Beltone appeals FRA’s decision, backed by ECMA, MCDR reports

Mahmoud El-Qassas
5 Min Read
Asset management company Beltone Financial will be managing a EGP 100m investment fund for Misr Insurance Holding Company. (Photo from Beltone Financial)

Daily News Egypt obtained a copy from Beltone Financial Holding appeal against the Financial Regulatory Authority’s (FRA) statement of accusation that was prepared by Matouk Bassiouny’s law firm which also acted as legal consultant to Sarwa Capital’s private placement.

The FRA has decided to suspend Beltone’s investment banking arm—banning it from carrying out any market activities for a six-month period.

In its appeal, Beltone explained that 80% of the private placement was for foreign investors and accounted for 11% of the volume of applications, while 20% of the offering was allocated to Egyptian investors and represented 6% of the volume of applications received.

The company added denies irregularities in Sarwa Capital’s IPO, and claimed it is baseless, and that the public offering is completely different from the private offering.

Sarwa Capital announced that the total number of public offering shares reached 29.52m shares representing 10% of the number of shares offered for sale, and approximately 4.7% of the company’s issued capital, while the number of the shares floated in the private placement reached 265.6m shares, representing 90% of the total shares offered for sale, and 42.5% of the total issued capital.

Beltone submitted its appeal to the FRA’s Appeals Committee on 4 November, accompanied by the reports from the Egyptian Capital Market Association (ECMA), and the Misr for Central Clearing, Depository, and Registry (MCDR).

According to the accusation statement, the FRA’s decision was based on what was revealed by authority’s experts during their initial examination of the case which revealed some irregularities in the placement process.

The statement concluded that “The FRA’s investigation team would listen to Beltone’s statements on 7 November at the authority’s headquarters.”

Beltone addressed MCDR to obtain the settlement certificate of Sarwa Capital’s IPO after the FRA had accused the company of “settling the transactions contrary to the MCDR’s system”.

The MCDR’s letter said that the transactions for both public and private placements were settled in a “marriage” method in the buyers’ shares on time.

The FRA pointed out that “There are some irregularities in the pricing method of the private placement according to the Book Building mechanism.” Therefore, Beltone also ECMA.

The process of receiving orders for internationally recognised price terms in private propositions is quite different from the traditional order record conditions, which may be behind the most recent confusion.

The ECMA said that the international mechanism of special market orders’ pricing is different than the registration statement mechanism, which could lead to a misunderstanding.

The FRA accuses Beltone of spreading misleading news about the coverage of Sarwa Capital’s private placement.

The ECMA report added that the offering coordinator and bookrunner is free and authorised to determine the selling price within the range of the advertised price, adding that the bookrunner has the right to exclude any offer without giving reasons and in direct agreement with the seller, without requiring the validity of the issuance of the subscription order.

The report also stated that the basis of the private offering is payment after the customer is informed of the value, and the number of shares distributed to him.  Furthermore, it added that “The Egyptian law does not require the use of a specific computer programme to collect the subscription applications.”

Moreover, the ECMA report explained that any other figures, after the closure of the private offering, are just indicators, and the bookrunner is not bound by them.

Based on the FRA’s accusation that the offering subscription was false, Beltone was accused of publishing misleading news, after the latter reported that the private offering oversubscribed 10.8 folds.

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