Regulator Warns Companies Selling Shares through Misleading Ads 

ADDIS ABABA – The Ethiopian Capital Market Authority (ECMA) says it has not yet authorized any entity to deal in securities and issued a warning to “some companies” selling shares through misleading advertisements

The regulator urged the public to beware of advertisements inaccurately claiming their public offer per the Capital Market Proclamation.

Lawmakers enacted the proclamation in 2021, paving the way for the establishment of the ECMA as an autonomous regulatory body.

The legislation states that any issuer to get registered with the ECMA prior to the offer. 

For that, the issuer is required to sign and file a statement of registration with a prescribed fee, and then, submit a prospectus before issuing an advertisement to offer securities to the public. 

The issuer shall make the prospectus available to the public free of charge, in the terms and conditions as determined in a directive by the Authority, per the proclamation.

The directive, however, has not been finalized.

Despite this, the regulator says some companies are selling shares through advertisements calming their public offer as per the proclamation.

Beware of such advertisements, ECMA Director General Brook Taye advised the public on Thursday.

“No entity has been issued an authorization as of yet,” the Director General said.

“The Public Offer directive is currently in its final stages and will be shared for public comment very soon,”  Brook announced.

The draft directive is expected to be ready for public consultation within five months. 

In the meantime, the Authority has warned companies to refrain from using the proclamation in any shape or form in their advertisements for the purpose of selling their shares.

They will otherwise face legal action, the Capital Market regulator warned.

Any person who issues a security that has not been registered could be punished up to 15 years in jail and Birr 300,000 birr fine, per the proclamation.

Currently,  efforts to develop a financial market are ongoing as Ethiopia prepares to launch its first-ever securities exchange in 2024.

The government has already launched a roadshow aimed to raise capital for the Ethiopia Securities Exchange (ESX).

The exchange’s 75 percent share is on offer to investors while the remaining 25% will be owned by the Government through the Ethiopian Investment Holdings (EIH), country’s sovereign wealth fund.