Mohamed Omran, Chairman of the Egyptian Stock Exchange, issued a decision for rules governing mentoring companies for small and medium sized enterprises (SMEs). The decision included rules for mentoring as well as measures to be taken in the case of violations.
The first article of the decision obligated companies wishing to offer mentoring services to submit a request and obtain a decision from the administration of the Egyptian Stock Exchange. The decision stipulated mentoring companies must obtain a license from the Egyptian Financial Supervisory Authority (EFSA) to offer any consultancy, mentoring, listing, or other services to securities companies.
As part of the agreement, the companies that sign a contract with the stock exchange must mentor at least one other company every two years. Failure to abide by the regulations of the stock exchange could invoke penalties from the stock exchange such as written warnings, banning the company from mentoring new companies and suspending the company’s registration.
The decision gave the stock exchange’s administration the right to withdraw a mentoring company’s registration if it does not mentor any companies within two years of obtaining mentoring status, or within two years of the last application for mentorship.
The decision also allowed companies whose mentorship registration has been withdrawn to re-register after two years. The stock exchange’s administration has the right to reconsider the time length of the ban according to the mentoring company’s circumstances and the needs of the market.
The decision held the stock market administration accountable for providing EFSA with data on mentoring companies. The administration must publish a list of all registered mentoring companies and their mentored companies on its website.
The reaction to this new ruling has been mixed. Some companies criticized the stock market administration for not including them while drawing up the new regulations. Others maintained that the decision was overly focused on organising the relationship between the stock exchange, mentoring companies, and mentored companies, but that it ignores other administrative and procedural problems.
Hisham Ali, Director of White House Securities,criticised the decision, noting that it ignored that the stock exchange could encourage more companies to list stocks on their own.
He added that the new decision does not address a number of problems that mentoring companies experience when attempting to list mentored companies’ stocks. He also expressed reservations about the penalties imposed on mentoring companies for violations.
He said that demanding reports from mentored companies twice a year represented an excessive burden on them.
On the other hand, Abdallah Anani, President of the First Investments Company, praised the decision saying that there was a need to specify the relationships between the stock exchange, mentoring companies, and mentored companies.