Regulatory authority warned against deceptive practices employed by certain companies fraudulently claiming to have followed the legal procedures required by the capital market proclamation for share sales.
The Ethiopian Capital Market Authority (ECMA) issued a warning on Thursday, August 17, 2023, cautioning these companies about the potential legal repercussions. It clarified that they have not initiated the registration and approval process for share sales.
The Authority expressed concern over companies advertising their public offerings as compliant with the capital market proclamation, emphasizing that no such authorization had been granted.
The warning explicitly stated that the Authority has not yet introduced a service enabling companies to claim their stock sales in accordance with the legal procedures outlined in the capital market proclamation.
It referred to an article in the proclamation that stipulates “issuers of securities must obtain approval from the Authority for their prospectus prior to issuing or advertising any security for a public offering.”
Brook Taye (PhD), Director General of the Authority, took to social media to alert the public that “no entity has been granted authorization” thus far, exposing the fraudulent advertisements circulated by the companies.
Since its establishment in the previous year, following the ratification of the proclamation in July 2021, the Authority has been diligently working on formulating the necessary legal frameworks to commence its regulatory responsibilities.
Among the directives currently under development, the Public Offer directive stands as one of the key components. The directive mandates companies to obtain approval from the Authority prior to offering their shares to the public.
During an interview with The Reporter in June, Brook emphasized his team’s accelerated efforts in preparing this directive “at bullet speed” in response to recent controversies surrounding share sales to the public.
“The directive is currently in its final stages and will be made available for public comment in the near future,” the Director General conveyed on his social media platform.
The Authority’s notice this week stated that the directive will be shared with the public for consultation “in the next five weeks.”
“Prior to going live with the advertisements and making claims, [the companies] will have to submit the advertisement to the Authority for approval,” Brook told The Reporter in his interview a month ago.
The companies will be obligated to submit a prospectus before proceeding with the advertisement in order to inform the public of all necessary information.
Failure to comply with these requirements will result in termination of their public offering as well as being considered a criminal offense, as stated in one of the provisions of the directive.