FRA: Manipulation of Stock Market on Social Media 'Prohibited'

The Board of Directors of the Financial Regulatory Authority (FRA) approved a legislative proposal, prohibiting and criminalizing the publication of recommendations and advice related to securities listed on the Egyptian Stock Exchange on social media.

The Financial Supervisory Authority confirmed, in a statement on Sunday, that the legislative proposal aims to deter people who issue and publish misleading recommendations and advice to manipulate small investors and cause them losses.

Egypt's Chairman of the Financial Regulatory Authority (FRA), Mohamed Omran said that reports of monitoring trading operations on securities listed on the Egyptian Stock Exchange revealed the presence of many pages on social media sites dealing with securities listed on the Egyptian Stock Exchange.

He continued: "Some inpiduals provide information, provide advice and recommendations about the securities listed in the stock exchange, and publish them on those - virtual pages - with the intent of directing investment decisions for inpiduals to achieve personal benefit and harm small investors."

He added that the authority has noticed that these pages include many dealers in the Egyptian Stock Exchange and that the recommendations published on them actually affect the trends of the shares listed in the stock exchange, and the decisions of many investors and often lead to moving and changing the prices of the securities for which the recommendations are issued.

He pointed out, "This is what falls under the category of manipulation in the prices of securities and was prohibited in accordance with law."

The misleading information about the market movies the prices of deals and execution towards a certain direction, according to the head of the FRA.

He confirmed that the board of directors of the International Organization of Securities Commissions (IOSCO), in its meeting this year, focused on the issue of possible manipulation through electronic platforms after highlighting the sharp price fluctuations of some small-value stocks in the global financial markets during January 2021.

He discussed the evolving role of social media in stock markets and discussed the possibility that social media and other unregulated platforms could become means of spreading misinformation about companies.

Omran stated that the legislative proposal includes penalties of imprisonment and a fine, or one of these two penalties to achieve general deterrence for anyone who publishes in any of the media outlets misinformation on the stock market.

The penalties of imprisonment and a fine escalate to anyone who achieves a personal profit and cause financial loss to others, which harms the capital market, the national economy, and the public interest, bringing the penalty of imprisonment to a period of no less than 3 years and not more than 10 years.