Egyptian Financial Supervisory Authority (EFSA) has defended the government's recent decision to ban local brokerages from trading in foreign securities, saying it is necessary to save already wary local investors from more serious losses."You can't drive in England with an Egyptian driving license".. This was the analogy used by Dr. Ashraf El-Sharkawy, EFSA Chairman, when talking to Ahram Online.
He added if Egyptian brokerages obtain foreign licenses then they will also have the right to deal abroad but that current restrictions will help ease the losses of domestic investors.
The new market law does not apply to global depository receipts (GDRs) -- shares that are traded on both the Egyptian and foreign exchanges -- as they are related to Egyptian listed firms, El-Sharkawy pointed out.
A decree signed this week by Prime Minister Kamal El-Ganzouri amends Egypt's capital market law to make it illegal for brokerages and investment firms to deal in all foreign listed or unlisted securities.
In a statement on Monday, EFSA said it had received many complaints from people dealing with brokerage firms "stating that they have lost large sums of money as a result of following the guidance and advice these firms gave to invest through them in foreign securities traded on foreign exchanges".
Reuters reported objections to the move from brokerages, already troubled by falling revenues.
"It is a shame and I think the decision was taken too quickly, without understanding the effects," said Taimour El-Dreini, a trader at Naeem Brokerage.
He said the measure meant a "huge loss" for investment houses like Naeem, and suggested the main reason for the move was to limit outflows of foreign currency from Egypt, which has suffered a sharp decline in foreign reserves.
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