Public Offering and Trading of Securities Directive No. 1030/2024
Summary
This directive establishes the regulatory framework for the public offering and trading of securities in Ethiopia. It outlines the general provisions, registration requirements for various types of securities (including shares, debt securities, and preferred rights of subscription), the process for offering securities, content requirements for prospectuses, ongoing information disclosure obligations for issuers, exemptions from registration, rules for trading in securities, and enforcement measures and penalties for non-compliance. The directive aims to ensure an orderly, fair, efficient, and transparent capital market and protect investor interests.
Who's affected
Entities intending to offer securities to the public in Ethiopia, including share companies, companies under formation, statutory bodies, multilateral agencies, and public enterprises. It also affects investors, transaction advisors, compliance advisors, book runners, underwriters, and securities exchanges.
Action required
Entities planning to offer securities to the public must comply with the registration, prospectus, and disclosure requirements outlined in this directive. Investors should carefully review prospectuses and consult licensed financial advisors before making investment decisions.
Key points
6- Mandatory registration of securities before public offering or trading.
- Detailed prospectus requirements for investor information.
- Clear distinction between qualified and retail investors.
- Strict rules for advertisements and ongoing disclosures.
- Specific procedures for book building, debt securities, and companies under formation.
- Significant penalties and administrative measures for non-compliance.
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Requirements
12- Securities must be registered with the Authority before being offered or traded publicly, unless exempted.
- Issuers must submit a comprehensive Registration Statement including a Prospectus.
- Specific eligibility and application procedures apply to different types of issuers and securities.
- Prospectuses must contain detailed information about the issuer, securities, offer, risks, and governance.
- Ongoing disclosure obligations (current and periodic) must be met by issuers.
- Advertisements relating to public offers require prior approval from the Authority.
- Specific requirements apply to book building, allotment, and underwritten offers.
- Companies under formation have specific formation and compliance advisor requirements.
- Debt securities must meet certain characteristics and eligibility criteria.
- Shelf registration has specific eligibility and validity periods.
- Exemptions from registration and prospectus requirements are outlined.
- Compliance with corporate governance, financial reporting, and internal control standards is required.
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Rights and permissions
5- Investors have the right to access a prospectus and other relevant offer documents.
- Investors have the right to withdraw subscriptions under certain circumstances (e.g., material changes to the prospectus).
- Shareholders have preferred rights of subscription as defined by law and this directive.
- Issuers have the right to seek exemptions from certain requirements under specific conditions.
- Issuers have the right to appeal decisions of the Authority.
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Restrictions
6- No securities may be offered or sold to the public, listed, or quoted without prior registration, unless exempted.
- Advertisements related to public offers require prior approval and must not be misleading.
- Unauthorized activities such as public trading of unregistered securities are prohibited.
- Offers of securities are subject to specific offer periods and minimum subscription amounts.
- Companies under formation have restrictions on trading securities for a period.
- Securities issued under exemptions like private placement, small offering, or to qualified investors may have restrictions on transferability and public trading.
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Penalties
6- Fines for unauthorized publication (e.g., 10-25% of agreement value for advisors, 0.1-1% of capital raised for issuers).
- Fines for unauthorized activities (e.g., 15-25% of agreement value for advisors, 10-20% of money raised for issuers, 15-25% of gained amount for exchanges).
- Fines for late filing in relation to public offers (e.g., Birr 1,000,000-3,000,000 for lead transaction advisors, Birr 100,000 for others).
- Fines for late filing of ongoing information disclosures (Birr 10,000-20,000 plus daily default penalty for issuers).
- Other violations may incur a fine of not less than Birr 10,000.
- Administrative measures include public/private warnings, suspension/revocation of registration, trading suspension/prohibition, ordering corrective measures, blacklisting, and other prescribed measures.
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Objectives
4- Provide a regulatory framework for the public offering and trading of securities.
- Ensure an orderly, fair, efficient, and transparent capital market.
- Protect investors' interests.
- Promote the development of the capital market in Ethiopia.
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Organizations
14- Ethiopian Capital Market Authority
- Ministry of Justice
- National Bank of Ethiopia
- Commercial Registration and Licensing Agency
- Securities Exchanges
- Over-The-Counter Markets
- Banks
- Insurance Companies
- Microfinance Institutions
- Collective Investment Schemes
- State-owned Enterprises
- Pension Funds
- Law Firms
- Auditing Firms
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Legal references
4- Capital Market Proclamation No. 1248/2021
- Commercial Code of Ethiopia Proclamation No. 1243/2021
- Commercial Registration and Licensing Proclamation No. 980/2016
- Accounting and Auditing Board of Ethiopia standards