The Parliament tabled a draft bill to establish a capital market where securities such as shares, bonds and derivatives are bought and sold.
Drafted by the National Bank of Ethiopia (NBE), the bill was approved by the Council of Ministers four weeks ago and is expected to create an avenue where investors meet fund seekers, thereby facilitating better returns for investors who provide cash for companies and businesses that exhibit viable returns.
Aiming to protect investors, the bill will serve as a legal framework in establishing a capital market that will support the development of the national economy through mobilizing capital, promoting financial innovation and sharing investment risks.
According to experts, establishing a capital market bill will help Ethiopia regenerate the existing fragmented and uncoordinated share markets to a higher level of organization and enhance competition between financial institutions and break commercial banks’ domination of the market.
The bill will allow the establishment of a Capital Market Authority, an autonomous federal government regulatory body with its own juridical personality, with the objective of protecting investors and creating an enabling environment for long term investments.
The Authority, which will be accountable to the Prime Minister who will also appoint its Director-General, is responsible for ensuring the existence of the capital market ecosystem in which securities can be issued and traded in an orderly, fair and transparent manner.
Tasked with regulating the primary and secondary market, the Authority will also grant license to any person who operates a security exchange, derivatives exchange, securities depository and Clearing Company, capital market services provider, and other duties.
Based on the bill, the Exchange Authority will have a board with seven members, including the Governor of the NBE, Director of Accounting and Audit Board of Ethiopia and four other individuals.
The Director-General of the Authority, who is expected to have at least 10 years of experience at a senior management level, will also be a non-voting member of the board, according to the bill.
The draft proclamation will recognize a self-regulatory organization which will be delegated by the Authority. The organization, upon being licensed by the Authority, can take disciplinary action against any of its members based on its rules.
Furthermore, license will also be granted to over-the-counter platforms and other security exchanges, which will be established as share companies with their minimum capital requirement being decided by a directive that will be drafted following the legislation of the bill.
The parliament, after deliberating on the bill, has referred the bill to the Trade and Industry Affairs Standing Committee for further revisions.