New directive underway for ECMA to register securities

Market fraudsters will face the music, Authority warns
By our staff reporter
The Ethiopian Capital Market Authority (ECMA) discloses that it is on the final stage of directive issuance for the share offering prices and approval of prospectuses. As the Authority edges closer to launch the securities exchange, it has warned the public to be extra cautious of companies selling shares through misleading advertisement and has further stated that such companies will be dealt with accordingly.
In a statement that the Authority issued in the evening of Thursday August 17, it was stated that the ECMA was in the final drafting stage of tabling the directive for public consultation. The directive will allow the Authority to register securities and give green light for prospectuses, from which traders can disseminate to the public.
The statement also highlighted that the draft directive will be in circulation for consultation in the coming five weeks.
In June, the recently established Authority announced that those who want to raise funds from the public through primary or secondary markets should get approval from the regulatory body before going through with public announcements. The Authority underscored that it has a mandate to follow up and regulate any type of shares floated with very little exceptions.
On its latest statement, the regulatory body has also claimed that there are companies that have been mentioning the Authority for the benefit of their share sales announcement.
As the Authority alerts, “The public must be very cautious since the ECMA is yet to start any registration and approval for offerings and prospectus.”
It warned those with misleading information, that it has authority through the capital market establishment proclamation to pause their activity.
“Except for the few that are aligned to individuals or associated with families and relatives, the Authority has a mandate to overlook the activity regarding share sales,” Brook Taye, Director General of CMA recently explained.
As per the law, Capital market proclamation 1248/2021 article 75.1 states that a publicly traded security shall be registered, prior to the offer or placement, by the Authority.
Likewise, Article 76.1 states an issuer of securities shall obtain approval from the Authority for its prospectus prior to issuing or advertising any securities for a public offering; while sub article two of the same article adds that the prospectus under sub-article one of this article shall be accurate, sufficiently clear, comprehensive and reasonably specific and timely.
With a follow through, sub article three further states notwithstanding sub-article two of this article, the Authority may issue specific requirements of the prospectus, including advertisement of public offerings, in a directive.
Regarding legal measures, article 106.16 of CMA proclamation stated that whoever, directly or indirectly, makes, circulates or publishes a prospectus that he knows is false, with intent to induce other persons, whether ascertained or not, to purchase a security, or deceive or defraud the shareholders or creditors shall be punishable with a fine of no less than Birr 200,000 and no more than Birr 350,000, and a rigorous imprisonment of no less than 7 years and no more than 15 years.

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