Ethiopia's securities watchdog has proposed sweeping reforms that would require mandatory registration for all public offers of shares and bonds in the country.
The Ethiopian Capital Market Authority (ECMA) unveiled draft rules today which, if finalized, would overhaul how securities sales are regulated and provide regulators with expanded oversight of capital raising activities.
In an announcement made today, ECMA released the "Draft Public Offering and Trading of Securities Directive" for a 45-day public comment period. The directive aims to establish a comprehensive regulatory framework for activities like initial public offerings, rights issues and trading on stock exchanges.
The new registration mandate represents a significant strengthening of transparency requirements and aims to better protect investors as the stock market continues to develop.
A key highlight of the proposed rules is a provision mandating all securities offered to public investors must be registered with ECMA, except for certain exempt categories.
If finalized, the new directive would require all prospectuses to be submitted to and approved by the ECMA before any share sales could take place, according to Brook Taye, Director of the ECMA.
Brook explained that the rules would dictate the format and required disclosures for any advertisements used to promote share offerings. "The contents of such ads would be standardized to ensure full transparency around material details like financials, risks, and use of proceeds," he said in a video posted on the ECMA's LinkedIn page.
Protecting small investors through expanded disclosure norms is a core aim of the proposed regulatory changes, Brook added. "By mandating prospectus approval and controlling the information provided to the public, we hope to establish appropriate safeguards that build confidence in the market," he noted.
Other important aspects of the draft directive include more stringent prospectus disclosure standards, continuous reporting obligations for listed companies, and expanded powers for ECMA for oversight and compliance monitoring.
Innovative modes such as shelf registration and book building for pricing discovery also find a place in the proposed regulatory overhaul. Shelf registration will facilitate repeated public fund raising, while book building is expected to boost capital raising efficiency.
The directive seeks to better protect investors through increased transparency and disclosure. It also aims to promote the development of Ethiopia's nascent capital markets.
ECMA is inviting public comments on the draft directive for the next 45 days, after which the regulator plans to finalize the rules taking into account stakeholder input.
