Addis Abeba — The Ethiopian Capital Market Authority (ECMA) has issued a stern warning to the public regarding companies engaging in improper procedures while floating shares. The authority emphasized that certain entities are exploiting unsuspecting investors by enticing them with dubious promises. These companies are advertising their shares as if they bear the official recognition of the regulatory body.
The lack of institutional and legal frameworks regulating the stock exchange market has been a major issue in Ethiopia. Without adequate and enforced laws, companies have been deceiving the public by selling shares with false promises, negatively impacting investor confidence. The authority have expressed concern and warned of legal consequences for those who violate the law.
In 2021, legislators approved a proclamation that paved the way for the establishment of an authority that aims to provide a legal foundation for the development of capital markets in the country. According to the proclamation, companies that offer shares must prepare a prospectus, which needs approval from the authority, before making stocks available to the public. The proclamation also requires the registration of shares that are listed on the market. Currently, the authority is in the process of drafting a legal framework to facilitate these regulations. However, despite not yet offering these services, the authority has observed companies falsely advertising their offerings as authorized by ECMA.
"No entity has been issued an authorization as of yet," Brook Taye, the Director General of the authority, twitted.
In February 2023, Brook announced that the regulatory body was preparing to issue licenses to capital market service providers. He emphasized the ongoing efforts to establish the necessary requirements and criteria for joining the capital market. The authority plans to present the draft directives for public consultation within a month.
Additionally, the Ethiopian Securities Exchange (ESX) is currently being established. Prime Minister Abiy Ahmed mentioned during a recent parliamentary session that the Exchange is expected to open next year.