Proclamation No .....

/2020

Federal Democratic Republic of Ethiopia

Capital Market Proclamation

WHEREAS, it has become necessary to establish a capital market to support the

development of the national economy through mobilising capital, promoting financial
innovation, and sharing investment risks;

WHEREAS, it is necessary to adopt a legal framework for the regulation and supervision of
the capital market to ensure the fairness, integrity, and efficiency of the market and protect
investors;

WHEREAS, it is necessary to legislate uniform requirements for the regulation of issuers

who desire to raise capital from public investors;

WHEREAS, it is necessary to adopt a legal framework for effective monitoring and

surveillance of the capital market to detect, mitigate, and prevent systemic risk to the
country’s financial system;

NOW, THEREFORE, in accordance with Article 55(1) of the Constitution of the Federal
Democratic Republic of Ethiopia, it is hereby proclaimed as follows:

PART ONE
GENERAL PROVISIONS
1. Short Title

This Proclamation may be cited as “Capital Market Proclamation No. …/2020.”

2. Definitions

In this Proclamation, unless the context otherwise requires:

1/ “Advertisement” includes every form of advertising, whether:

a) in a publication, by the display of notices or by means of circulars, or
other documents;
b) by the exhibition of photographs, cinematograph films or videos;
c) by way of sound broadcast, television, or by the distribution of
recordings; or
d) other electronic media platforms such as websites and social media.

2/ “An appointed representative” means a person who conducts regulated

activities and acts as an agent for a capital market service provider licensed by
the Authority.

3/ “Asset-Backed Securities (ABS)” means:

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 a) securities that are primarily serviced by the cash flows of a discrete
pool of receivables or other financial assets, either fixed or revolving,
that by their terms convert into cash within a finite period of time, plus
any rights or other assets designed to assure the servicing or timely
distributions of proceeds to the security holders;
b) any securities including promissory notes but do not include shares or
entitlements under a collective investment scheme;
c) any rights or interests, debentures or certificates evidencing the legal,
equitable or beneficial interest or entitlement of its holder to a share of
the assets of a special purpose vehicle or to entitlement to payment
from such assets where payments or distributions of capital, income,
principal or interest to investors accrue principally from the assets of
the special purpose vehicle as a consequence of the establishment or
operation of a securitization transaction; or
d) any other right, interest, instrument of security or class of securities
prescribed to be asset-backed securities.

4/ “Bank” means a company licensed by the National Bank of Ethiopia to

undertake banking business or a bank owned by the Government.

5/ “Broker” means a person which conducts the business of purchase and sale of
securities for the account of others in consideration of a commission.

6/ “Capital Market” means a market where securities such as shares or equities,

bonds, derivatives, or other related securities are bought and sold.

7/ “Capital Market Participants” means capital market service providers,

issuers of securities, investors, securities exchanges, and securities depository
and clearing companies.

8/ “Capital Market Service Provider” means any person engaged in regulated

capital market activities and services under this Proclamation.

9/ “Central Clearing Counterparty” refers to the act of:

a) providing post-trade clearing and settlement services for transactions
in securities; and
b) taking on counterparty credit risks between parties to such a
transaction.

10/ “Central Securities Depository” refers to a system:

a) for central handling of securities;
1) where securities are immobilised or dematerialised and held in
custody by, or registered in the name of the company or its
nominee company for depositors and dealings in respect of
these securities are effected by means of entries in securities
accounts without the physical delivery of certificates; or
2) which permits or facilitates the registration, clearing and
settlement of securities transactions or dealings in securities
without the physical delivery of certificates; and
b) that provides other facilities and services incidental thereto.

11/ “Collective Investment Scheme” means any arrangement where:

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 a) it is made for the purpose, or having the effect, of providing facilities
for persons to participate in or receive profits or income arising from
the acquisition, holding, management or disposal of securities, or any
other property or sums paid out of such profits or income;
b) investors who participate in the arrangements do not have day-to-day
control over the management of the scheme's assets; and
c) the scheme's assets are managed by a person who is responsible for the
management of the scheme's assets and client accounts.

12/ “Collective Investment Scheme Operator” means a legal entity that has
overall responsibility for management and performance of the functions of a
collective investment scheme.

13/ “Company” means a share company as defined in the Commercial Code of

Ethiopia.

14/ “Credit Rating Service” means an opinion regarding the credit worthiness of
an entity, a security or an issuer of securities using an established and defined
rating systems or rating categories.

15/ “Credit Rating Service Agency” means a person licensed by the Authority
under this Proclamation to provide credit rating services.

16/ “Custodian” means a financial institution that holds customers' securities for
safe-keeping or convenience as per the provisions of this proclamation.

17/ “Days” means calendar days excluding Saturdays, Sundays and public
holidays in Ethiopia.

18/ “Dealer” means any person who engages either for all or part of his time,
directly or indirectly, as agent, broker, or principal, in the business of offering,
buying, selling, or otherwise dealing or trading in securities issued by another
person.

19/ “Dealing in Securities” means dealing in securities for own account or for
the account of others by:
a) selling or purchasing,
b) issuing or public offering,
c) depositing or taking custody of,
d) clearing and settling,
e) lending or pledging, or
f) any other transaction that the Authority considers as “dealing in
securities”.

20/ “Debt Security” means any instrument creating or acknowledging

indebtedness issued or proposed to be issued by a company including a
debenture, debenture stock, loan stock, bond or note.

21/ “Dematerialisation" means the issuance and recording of securities in

electronic format.

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22/ “Dematerialised Security” means a security whereby the prima facie
evidence of legal title to the security is established by an electronic book
entry.

23/ “Derivatives” or “Derivatives Contract” means financial instruments which

derive their value from the value of the relevant assets such as shares, bonds,
commodities, and currencies, and which can be purchased or sold or traded in
a similar method as the trading of shares or of any other financial assets.

24/ “Derivatives Exchange” means a securities exchange which has been granted
a license to list exchange-traded derivative contracts by the Authority under
this Proclamation or approved for such purposes and in accordance with the
regulations or directives issued thereunder.

25/ “External Auditor” means a public auditor licensed by the pertinent

government organ to provide audit service.

26/ “False Statement” includes a statement that is misleading in the form and
context in which it is made. It also includes an omission from a prospectus or
written statement of any matter that, in the context, is calculated to mislead
investors or market participants.

27/ “Financial Instruments” are assets that consist of monetary contracts

between parties and that can be created, modified, exchanged, and settled.

28/ “Foreign Investor” means any one of the following who has invested foreign
capital in Ethiopia:
a) A foreign national;
b) An enterprise in which a foreign national has an ownership stake;
c) An enterprise incorporated outside of Ethiopia by any investor;
d) An enterprise established jointly by two or three of the investors
specified under paragraphs (a), (b) and (c) of this sub-article; or
e) An Ethiopian permanently residing abroad and preferring treatment as
a foreign investor;
but, doesn’t include foreign nationals of Ethiopian origin who prefer to be
treated as Ethiopian nationals.

29/ “Government” means the Government of the Federal Democratic Republic

of Ethiopia.

30/ “Immobilisation” means depositing of physical certificates of securities in a

central securities depository to facilitate book-entry transfers.

31/ “Immobilized Security” means a security where the underlying physical

certificates have been deposited with and are held by a central securities
depository.

32/ “Initial Public Offering” means an offer to the public of any securities or a
company, if:
a) no securities of that company have previously been the subject of an
offer to the public; or

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 b) all of the securities of that company that had previously been the
subject of an offer to the public have subsequently been re-acquired by
the company.

33/ “Investor” means any person who sells, buys, or holds securities in
accordance with this Proclamation with the expectation of a financial return
from such transactions.

34/ “Investment Bank” means a non-deposit taking financial institution that

facilitates the creation of capital for other companies, governments, and other
entities through underwriting, acting as an intermediary between a securities
issuer and the investing public, facilitating mergers and other corporate
reorganizations and acting as a broker or financial adviser for institutional
clients.

35/ “Investment” refers to:

a) securities publicly offered;
b) securities listed on a foreign securities exchange or facility;
c) ownership interests and/or units in a collective investment scheme
approved under this Proclamation;
d) funds intended for the purchase of such securities, units or other
instruments; or
e) any other instruments declared to be investments for the purposes of
this Proclamation by a directive of the Authority;

36/ “Investment Adviser” means a licensed person who:

a) carries out the business of advising others concerning investments;
b) as part of a regular business, issues or promulgates analyses or reports
concerning investment; or
c) a financial institution licensed to provide investment advice on
particular type of investment such as bonds, commodities, mutual
funds, and stocks.

37/ “Issuer” means any person who issues or proposes to issue any security; and
shall include a government, company or other legal entity that offers securities
to the public.

38/ “License” means a business license that is granted by the Authority to a

person to carry out a business in any regulated activity.

39/ “Licensed Securities Exchange” means a securities exchange to which an

exchange license has been issued under this Proclamation.

40/ “Listing Requirements” mean, in relation to a securities exchange, rules

governing or relating to:
a) The grant of permission to listing or dealing in securities on a
securities exchange or the removal from listing or for other purposes;
or
b) The activities or conduct of issuers and other persons who are admitted
to that list, whether those rules are made by:
1) the securities exchange or are contained in any of the
constituent documents of the securities exchange; or

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 2) another person and adopted by the securities exchange.

41/ “Listed Securities” means securities listed or quoted on a licensed securities

exchange.

42/ “Market Maker” means a person who ensures the availability of supply and
demand for one or more securities according to such controls as may be laid
down by the Authority.

43/ “Mark the close” means buying a security at the very end of the trading day at a
significantly higher price than the current price of the security with the
intention to raise the closing price of the security.

44/ “Mutual Fund” means a company or partnership that issues equity interests
or units, the purpose or effect of which is the pooling of investor funds with
the aim of spreading investment risks and enabling investors in the mutual
fund to receive profits or gains from the acquisition, holding, management or
disposal of investments.

45/ “National Bank” means the National Bank of Ethiopia established under the
National Bank of Ethiopia Establishment (as amended) Proclamation No.
591/2008.

46/ “Nominee” means a person in whose name securities are recorded on a book-
entry register and held for the beneficial owner of the securities under a
custodial agreement with the beneficial owner.

47/ “Over-the-Counter Market” means a market in which securities

and/or derivatives are traded by parties directly (face-to-face or using
communication devices such as telephones and networked computers) with
each other rather than through a recognized exchange.

48/ “Primary Market” means a market facilitated by underwriters in which new

capital is created or raised by selling newly issued stocks, bonds, notes, and
other financial instruments.

49/ “Primary Regulator” means a federal regulatory authority having a primary

jurisdiction and supervising authority over a regulated activity.

50/ “Private Placement” means the act of offering securities to a limited number
of investors, according to a directive to be issued by the Authority, rather than
to the general public.

51/ “Prospectus” refers to a document or a publication by, or on behalf of, a

share company containing information on the character, nature, and purpose
of an issue of shares, debentures, or other corporate securities that extends an
invitation to the public to purchase the securities.

52/ “Public Company” is a share company, whether listed on a securities

exchange or not, whose shares of stock are traded on a securities exchange or
over-the-counter markets.

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53/ “Public Debt Security” means any loan stock, bond, note or other instrument
creating or acknowledging indebtedness issued by or on behalf of the
Government and other government entities.

54/ “Public Enterprise” means an enterprise wholly owned by the government.

55/ “Public Offer" means the act of offering securities to the general public in
order to raise capital by the promoters prior to the incorporation of the
company, or by the issuing company prior to the issuance of said securities.

56/ “Publicly Traded Security” means a security traded on a securities exchange

or through over-the-counter markets.

57/ “Regulated Person” means any person who has been granted a license under
this Proclamation, or any other Proclamation for whose administration the
Authority is wholly or partly responsible or an approved securities exchange
or any persons associated with such licensees or approved securities
exchanges.

58/ “Rules” means, in relation to a securities exchange, a securities depository

and clearing company, or a self-regulatory organization, the rules governing
the activities and market conducts of a securities exchange, a securities
depository and clearing company, or a self-regulatory organization and their
respective members.

59/ “Secondary Market” means market or markets where investors buy

previously issued securities from other investors as opposed to the primary
market, where investors buy new securities directly from the issuer or an
intermediary.

60/ “Securities” means any instrument - in any legal form - that evidences
ownership of a share in a financial transaction and that is negotiable pursuant
to approval from the Authority, such as:
a) shares issued or proposed to be issued in the capital of a company;
b) any instrument that creates or acknowledges a debt issued or to be
issued by a company;
c) loans, bonds, and other instruments that can be converted to shares in
the capital of a company;
d) all public debt instruments that are tradable and issued by the
Government and other government entities;
e) any right or derivative relating to securities;
f) units in a collective investment scheme;
g) any paper or instrument considered by the Authority as a security for
the purposes of implementing this Proclamation.

but does not include commercial papers such as cheques, promissory notes,
bills of lading, letters of credit, cash transfers and instruments
negotiated by banks exclusively between each other, insurance policies
and rights arising from retirement funds established for the benefit of
the beneficiaries therefrom.

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61/ “Securities Depository and Clearing Company” means any legal entity that
offers securities depository, clearing and settlement, and other related
services.

62/ “Securities Exchange” means, in relation to premises of a licensed securities

exchange, the one place in those premises which constitutes, maintains or
provides a market or a facility by means of which:
a) offers to sell, purchase or exchange securities are regularly made or
accepted;
b) offers or invitations are regularly made, being offers or invitations that
are intended, or may reasonably be expected to result, whether directly
or indirectly, in the making or acceptance of offers to sell, purchase or
exchange securities;
c) information is regularly provided concerning the prices at which, or
the consideration for which, particular persons or particular classes of
persons, propose, or may reasonably be expected, to sell, purchase or
exchange securities; or
d) clearing service for securities traded in the exchange takes place.

63/ “Securitization Transaction” means an arrangement that involves the sale,

transfer or assignment of assets to a special purpose vehicle where —
a) such sale, transfer or assignment is funded by the debentures or units
of debentures issued by that special purpose vehicle or another special
purpose vehicle; and
b) payments in respect of such debentures or units of debentures are or
will be principally derived, directly or indirectly, from the cash flows
generated by the assets.

64/ “Self-Regulatory Organization” means an entity that is recognized under

this Proclamation to regulate its own members through the adoption and
enforcement of rules of conduct for fair, ethical, and efficient practices in the
capital market; with a view to promoting the protection of investors and the
public interest.

65/ “Senior Personnel” means senior executive or any employee of a licensed

person whose appointment requires consent or prior approval of the Authority.

66/ “Share” means a portion of ownership interest in a share company, or an

interest or stake in any collective investment scheme.

67/ “Special Purpose Vehicle” means an entity that is established solely in order
to do either or both of the following:
a) hold (whether as a legal or equitable owner) the assets from which
payments to holders of any asset-backed securities are or will be
primarily derived;
b) issue any asset-backed securities.

68/ “Underwriter” means any person who has purchased from an issuer with a
view to, or offers or sells on behalf of the issuer in connection with, the
distribution of any security, or participates or has a participation in the direct
or indirect underwriting of any such undertaking.

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 69/ “Warrant” means any right, whether, conferred by warrant or otherwise, to
subscribe for shares or debt securities.

70/ “Person” means a physical or juridical person.

71/ Any expression in the masculine gender includes the feminine.

PART TWO
CAPITAL MARKET AUTHORITY

3. Establishment of the Capital Market Authority

1/ The Ethiopian Capital Market Authority (hereinafter “the Authority”) is

hereby established as an autonomous Federal Government regulatory
Authority with its own juridical personality.

2/ The Authority shall be accountable to the Prime Minister of the Federal

Democratic Republic of Ethiopia.

3/ The Authority shall have the capacity to:

a) sue and be sued;
b) purchase or otherwise acquire, hold, charge and dispose of both
movable and immovable property;
c) enter into contracts; and
d) perform all such other things or acts necessary for the proper
performance of its functions under this Proclamation which may
lawfully be done by autonomous government organ.

4. Head Office

The head office of the Authority shall be in Addis Ababa and may have branch
offices elsewhere as deemed necessary.

5. Objective of the Authority

The principal objectives of the Authority shall be to:

1/ Protect investors;

2/ Ensure the existence of a capital market ecosystem in which securities can be

issued and traded in an orderly, fair, efficient and transparent manner;

3/ Reduce systemic risk by ensuring the integrity of the capital market and
transactions; and

4/ Promote the development of the capital market by creating enabling

environment for long term investments.

6. Powers and Duties of the Authority

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For the purpose of carrying out its objectives, the Authority shall have the following
powers and duties:

1/ Grant license to any person to operate as a securities exchange, derivatives

exchange, securities depository and clearing company, capital market services
provider, over-the-counter trading facility or any other activity deemed by the
Authority as a regulated activity under its jurisdiction.

2/ Determine and collect reasonable levies and fees from capital market
participants for its services or to cover the cost of its operations.

3/ Develop a framework to facilitate the use of information technology to effect

linkages among functions provided by licensed persons or other market
participants to allow:
a) the transfer and dissemination of market information to a wider
number of users within and between networks;
b) the offer, distribution or delivery in electronic form of securities or
services ordinarily provided by licensed persons; and
c) the execution of securities transactions without the need for parties to
the transaction to be physically present at the same location.

4/ Develop plans for dealing with the eventuality of a licensed person’s failures
as well as an early warning system about potential defaults by market
intermediaries.

5/ Take the following administrative measures for the breach of the provisions of
this Proclamation or the regulations or directives made thereunder:
a) levying of financial penalties pursuant to a directive that will be issued
by the Authority with a principle of proportionality to the gravity or
severity of the breach;
b) publishing administrative findings of malfeasance by any person;
c) suspending or cancelling licenses or authorizations or approvals
granted under this Proclamation; or
d) any other administrative measures the Authority may determine by a
directive, from time to time, in line with its mandate

6/ Conduct off-site surveillance activities and onsite inspections, with or without

prior notice:
a) of all securities markets and licensed persons’ activities, with access to
all necessary books and records; and
b) over any transactions and financial instruments traded by licensed
persons or sold to the public.

7/ In order to carry out its on-sight inspections or off-site surveillance, the

Authority may use, in addition to its staff, police officers, prosecutors, and
auditors.

8/ Inquire into the affairs of or give directions to any person to which the
Authority has granted a license and any public company the securities of
which are publicly offered or traded on an approved securities exchange or on
an over the counter market.

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9/ Approve the appointment of external auditors of licensed and authorized
market participants.

10/ Appoint an external auditor to carry out a specific audit of the financial
operations of any licensed and authorized market participants, when such an
audit is necessary, at the expense of such market participants.

11/ Facilitate the management of a compensation fund and grant compensation to

any investor who suffers pecuniary loss resulting from the failure of a capital
market service provider or securities exchange to meet his contractual
obligations.

12/ Have recourse against any person whose act or omission has resulted in a
payment from the compensation fund.

13/ Give recognition to and oversee the activities of self-regulatory organizations.

14/ Be in charge of the surveillance of the market, including with the oversight of
day-to-day trading activity on the exchange or trading system through a
market surveillance program with the aim to:
a) monitor the conduct of market intermediaries;
b) collect and analyse information gathered through market surveillance;
and
c) verify compliance by the exchange with its responsibilities related to
market integrity, market surveillance, the monitoring of risks and the
ability to respond to such risks.

15/ Regulate the use of electronic trading platforms for dealing in securities or
services ordinarily carried out by a licensed person.

16/ Co-operate or enter into agreements for mutual co-operation with other
regulatory authorities to regulate cross-border activities in capital markets and
address systemic risk in the financial system.

17/ Regulate and oversee the issue, and subsequent trading, both in primary and
secondary markets, of securities.

18/ Supervise the listing and delisting of securities.

19/ With a good cause, conduct administrative investigation and obtain data,
information, documents, books and records, and voluntary statements or
testimony from any person, including third party entities and individuals,
whether regulated or unregulated, that are either involved in relevant conduct
or who may have information relevant to a regulatory or enforcement
investigation.

20/ Closely collaborate and coordinate with the Federal Attorney General and
Federal Police to enable them investigate and prosecute offenses committed in
violation of this Proclamation.

21/ When there is reasonable cause to believe that recovery of gains from
fraudulent activities will be impeded, issue administrative order on a financial

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 institution requiring the financial institution to do one or more of the
following:
a) to block the accounts of the capital market participant or any one of its
officers;
b) freeze access to any cash, valuables, precious metals, or other assets of
the participant, in a safe deposit box held by the financial institution;
and
c) provide information relating to the accounts or contents of the safe
deposit box.

22/ To sustain the order under sub-article (21) of this Article, the Authority shall
obtain a court authorization for the order within 10 (Ten) days of
service of the notice of the order on the financial institution.

23/ If there is no court authorization of the order obtained within 10 (Ten) days of
service of notice of the order under sub-article (22) of this Article, the
order shall lapse.

24/ Prescribe notices or guidelines on corporate governance of a company whose

securities have been issued to the public or a section of the public.

25/ Implement transparent, fair, equitable and consistent operational procedures.

26/ Promote investor education.

27/ Conduct a regular review of products, markets, market participants and

activities to identify and assess possible risks to investor protection and
market fairness, efficiency and transparency or other risks to financial
markets.

28/ Ensure that conflicts of interest among regulated capital market service
providers and misalignment of incentives are identified, avoided, eliminated,
disclosed or otherwise managed.

29/ Regularly review the perimeters of securities regulations in order to identify

and assess evidence of changing circumstances and emerging risks and the
need for revisions of regulatory framework.

30/ Do all such other acts as may be incidental or conducive to the attainment of
the objectives of the Authority or the exercise of its powers under this
Proclamation.

7. Organisational Structure of the Authority

The Authority shall have:

1/ Board of Directors (hereinafter the “Board”);

2/ A Director General and deputy Director Generals as necessary; and

3/ The necessary staff.

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8. Composition and Appointment of Board of Directors

1/ The Board shall have seven members, consisting of:

a) The Governor of the National Bank of Ethiopia─ permanent ex-officio
member;
b) The Director of the Accounting and Audit Board of Ethiopia─
permanent ex-officio member;
c) Four other individuals to be appointed based on qualification─
members; and
d) The Director General of the Authority─ non-voting member.

2/ Members of the Board under sub-article (1) (c) of this Article shall be
appointed by the Prime Minister.

3/ The Chairperson of the Board shall be appointed by the Prime Minister

amongst the Board members; however, the Director General may not be a
Chairperson.

4/ The Chairperson and every member of the Board appointed under sub-article
(1) (b) of this Article shall be appointed from amongst persons who have
experience and expertise in legal, finance, economics, management, or related
disciplines.

5/ The Board shall have an Audit Committee composed of at least three Board
members, excluding the Director General.

6/ The Board may have other committees as needed.

7/ The members of the Board shall be paid such remuneration and allowances
out of the general fund of the Authority as may be determined by the
Government.

9. Conflicts of Interest

1/ Members of the Board under Article (8), sub-article (1)(c) of this

Proclamation may not hold other positions that may cause conflict of interests.

2/ Members of the Board shall recuse themselves from participating and voting
in matters which may have conflict of interests.

10. Tenure of Board Members

1/ The tenure of the Chairperson and every member of the Board appointed
under Article (8), sub-article (1)(c) of this Proclamation shall be five years.

2/ Notwithstanding sub-article (1) of this Article, the tenure of Board members

may be renewed for an additional term of five years.

3/ Notwithstanding sub-articles (1) and (2) of this Article, the tenure of two
Board members appointed under Article 8, sub-article (1)(c) of this
Proclamation for the first round shall be six years.

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 4/ The specific Board members whose tenure will be six years under sub-article
(3) of this Article shall be determined at the time of their appointment.

5/ The tenure of Board members who will be appointed for six years under sub-
article (3) of this Article may not be renewed for an additional term.

11. Removal or Resignation of Board Members

1/ Any member of the Board appointed under Article (8), sub-article (1)(c) of
this Proclamation shall be removed from office if he፡
a) delivers to the Prime Minister a written resignation of his appointment,
and his request for resignation is accepted by the Prime Minister;
b) is found to be incapacitated by mental or physical illness or is
otherwise unable or unfit to discharge the functions of a member or is
unable to continue as a member;
c) has been absent from three consecutive meetings of the Board of
Directors of the Authority without leave or good cause;
d) is adjudged bankrupt or enters into a composition scheme or
arrangement with his creditors;
e) is sentenced by a court to imprisonment for a term of six months or
more; or
f) is convicted of an offence involving dishonesty, fraud or moral
turpitude.

2/ In the event that the office is vacated by any member appointed under Article
(8), sub-article (1)(c) of this Proclamation, the Prime Minister shall appoint
another person to hold office until the expiry of the term of the member in
whose place he is appointed.

3/ If any member of the Board appointed under Article (8), sub-article (1)(c) of
this Proclamation is temporarily unable to perform his duties, the Prime
Minister shall appoint another person to act in his place during the period of
his absence.

12. Powers and Duties of the Board

1/ The Board shall have the following powers and duties:

a) approve directives to be issued by the Authority;
b) approve the budget of the Authority;
c) review the strategy, annual work program, and performance report of
the Authority;
d) upon the recommendation of the Director General, approve the salary
and benefit structure of employees of the Authority;
e) oversee the power and functions of the Authority;
f) appoint external auditors of the Authority; and
g) approve the delegated powers and functions of the Authority.

2/ The Board’s Audit Committee shall receive and examine the findings and
recommendations of the internal and external auditors and also give the
necessary direction for the implementation.

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13. Meeting Procedures of the Board

1/ The presence of four members of the Board shall constitute a quorum.

2/ The Board shall meet at least monthly; provided, however, that the
Chairperson or, in his absence, the person delegated by him, may call urgent
meetings at any time or when the Director General or three Board members
so request.

3/ The Chairperson or a Board member delegated by him shall preside at every

meeting of the Board.

4/ All decisions of the Board shall be made by a simple majority vote of the
members present. In case of a tie, the Chairperson shall have a casting vote.

5/ The Board shall have its own secretary.

6/ Minutes of meetings of the Board shall be recorded accurately and in such

form as the Board may determine.

7/ Unless the Board decides otherwise, minutes of the Board shall be

confidential.

8/ Notwithstanding the provisions of this Article, the Board may adopt its rules
of meeting procedures.

14. Appointment, Powers, and Duties of Director General

1/ The Director General shall be appointed by the Prime Minister.

2/ A person appointed as a Director General shall meet the following

qualifications:
a) has at least ten years’ experience at a senior management level in
matters relating to finance, economics, management, law or related
issues; and
b) has expertise in matters relating to money or capital markets or
finance.

3/ The Director General shall nominate and recommend other senior executives
of the Authority, excluding deputy Director Generals, for approval to the
Board.

4/ The Director General shall direct and supervise the administration and
operations of the Authority in accordance with this Proclamation and the
decisions of the Board.

5/ The Director General shall prepare the plans and annual budgets of the
Authority and, upon approval by the Board, implement the same.

6/ The Director General shall be the principal representative of the Authority,

and in this capacity shall:

15
 a) represent the Authority in its all relations with other persons, the
Government, and international bodies in which the Authority is a
member;
b) sign individually or jointly with other authorized officers of the
Authority contracts concluded by the Authority, periodic reports,
balance sheets, profit and loss statements, correspondence and other
documents of the Authority;
c) represent the Authority, either personally or through counsel, in any
legal proceeding to which the Authority is a party; and
d) hire and administer employees of the Authority in accordance with a
regulation issued by the Council of Ministers.

7/ The Director General may delegate part of his powers and duties to his
deputies and other officers of the Authority, as may be required to ensure the
business continuity of the Authority.

15. Deputy Director General

1/ The deputy Director Generals of the Authority, who shall have similar
qualifications to a person who is eligible to be Director General, shall be
appointed by the Prime Minister.

2/ The deputy Director Generals of the Authority shall assist the Director
General and, in the absence of the Director General, shall discharge all the
functions conferred on the Director General.

16. Delegation of Power and Duties

1/ The Authority may delegate any of its powers and duties under this
Proclamation to:
a) a committee that is established for specific purpose;
b) a recognized self- regulatory organization; or
c) a person.

2/ When delegating any of its powers and duties under this Proclamation, the
Authority shall clearly state the specific duties and powers that the delegated
person may exercise.

3/ A delegation made under this Article shall not include issuing directives.

4/ The Authority may, at any time, revoke a delegation under this Article.

17. Furnishing of Information to the Authority

1/ The Authority or any person officially authorized on its behalf may, by

notice in writing, require any person engaged in activities under the
Authority’s jurisdiction to furnish information to the Authority or to the
authorized person, in the form and within such period as is specified in the
notice. Details shall be prescribed by the directives of the Authority.

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 2/ The Authority or any officer of the Authority shall not disclose to any person
or use any information acquired under sub-article (1) of this Article except
for the purpose of achieving the objectives of the Authority unless required to
do so by a court of law.

3/ Notwithstanding sub-article (2) of this Article, the Authority may share

information, upon request or on unsolicited basis, with other regulatory
bodies, whether established within or outside Ethiopia, for assistance in
administrative investigations of a person specified by the regulatory body
who has contravened or is contravening any legal or regulatory requirements.

4/ The information sharing under sub-article (3) of this Article shall have an
effect only if:
a) the Authority has entered into information sharing agreements with
such foreign counterparts or any international agreement to which
Ethiopia is a party; and
b) the issue under administrative investigation is enforced or
administered by, or is under the jurisdiction of the requesting foreign
regulatory body.

5/ For the purposes of sub-article (3) of this Article, the provisions of this
Proclamation shall, with such modifications as may be necessary, apply and
have effect as if the contravention of the legal or regulatory requirement
referred to in sub-article (3) of this Article were an offence under this
Proclamation.

6/ A regulatory body which requests for assistance under sub-article (3) of this
Article shall demonstrate that:
a) the assistance requested is in the interest of the public; or
b) the request assists the regulatory body in the discharge and
performance of its functions.
7/ Notwithstanding the requirement under sub-article (6) of this Article, the
Authority shall, in deciding whether to provide the requested assistance, take
into account whether the regulatory body shall:
a) pay the Authority any of the costs and expenses incurred in providing
the assistance; and
b) be able and willing to provide reciprocal assistance within its
jurisdiction in response to a similar request for assistance from
Ethiopia.

8/ Nothing in this Article shall be construed to limit the powers of the Authority
to cooperate or coordinate with any other regulatory body in the exercise of
its powers under this Proclamation; in so far any such cooperation or
coordination is not contrary to the objectives of this Proclamation.

9/ The staff of the Authority shall identify, avoid or disclose conflict of interest
and observe procedural fairness.

18. Funds of the Authority

1/ The funds of the Authority shall consist of:

17
 a) fees payable to the Authority for licenses issued and other duties
performed in terms of this Proclamation;
b) such sums of money as are paid under this Proclamation as
administrative fines or penalties; and
c) any other sums of money received as grant to the Authority.

2/ Funds not immediately required by the Authority may be invested in such a

manner as the Authority may determine.

3/ In the instance where the Authority’s funds under sub-article (1) of this
Article falls short of covering its budget, the shortfall shall be covered by
budget allocated by the Government.

19. Accounts of the Authority

1/ The Authority shall ensure that proper accounts and other records relating to
the accounts are kept in respect of all its activities, funds and property.

2/ Within 3 (three) months after the end of each year, the Authority shall prepare
statement of financial accounts and all other transactions.

3/ The financial statements of the Authority shall be prepared in line with the
international financial reporting standards or other frameworks as determined
by a pertinent Government authority.

20. External Audit of the Authority’s Accounts

1/ The accounts of the Authority shall be audited by external auditor annually.

2/ The audit report shall be completed and issued to the Board’s Audit
Committee for review and approval by the Board within 3 (three) months
from the end of each financial year.

3/ A duly audited financial statement signed by external auditor shall be

published in the annual report to be issued by the Authority.

21. Financial Year of the Authority

The financial year of the Authority shall be the period of twelve months beginning the
1st day of July of each year.

PART THREE
RECOGNITION OF A SELF-REGULATORY ORGANIZATION
22. Application for Recognition

1/ An entity under the jurisdiction of the Capital Market Authority which intends
to be recognized and operate as a self-regulatory organization shall apply to
the Authority, in the prescribed form.

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 2/ Notwithstanding sub-article (1) of this Article, an exchange and a securities
depository and clearing company shall be recognized as self-regulatory
organization without submitting an application.

3/ An application made under sub-article (1) of this Article shall specify the
functions and powers that the entity is seeking to exercise upon recognition.

4/ The Authority may recognize a self-regulatory organization where it is

satisfied that the organization፡
a) has internal rules and policies which are consistent with this
Proclamation or related regulations and directives;
b) has the financial capacity and administrative resources necessary to
carry out its functions as a self-regulatory organization, including
dealing with a breach of the law or of any other applicable guidelines;
c) is fit and proper;
d) has competent personnel for the carrying out of its functions; and
e) satisfies such other conditions as may be determined by a directive to
be issued by the Authority.

5/ The Authority may, in respect of an application made under sub-article (1) of

this Article, subject to such terms and conditions as it considers necessary, by
notice in a widely circulated newspaper, declare an entity to be a recognized
self-regulatory organization

23. Conditions for Delegation of Power and Duties to a Self-Regulatory

Organization

A delegation of power and duties made to a self-regulatory organization shall specify:

1/ the function or power delegated to the self-regulatory organization;

2/ the extent of disciplinary powers delegated and the scope of sanctions that
may be imposed;

3/ the terms and conditions upon which the power or function has been delegated
and may be exercised;

4/ the persons authorized to exercise the delegation on behalf of the self-

regulatory organization;

5/ the manner in which a self-regulatory organization shall submit a periodical

report to the Authority in respect of the exercise of a delegated power or
function; and

6/ any other matter as the Authority may prescribe.

24. Rules of a Self-Regulatory Organization

1/ A self-regulatory organization shall make rules relating to the matters for

which it has regulatory or supervisory functions, including any sanction and
disciplinary powers to be exercised in connection with the functions delegated
to it.

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 2/ The rules made under sub-article (1) of this Article shall make provisions
relating to:
a) management structures and shareholding rights of the self-regulatory
organization taking into consideration the interests, rights and
liabilities of its members, investors, and users of their services;
b) rules of membership and conditions for approval and admission of
members;
c) fair and consistent treatment of all members; and fair representation of
members in the selection of its directors and administration;
d) procedures for dispute resolution between members, users, investors
and their clients and the right of appeal to the Authority or other
relevant primary regulator;
e) procedures to address potential conflicts of interest and cooperate with
the Authority to investigate and enforce laws and regulations;
f) the rules and procedures of self-regulatory organization with respect to
reporting and accountability to any primary regulator other than the
Authority;
g) mechanisms of protecting personal data of the data subjects in
compliance with the principles of data protection as set out by the
Authority;
h) avoidance of anti-competitive practices;
i) standards of behaviour for its members; and
j) investor protection and market integrity.

3/ The rules made under sub-article (1) of this Article shall not be implemented
unless approved by the Authority.

4/ A self-regulatory organization shall submit any amendments to its constitution

to the Authority for approval before the amendments come into effect.

25. Restrictions on Decision

A self-regulatory organization shall not make a decision, under its rules, which
adversely affect the rights of a person unless the self-regulatory organization:

1/ has given that person an opportunity to make representations about the matter;
or

2/ considers, on a reasonable ground, that a delay in making the decision will

prejudice a class of consumers.

26. Disciplinary Action

1/ A self-regulatory organization may take a disciplinary action against any of its

members in accordance with its rules, if the member contravenes any
provisions of the rules.

2/ Any action taken by a self-regulatory organization under sub-article (1) of this

Article shall not prejudice the power of the Authority to take any further
action as it considers necessary with regard to the licensed person.

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 3/ self-regulatory organization shall, where it has taken a disciplinary action
under sub-article (1) of this Article, within two days inform the Authority, in
writing, of the name of the member, the reason and the action taken, the
amount of any fine and the period of suspension if any.

4/ The Authority may, on application by an aggrieved person, review any

disciplinary action taken under sub-article (1) of this Article and may affirm,
modify or set aside the decision after giving the aggrieved person and the self-
regulatory organization an opportunity to be heard.

5/ Nothing in this Article shall preclude the Authority, in any case where a self-
regulatory organization fails to act against its member, from suspending,
expelling or otherwise disciplining a member of the self-regulatory
organization.

6/ The Authority shall, before taking any action under sub-article (5) of this
Article, give the licensed person and the self-regulatory organization an
opportunity to be heard.

7/ The Authority may, after giving a self-regulatory organization reasonable

opportunity to be heard in respect of any matter, give direction, in writing, to
the self-regulatory organization in terms of this Article.

8/ A direction given under sub-article (7) of this Article may:

a) suspend a provision of the constitution or rules of a self-regulatory
organization for a period specified in the direction;
b) require a self-regulatory organization to amend its rules; or
c) require a self-regulatory organization to implement or enforce its
constitution or its rules.

27. Appointment and Change of Senior Personnel

1/ A self-regulatory organization shall not appoint or change its senior personnel

except with the prior written notification to the Authority of such intention to
appoint or change.

2/ Under sub-article (1) of this Article, if the Authority does not express its
objection within 15 days, the appointment or change of senior personnel shall
be effective.

28. Removal of a Senior Personnel

The Authority may, if it reasonably believes that:

1/ A senior personnel of a self-regulatory organization is not a fit and proper
person to be an officer of the organization; or

2/ The appointment of a person or continuing in office as a senior personnel of a

self-regulatory organization is likely to be detrimental to the self-regulatory
organization or may prejudice the interest of investors and consumers of
financial services or members of the relevant sector or industry,

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 after giving the senior personnel and the self-regulatory organization an opportunity
to be heard, direct the self-regulatory organization not to appoint or to remove the
senior personnel from office.

29. Annual Report

1/ A self-regulatory organization shall, within four months after the end of every
financial year, submit its annual report to the Authority.

2/ The report in sub-article (1) of this Article shall include: –

a) a report on the corporate governance policy and practices of the self-
regulatory organization;
b) financial statements prepared and audited in accordance with the
accounts and audit requirements for regulated persons; and
c) such other requirements as may be specified by directive of the
Authority.

3/ An external auditor who, in the course of his audit, has reason to believe that:
a) there is or has been an adverse change in the risks inherent in the
business of a self-regulatory organization with the potential to
jeopardize its ability to continue as a going concern;
b) the self-regulatory organization may be in contravention of any
provisions of this Proclamation, or directions issued by the Authority;
c) a financial crime has been or is likely to be committed; or
d) serious irregularities have occurred;
shall report the matter, in writing, to the Authority.

4/ A report made under sub-article (2) of this Article shall not constitute a breach
of the duties of the external auditor.

PART FOUR
SECURITIES EXCHANGE
30. Prohibition of Unlawful Securities Exchange

1/ A person shall not establish or launch a business as a securities exchange or a

derivatives exchange or over-the-counter trading facility, or hold himself out
as creating a securities market or a derivatives market or over-the-counter
trading facility that is not licensed or approved as a securities exchange or a
derivatives exchange or over-the-counter trading facility by the Authority
under this Proclamation.

2/ It is prohibited for any person to use the words “securities exchange” or

“derivatives exchange” in connection with a business except with an exchange
license granted by the Authority.

31. Establishment of the Ethiopian Securities Exchange

1/ The Ethiopian Securities Exchange (hereunder the “Exchange”) shall be

established as a share company by the Government in partnership with the
private sector, including foreign investors.

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 2/ The total ownership of the Government and government-owned entities shall
not exceed 25% of the Exchange’s capital.

3/ Notwithstanding sub-article (2) of this Article, and if there is insufficient

interest from the private sector, the Government’s ownership of the Exchange
can be increased to whatever amount is needed to establish the Exchange.

4/ Notwithstanding sub-articles (2) and (3) of this Article, and if there is no

interest at all from the private sector, including from foreign investors, the
Exchange shall be established as a fully Government owned public enterprise
by regulation of the Council of Ministers.

5/ The Authority shall grant an exchange license to the Exchange upon its
establishment and meeting minimum capital requirements, fit and proper
criteria, conditions of work and management, evidence of competence, and
any other requirements to be specified by directive of the Authority.

6/ Notwithstanding the provisions of this Article, other relevant provisions of the

commercial code shall have an effect.

32. Other Securities Exchanges and Trading Platforms

1/ The Authority may grant license to other securities exchanges or derivatives

exchanges or over-the-counter trading platforms which shall be established as
share companies.

2/ The Authority shall determine, by a directive, minimum capital requirements,

fit and proper criteria, conditions of work and management, evidence of
competence, and any other requirements for licencing under sub-article (1) of
this Article.

33. Administrative Measures against a Securities Exchange and Trading

Platforms

1/ The Authority may direct, by notice in writing, that a securities exchange or

derivative exchange shall be closed for such period as may be specified in the
direction, where:
a) there is a major market disruption which prevents the market from
accurately reflecting price signals based on the forces of demand and
supply for such securities;
b) there is a threatened or actual manipulation of the market;
c) the Authority considers it necessary or beneficial in the interest of the
public or for the protection of investors’ interest; or
d) there is in place, an act of Government affecting the trading of
securities.

2/ The Authority may take such steps as it considers necessary to:

a) maintain or restore a fair, efficient, and transparent trading in
securities or any classes of securities or exchange-traded derivative
contracts; or

23
 b) liquidate any position in respect of any securities or any classes of
securities or exchange-traded derivative contracts.

3/ The Authority may suspend the license of an Exchange for such period or
until the occurrence of such event as the Authority may specify if the
exchange:
a) carries out any activity outside the scope of the exchange or approved
activities;
b) has contravened or failed to comply with any condition applicable in
respect of the license;
c) fails to comply with a direction of the Authority;
d) fails to provide the Authority with such information as it may require;
e) provides false or misleading information; or
f) is in breach of any other provision under this Proclamation or
regulations or directives issued thereunder.

4/ A suspension of a license under sub-article (3) this Article shall not exceed a
period of 3 (three) months; the Authority, if deemed necessary, may extend
the suspension for a further period not exceeding three months.

5/ The Authority shall, at the expiry of the suspension period specified under
sub-article (4) this Article, lift the suspension or revoke the license, as the
Authority considers appropriate.

6/ The Authority may revoke the license of an Exchange if the Exchange:

a) goes into liquidation or an order is issued for its winding up;
b) fails to rectify the failings that led to the suspension of its license
within the specified time given by the Authority;
c) has requested it and its request is accepted by the Authority;
d) has committed a violation that has led to suspension of its license in
the past; or
e) for any other reason, is no longer a fit and proper person to hold the
license.

7/ The authority, before deciding to revoke the license pursuant to sub-article (6)
of this Article, shall notify the licensed person by a letter to submit his
objection in writing, if any.

8/ If the objection of the licensed person is not found to be satisfactory or the

licensed person fails to submit his objection within 30 (thirty) days of receipt
of Authority’s letter, his license shall be revoked.

9/ The decision to revoke the license of an Exchange shall be published by the

Authority in a newspaper of wide circulation.

10/ The revocation of license shall become effective on the date of its publication
or on any other date as the Authority may specify.

34. Management of a Securities Exchange

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 1/ The affairs of a securities exchange shall be managed by a board of directors
whose members shall be elected by the shareholders of the securities
exchange.

2/ Notwithstanding sub-article (1) of this Article, the election of board of

directors of the securities exchange shall be effective subject to consent of the
Authority.

3/ Under sub-article (1) of this Article, if the Authority does not express its
objection within 30 (thirty) days, the election of board of directors of the
securities exchange shall be considered as having received the consent of the
Authority.

4/ A member of the board of directors of a securities exchange shall at all times,

while remaining in his position, be subject to the following conditions:
a) not have been convicted of a crime of breach of honour or trust;
b) not have been declared bankrupt under a final judgment;
c) be of good reputation; and
d) continuously work towards improving his qualification and experience
in finance, management, economics, legal, or related affairs.

5/ The board of a securities exchange shall ensure that the exchange is operated
in compliance with this Proclamation, as well as regulations and directives
made in accordance with this Proclamation, and the exchange’s own rules and
shall:
a) be responsible for the general oversight of the affairs of the exchange;
and
b) oversee the administrative affairs of the exchange in order to ensure
sound financial management structures and processes.

6/ The members of the board of directors of a securities exchange shall

individually and collectively be responsible for any non-compliance with the
provisions of this Proclamation, as well as regulations and directives made in
accordance with this Proclamation.

7/ A securities exchange shall have a chief executive officer or more appointed

by the board of directors of the exchange; and subject to consent of the
Authority.

8/ Under sub-article (7) of this Article, if the Authority does not express its
objection within 30 (thirty) days, the appointment of the chief executive
officers of the exchange shall be considered as having received the consent of
the Authority.

9/ It is prohibited to conjoin the position of the chairman of the board of

directors with the position of the chief executive officer of a securities
exchange.

35. Rules of a Securities Exchange

Subject to the approval of the Authority, a securities exchange shall make such rules
or procedures of the exchange as it considers necessary or desirable for the proper and

25
 efficient regulation, operation, management and control of the exchange and the
securities market operated by the exchange.

36. Responsibilities of a Securities Exchange

A securities exchange shall be responsible for:

1/ Monitoring, surveillance and supervision of the exchange and its members to

ensure fairness, efficiency, transparency, and investor protection, as well as
compliance with the securities regulatory framework.

2/ Having a market’s dispute resolution and appeal procedures as appropriate,

technical systems standards and procedures related to operational failure,
recordkeeping system, reports of suspected breaches of law, arrangements for
holding client funds and securities, if applicable, and information on how
trades are cleared and settled.

3/ Ensuring that the trading venue has in place suitable trading control
mechanisms including trading halts, volatility interruptions, limit-up/limit-
down controls and other trading limitations to deal with volatile market
conditions.

4/ Having mechanisms to monitor open positions, or credit exposures, on

unsettled trades that are sufficiently large to pose a risk to the market or to the
Securities Depository and Clearing Company.

5/ Making sure that execution rules and trade order routing procedures are
clearly disclosed to the Authority and to market participants and consistently
applied to all participants.

6/ Providing equal opportunity to all system users to connect, and maintain the
connection to, the electronic trading system.

7/ Designing systems and controls to enable the management of risk about fair
and orderly trading including, in particular, automated pre-trade controls that
enable members to implement appropriate risk limits.

8/ Providing market participants equitable access to market rules and operating

procedures.

9/ Providing members access to relevant pre- and post-trade information on a

real-time basis.

10/ Ensuring the existence of a management that is aware of the risks associated
with its business and operations.

11/ Prioritizing the public interest in case of a conflict of interest with the
securities exchange or its members, shareholders or management.

12/ Adhering to provide and operate its services in accordance with the directives
issued by the Authority.

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 13/ Adhering to organize its operations, standards of its practices and its
members’ behaviours in accordance with the rules, policies and procedures of
the securities exchange.

14/ Adhering to organize the operations and standards of practices of the

companies listed therein and their employees in accordance with the
governing regulations.

15/ Maintaining the confidentiality of all information under its custody with
respect to its members and customers, unless it is required by law to publish
or disclose such information; not disclose such information except for the
Authority or by an order from the Authority or the court.

16/ Issuing rules with requirements for providing pre-trade information, post-trade
information and information on completed transactions on an equitable basis
to all market participants.

37. Information Sharing, Reporting, and Assistance to the Authority

1/ A securities exchange shall provide such assistance to the Authority as the

Authority may reasonably require for the performance of its functions and
duties, including the furnishing of such returns and information relating to its
business or in respect of dealings in securities or any other specified
information as the Authority may require for the proper implementation of
this Proclamation.

2/ A securities exchange shall inform the Authority immediately about the

following issues:
a) if found that one of its members does not comply with any of the
securities exchange’s rules or its financial resources’ regulations;
b) if it deemed there is a financial irregularity or any other situation that
may indicate inappropriateness of the member or his incapacity to
fulfil his obligations; or
c) any disciplinary action is taken against any member, operator, or his
subordinates.

3/ The board of directors of an exchange shall inform the Authority of any

disciplinary action taken against any of its members under sub-article (2) (c)
of this Article, the details of the violation committed, and the procedures taken
and the penalty imposed. The Authority shall be provided with copies of all
documents related to the subject.

38. Amendment to Rules of a Securities Exchange

1/ A securities exchange that wishes to make any amendment (whether by way

of rescission, alteration or addition) to its rules shall submit a draft of the
proposed amendment to the Authority for approval.

2/ The Authority may, within 28 (twenty eight) days after receipt of a draft in
accordance with sub-article (1) of this Article, by notice to the exchange
concerned disallow the amendment; whereupon the amendment, if made,
ceases to have force or effect.

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 3/ If no such notice is given within 28 (twenty eight) days after the proposed
amendment was submitted to the Authority , the proposed amendment shall be
deemed to have been approved.

4/ The Board of Authority may direct a securities exchange to prepare specific

provisions within its scope of work or amend its rules within a certain period.

5/ If the securities exchange fails to abide by the request or to meet the request
within the specified period under sub-article (4) of this Article:
a) the Authority may prepare the rules or amend them on behalf of the
securities exchange at the expense of the latter; and
b) the exchange shall have the obligation to abide by these amended
rules.

PART FIVE
SECURITIES DEPOSITORY AND CLEARING COMPANY

39. Licensing

1/ No Person shall incorporate a Securities Depository and Clearing Company or

provide securities depository, clearing, or related services without obtaining
license from, or its license approved by, the Authority in accordance with this
Proclamation.

2/ A Security Depository and Clearing Company license may only be granted to

a share company that meets minimum capital requirements, fit and proper
criteria, conditions of work and management, evidence of competence, and
any other requirements to be specified by directive of the Authority.

3/ The Authority shall specify the conditions required for granting a license
under sub-article (2) of this Article and its procedures in a directive.

4/ Notwithstanding the provisions of this Article, other relevant provisions of the

commercial code shall have an effect

40. Obligations of Security Depository and Clearing Company

A company licensed by the Authority as Security Depository and Clearing Company

shall abide by the following obligations:

1/ Arrange for fair and effective clearing and settlement in relation to any
commercial transactions of securities.

2/ Manage risks associated with its activity and operation at the highest levels of
professionalism.

3/ Prioritize to the public interest and that of those who deal with the company
over the company’s own interests.

4/ Manage its services according to the related rules approved by the Authority.

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 5/ Maintain confidentiality of all information and data under its possession,
except what is required by the Authority or the judicial authorities.

6/ Provide its services with an up-to-date technology and automated systems in

line with international standards approved by the Authority or as requested or
decided by the Authority.

41. Rules and Regulations

1/ The Authority shall require the Security Depository and Clearing Company to
prepare rules and regulations related to the operations of clearing, settlement,
and registration of securities and other activities that relate to the company’s
business, or to amend the same within a certain period.

2/ If the Security Depository and Clearing Company does not comply with the
requirements under sub-article (1) of this Article within the specific period:
a) the Authority may prepare or amend the said rules on behalf of the
Security Depository and Clearing Company at the expense of the
latter; and
b) the Security Depository and Clearing Company shall have the
obligation to abide by these.

3/ No rules issued by the Security Depository and Clearing Company nor

amendments thereto, either by withdrawal, replacement or change, or addition
thereof, shall be valid and effective unless they are approved by the Authority.

4/ When proposing new rules or amendments, the Security Depository and

Clearing Company shall provide the Authority with the reasons and objectives
of the proposed new rules or amendments, and highlight the desired effects.

5/ The Authority may approve, disapprove or amend new rules and amendments
under sub-article (4) of this Article, and inform the Security Depository and
Clearing Company in writing of its resolution within at latest one week of the
resolution date.

6/ In case of noncompliance by any trader with the clearing rules, the Security
Depository and Clearing Company may penalize that trader to pay the charges
resulting from his noncompliance.

42. Securities Registration

1/ The following securities shall be registered at a central securities depository:

a) Publicly offered securities; and
b) Other securities, the issuers of which authorize the Security Depository
and Clearing Company to act as their transfer agents.

2/ Public companies and other issuers under sub-article (1) of this Article shall
register the types of their securities and information on owners of the
securities at the central securities depository.

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43. Custody and Recordkeeping

1/ The Security Depository and Clearing Company shall provide custody and
safekeeping for securities immobilized at its vaults.

2/ The Security Depository and Clearing Company shall create a computerized

book-entry system to record changes of ownership electronically, using a
computerized book-entry system, for securities that are dematerialized.

3/ The records of securities ownership maintained by the issuer shall be replaced

with electronic records of securities ownership in the book-entry register
maintained by the central securities depository.

4/ The Security Depository and Clearing Company shall create a global

certificate to replace the securities certificates under sub-article (3) of this
Article, for purposes of dealing, attending the general assembly, making
interest and dividend payments, pledging the security, and using priority and
other rights, according to the provisions stipulated by this Proclamation and
related regulations or directives issued in execution thereof.

5/ The Security Depository and Clearing Company shall maintain and update
electronic ownership records of dematerialized securities and responds to
inquiries of issuers, owners and other interested parties.

6/ The Security Depository and Clearing Company shall carry out all tasks it
deems appropriate for the completion of securities registration, transfer of
ownership of securities, and recording of related data, including obtaining
from nominees the names of beneficial owners and their ownership of
securities.

44. Clearing and Settlement

1/ The Security Depository and Clearing Company shall clear securities

transactions for the account of its members to determine the rights and
liabilities of every member.

2/ The Security Depository and Clearing Company shall settle securities

transactions by delivery versus payment.

3/ The period between the trade date and settlement date of a transaction under
sub-article (2) of this Article may not exceed the period specified by the
Security Depository and Clearing Company rules.

4/ The discharge of settlement obligations between Security Depository and

Clearing Company members shall be effected by book-entry made by the
central securities depository on securities accounts opened on the book-entry
register.

5/ The ownership of securities shall not be transferred before the settlement and
clearing of their transaction.

6/ The Security Depository and Clearing Company rules shall:

30
 a) specify the operations and relevant procedures pertaining to the
clearing and settlement of securities; and
b) be valid and binding on all participants of the central securities
depository itself and any other party participating in the central
securities depository.

45. Finality of Securities Ownership Transfer

1/ A Securities Depository and Clearing Company shall specify the rules to

achieve finality of securities transfer in its operations and to establish
irrevocability of orders once these have entered into the books of the system.

2/ The book-entry that has been effected in terms of rules issued under sub-
article (1) of this Article shall be final and may not be revoked, reversed, or
set aside, including, without limitation, by insolvency or bankruptcy
proceedings or any other law or practice similar in purpose and effect and is
not subject to any provision of law or order of an administrative or judicial
authority that operates as a stay of that securities transfer.

3/ The Authority may issue directives to prescribe finality of a securities trade,

settlement, netting, and loss allocation and apportionment.

46. Winding Up or Placement in a Scheme of Arrangement of a Participant

Notwithstanding any provision of law to the contrary relating to insolvency or

bankruptcy, the winding up or the opening of scheme of arrangement of a central
securities depository member shall not affect the finality or irrevocability of any
book-entry or securities transfer which became final and irrevocable in accordance
with Article 45 of this Proclamation before the copy of the relevant order or decision
was lodged with the Securities Depository and Clearing Company.

47. Arrangements and Rules Binding Liquidators

Notwithstanding any provision of law to the contrary relating to insolvency or

bankruptcy, if a participant is wound up or placed in a scheme of arrangement or
otherwise declared insolvent by court, any arrangement in relation to the central
securities depository to which the participant is a party or any netting rules or
practices applicable to the central securities depository shall be binding upon the
liquidator.

48. Collateral for Securities Transfer and Settlement Obligation

The rights and remedies of an operator, a participant, a clearing house, a central

counterparty on collateral granted to it as security for a securities transfer or the
performance of an obligation incurred in a central securities depository may not be:

1/ affected by insolvency or bankruptcy proceedings or any other law similar in

purpose and effect; or

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 2/ the subject of any stay provision or order affecting the ability of creditors to
exercise rights and remedies on the collateral.

49. Prohibition in Dealings in Book-Entry Securities

A Securities Depository and Clearing Company shall not purchase, acquire, or deal in
book-entry securities as principal other than for a purpose and in a manner that may
be permitted by the Authority.

50. Reporting on Counterparties

The Security Depository and Clearing Company shall inform the Authority at the
earliest of the following:

1/ If it found that any of its counterparty became unable to abide by any of the
rules applicable to operations of clearing and settlement.

2/ If it deemed that the financial position of counterparty and his ability to fulfil
his obligations has given signs of instability, or his ability to fulfil his
obligation has already become unstable.

51. Business Continuity and Disaster Recovery

1/ In case of disaster, crises and disturbance, which may result in substantial

effects in the market, the Authority may direct the Security Depository and
Clearing Company to amend or suspend any of its rules.

2/ If the Security Depository and Clearing Company fails to comply with the
Authority’s directions issued pursuant to sub-article 1 of this Article, the
Authority may take any procedure deemed necessary to maintain the fair
settlement and efficiency of the commercial transactions of securities or any
category thereof.

52. Administrative Measures against a Security Depository and Clearing

Company

1/ The Authority may suspend the license of a Securities and Clearing Company
for such period or until the occurrence of such event as the Authority may
specify if the company:
a) carries out any activity outside the scope of approved activities;
b) has contravened or failed to comply with any condition applicable in
respect of the license;
c) fails to comply with a direction of the Authority;
d) fails to provide the Authority with such information as it may require;
e) provides false or misleading information; or
f) is in breach of any other provision under this Proclamation or
regulations or directives issued thereunder.

2/ A suspension of a license under sub-article (1) of this Article shall not exceed
a period of 3 (three) months; the Authority, if deemed necessary, may extend
the suspension for a further period not exceeding three months.

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 3/ The Authority shall, at the expiry of the suspension period specified under
sub-article (2) this Article, lift the suspension or revoke the license, as the
Authority considers appropriate.

4/ The Authority may revoke the license of a Security Depository and Clearing
Company if the company:
a) goes into liquidation or an order is issued for its winding up;
b) fails to rectify the failings that led to the suspension of its license
within the specified time given by the Authority;
c) has requested to return its license and its request is accepted by the
Authority;
d) has committed a violation that has led to suspension of its license in
the past; or
e) for any other reason, is no longer a fit and proper person to hold the
license.

5/ The authority, before deciding to revoke the license pursuant to sub-article (4)
of this Article, shall notify the licensed person by a letter to submit his
objection in writing, if any.

6/ If the objection of the licensed person is not found to be satisfactory or the

licensed person fails to submit his objection within 30 (thirty) days of receipt
of Authority’s letter, his license shall be revoked.

7/ The decision to revoke the license of an Exchange shall be published by the

Authority in a newspaper of wide circulation.

8/ The revocation of license shall become effective on the date of its publication
or on any other date as the Authority may specify.

53. Priority Right Procedures

If a person is subject to insolvency, bankruptcy, liquidation or appointment of a

receiver on his properties, the clearing and settlement procedures of the Security
Depository and Clearing Company shall have priority over any procedures or other
debts.

54. Government Securities

1/ Notwithstanding the provisions of this Part and any provisions to the contrary,
the National Bank of Ethiopia shall have an autonomous power to:
a) Establish, own, operate, participate and regulate central securities
depository for Government securities;
b) Issue directives to determine manner of dematerialization and
immobilization of Government securities;
c) Issue directive to determine rules and regulations related to the
operations of central securities depository, clearing, settlement and
registration of Government securities; and
d) Register government securities at its central securities depository.

2/ Finality of securities transfer provided under sub-articles (1) and (2) of Article
45 and provisions of collateral for securities transfer and settlement

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 obligations under Article 48 of this Proclamation as the case may appropriate
shall apply mutatis mutandis to Government securities.

55. Special Authorization

Notwithstanding any provisions of this Proclamation to the contrary, the Authority

may, with special terms and conditions, authorize the National Bank of Ethiopia to
provide securities depository and clearing services to private securities traded at the
securities exchange.

PART SIX
LICENCING OF CAPITAL MARKET SERVICE PROVIDERS
56. Regulated Capital Market Activities and Services

1/ The following capital market activities shall be regulated under this

Proclamation:
a) buying, selling and dealing in securities,
b) investment advice,
c) underwriting,
d) fund management,
e) corporate finance advice relating to acquisitions, mergers, divestures,
combinations and other activities that involve buying, selling, and
exchanging securities,
f) custodial services,
g) collective investment schemes,
h) credit rating services, and
i) any other activity deemed by the Authority as a regulated activity
pursuant to this Proclamation.

2/ Sub-article (1) (b) of this Article shall not apply to any of the following
persons, to the extent that the advice in securities to others is incidental to the
ordinary course of their business:
a) A legal practitioner registered and recognized by pertinent government
organ;
b) A public accountant or public auditor registered and recognized by
pertinent government organ; and
c) The printer or publisher of a newspaper, magazine or other periodicals
in which advice, in regard to securities analyses or reports are
published to the public and the advice in regard to securities is
incidental to the ordinary course of a business of the printer or
publisher, as the case may be.

3/ Regulated capital market activities shall only be undertaken by the following

persons who hold a capital market services license for that activity:
a) Securities Broker,
b) Investment Adviser,
c) Collective Investment Scheme Operator,
d) Investment Bank,
e) Securities Dealer,
f) Custodian,

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 g) Market Maker,
h) Credit Rating Agency,
i) Appointed representative of a capital service provider, and
j) Any person who conducts or participates in any activity that is deemed
by the Authority to be an activity in securities to be regulated in
accordance with the purposes of this Proclamation.

4/ The capital market services license is issued by the Authority to any person
who satisfies the fit and proper criteria, minimum capital requirements,
internal organization and risk management, and other regulatory and
supervisory requirements to be determined by directive of the Authority.

5/ A person licensed to engage in regulated capital market activities shall

establish a compliance system aimed at preventing, detecting, and correcting
securities law violations.

6/ A person licensed to engage in regulated capital market activities shall comply

with the rules and regulations of a self-regulatory organization to which it
belongs.

7/ A person who conducts a regulated activity on behalf of a capital market

service provider is required to be a licensed appointed representative.

8/ The Authority shall determine the requirements for obtaining license for
appointed representative in a directive.

9/ A person may be licensed to perform two or more capital market activities and
the Authority shall determine the terms and conditions for granting such
licenses, as well as the criteria for performing such activities in a directive.

10/ The Authority may request from persons licensed to engage in capital market
activities to submit periodic reports on all their activities, including annual
reports and audited financial statements.

11/ In relation to sub-article ( 10) of this Article, the Authority may review and
check all of the records of a person licensed to engage in capital market
activities, and may take copies of these records or request a licensed person to
submit copies thereof.

57. Fit and Proper Persons

1/ For purposes of this Proclamation, in considering whether a person is a fit and

proper person, the Authority shall have regard to the:
a) Financial status;
b) Educational or other qualifications or experience with respect to the
nature of the application;
c) Ability to perform his proposed function efficiently, honestly and
fairly; and
d) Reputation, character, financial integrity and reliability of the
applicant.

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 2/ For the purposes of this Proclamation, the Authority may have regard to any
information in the possession of the Authority, whether furnished by the
applicant or not in considering the fit and proper requirement.

3/ For the purpose of sub-article (1) of this Article, the Authority may take into
account any matter relating to:
a) Any person who is or is to be employed by, or associated with, the
applicant for the purposes of the proposed business to which the
application relates;
b) Any person who will be acting as a representative in relation to such
business;
c) Where the applicant is a company, any substantial shareholder,
director or officer of the company, any other company in the same
group of companies or to any director or officer of any such company;
and
d) Where the applicant is a foreign investor, whether that investor meets
the minimum requirements for foreign investors stipulated under
Investment Proclamation No. 1180/2020.

4/ A “substantial shareholder” in sub-article (3) of this Article means, in relation

to a company, a person who has an interest in shares in the company:
a) The nominal value of which is equal to or more than five percent (5%),
or such other percentage as the Authority may determine by a
directive, of the issued share capital of the company; or
b) Which entitles the person to exercise or control the exercise of five
percent (5%) or such other percentage as the Authority may determine.

58. Applications for License

1/ An application for a license shall be made to the Authority in the prescribed

form and shall be accompanied by the prescribed fee.

2/ In the case of an application for renewal of a license, such application shall be

made not later than one month before the expiry of the license.

3/ The applicant may be required to supply the Authority with such further
information, in relation to the application, as the Authority considers
necessary.

59. Refusal to Grant or Renew a License

1/ The Authority may refuse to grant or renew a license for a person to engage in
regulated capital market activities, or any person related to it, if it were given
evidence that the person has:
a) given misleading information;
b) omitted a material fact when applying for a license or failed to mention
any other information that should be submitted to the Authority;
c) failed to meet the fit and proper criteria, minimum capital
requirements, internal organization and risk management, and other
regulatory and supervisory requirements for obtaining a license to be
determined by directive of the Authority;

36
 d) become incapable mentally or physically of performing the activities
to which the licence relates; or
e) violated any provision of this Proclamation or regulations or directives
issued thereunder.

2/ The Authority may not refuse to grant or renew a license without first giving
the applicant or the holder of a license an opportunity of being heard.

60. Suspension of a License

1/ The Authority may suspend the license of any person engaged in regulated
capital market activities on the grounds that the licensed person:
a) fails to discharge obligations of a licensed person as specified under
this Proclamation or regulations or directives issued thereunder;
b) fails to provide timely and accurate information upon the request of
the Authority;
c) violates or breaches any conditions or restrictions applicable in respect
of the license or any other provision in this Proclamation or
regulations or directives issued thereunder;
d) fails to carry out the activity for which the person was licensed for 12
(twelve) months following the granting or renewal of the license; or
e) fails to prevent one of his affiliates or subordinates from acting in a
way that violates the provisions of this Proclamation or regulations or
directives issued thereunder.

2/ Notwithstanding sub-article (1) of this Article, the Authority shall notify the
licensed person in writing the cause of the suspension and measures need to
be taken within reasonable period of time to rectify the shortcomings that led
to the suspension.

3/ The Authority may not suspend a license without first giving the applicant or
the holder of a license an opportunity of being heard.

4/ A person whose license has been suspended by the Authority shall be

prohibited from engaging in any regulated activity starting from the effective
date of suspension of its license.

61. Revocation of a License

1/ The Authority may revoke a license under this part on the following grounds:
a) it is confirmed that the license was obtained on the basis of false or
wrong information;
b) the licensed person ceases to carry out regulated activity by his own
choice;
c) the licensed person fails to rectify the failings that led to the
suspension of his within the specified time given by the Authority;
d) the licensed person has utilized the license for unauthorised activity
and purpose;
e) the licensed person has committed a violation that has led to
suspension of its license in the past; or
f) the licensed person has been declared bankrupt or insolvent.

37
 2/ The authority, before deciding to revoke the license pursuant to sub-article (1)
of this Article, shall notify the licensed person by a letter to submit his
objection in writing, if any.

3/ If the objection of the licensed person is not found to be satisfactory or the

licensed person fails to submit his objection within 30 (thirty) days of receipt
of Authority’s letter, his license shall be revoked.

4/ The decision to revoke the license of a licensed person shall be published by

the Authority in a newspaper of wide circulation.

5/ The revocation of license shall become effective on the date of its publication
or on any other date as the Authority may specify.

6/ In case of revocation a license or failure of a licensed person, the Authority

may require the licensed person to:
a) move clients’ accounts to another capital market service provider;
and/or
b) request the appointment of a monitor, receiver, curator or other
administrator
to take possession or control of the assets held by a licensed person or a third
party on behalf of the licensed person.

62. Membership to a Self-regulatory Organization

Notwithstanding the rights of applicants provided under this Part, the Authority may
issue a directive requiring capital market service providers to be members of a self-
regulatory organization as a requirement for the granting of license or for its renewal.

63. Review of Accounts and Internal Control procedures

1/ A licensed person shall establish and maintain books, records, and detailed
and accurate accounts that reflect transactions or transfers of ownership of the
assets related to such licensed person, in accordance with accounting
standards set out by the pertinent government organ.

2/ A licensed person shall maintain the records, books and accounts for ten years
(10) from the day of preparation thereof, or until any dispute between the
licensed person and a client is resolved, whichever is higher, during which
they should be available for review if requested.

3/ These documents shall be subject to inspection and auditing at all times by the
Authority or whoever is assigned by the Authority to do so.

4/ A licensed person shall maintain records concerning client identity and

maintain records that permit tracing of funds and securities in and out of
brokerage and bank accounts related to securities transactions.

5/ A licensed person shall establish an internal control system in relation to

review of accounts, and abide by the following:
a) Develop guidelines and procedures for supervision, risk management
and prevention of conflict of interests;

38
 b) Execute the operations according to general or special authorization
obtained from a relevant department;
c) Ensure independence of disposition of assets under general or special
authorization from a relevant department;
d) Compare registered assets during appropriate periods of time and take
the necessary actions towards any material changes; and
e) Record transactions to allow preparation of financial statements in
accordance with the standards set out by a pertinent government organ.

64. Appointment of External Auditors

1/ Every licensed person shall appoint an external auditor approved by the

Authority.

2/ A person may not be qualified for appointment as an external auditor of a

licensed person if:
a) he is a shareholder, director, or employee of the licensed person;
b) he is a spouse or relative by consanguinity or affinity to the first
degree to a person falling within the categories provided under
paragraph (a) of this sub-article; or
c) it is a firm of auditors of which any partner or auditing team falls
within the categories provided under paragraph (a) or (b) of this sub-
article.

3/ The Authority may issue directives from time to time on the minimum
professional knowledge and experience required of external auditors
appointed to perform audits of a licensed person.

PART SEVEN
CAPITAL MARKET TRIBUNAL
65. Establishment of the Capital Market Administrative Tribunal

The Capital Market Tribunal (hereunder the “Administrative Tribunal”) is hereby

established by this Proclamation to hear appeals against decisions of the Authority.

66. The Jurisdiction of the Administrative Tribunal

The Administrative Tribunal shall have jurisdiction to hear and determine appeals of
the decisions of the Authority or a person exercising the functions or powers of the
Authority.

67. Appointment of Members of the Administrative Tribunal

1/ The Prime Minister shall appoint five members to the Administrative

Tribunal.

2/ Members of the Administrative Tribunal shall constitute:

39
 a) Chairperson and vice chairperson, who shall have similar
qualifications to a person who is eligible to be a judge of the Federal
High Court; and
b) Three other members with knowledge and experience in law,
securities, commerce, finance or accountancy.

3/ A member of the Administrative Tribunal:

a) may be appointed as either a full-time or part-time member;
b) shall be appointed for an initial term of five (5) years and shall be eligible
for re-appointment for a further one term; and
c) shall hold office on such terms and conditions, including in relation to
remuneration and attendance fees, as determined by the Government.

68. Disqualification of Members of the Administrative Tribunal

A person shall not be appointed as a member of the Administrative Tribunal if he:

1/ is declared bankrupt;

2/ is an employee of the Authority or persons licensed by the Authority; or

3/ has been convicted of an offence under any law and sentenced to

imprisonment for a period exceeding 6 (six) months.

69. Administration of the Administrative Tribunal

1/ The Chairperson of the Administrative Tribunal shall be responsible for

managing the administrative affairs of the Tribunal.

2/ The Administrative Tribunal shall have a Registrar and such other staff as the
Chairperson determines.

70. Budget and Accounts of the Administrative Tribunal

1/ The budget of the Administrative Tribunal shall be allocated by the

Government.

2/ The Administrative Tribunal shall keep complete and accurate books of

account.

3/ The books of account and other financial documents of the Administrative

Tribunal shall be audited by the Federal Auditor-General or by an auditor
designated by the Federal Auditor-General.

71. Annual Report of the Administrative Tribunal

1/ The Chairperson of the Administrative Tribunal shall prepare a report of the

affairs of the Tribunal for each fiscal year.

2/ A report under sub-article (1) of this Article for a fiscal year shall be
submitted to the Prime Minister within 3 (three) months after the end of the
fiscal year.

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72. Filing of an Appeal

1/ A person may appeal to the Administrative Tribunal against the decision of the
Authority by filing a notice of appeal to the Registrar, accompanied by the
prescribed fee, within 28 (twenty eight) days of service of notice of the
decision.

2/ Notwithstanding sub-article (1) of this Article, an appeal may be instituted out

of time if the Administrative Tribunal is satisfied that there was a reasonable
cause for not appealing within the time prescribed and that the appeal was
filed thereafter without unreasonable delay.

3/ A notice of appeal shall specify the grounds of appeal and be in such form and
manner as may be prescribed by Administrative Tribunal.

4/ The Authority shall, within seven days, after receiving a notice of appeal,
forward to the Administrative Tribunal copies of all documents related to the
decision appealed from.

73. Proceedings of the Administrative Tribunal

1/ The Chairperson of the Administrative Tribunal shall serve as a member of

one of the panels of the Tribunal.

2/ The Chairperson of the Administrative Tribunal shall assign a member or

members to the hearing of an appeal as the Chairperson considers
appropriate having regard to the issues raised by the appeal.

3/ The Administrative Tribunal shall have the power, given to an ordinary court
under civil procedure code, to execute its own decision, decree, order and the
court procedure.

74. Decision of the Administrative Tribunal

1/ The Administrative Tribunal shall hear and determine an appeal and make a
decision.

2/ The Administrative Tribunal shall decide an appeal within 60 (sixty) days

after the notice of appeal was filed.

3/ The Chairperson of the Administrative Tribunal may, by notice in writing to

the parties to an appeal, extend the period for deciding the appeal for a period
not exceeding 30 (thirty) days having regard to the complexity of the issues in
the case and the interests of justice.

4/ A failure by the Administrative Tribunal to comply with sub-article (2) or (3)

of this Article shall not affect the validity of a decision made by the Tribunal
on the appeal.

5/ The Administrative Tribunal may dispose of an appeal by:

a) confirming, varying or setting aside an original order, or decision;

41
 b) remitting the matter in question to the Authority with such directions
as it considers appropriate; or
c) making any other order which the Administrative Tribunal considers
appropriate

6/ Under sub-article (5) (a) of this Article, where the original order or decision is
set aside, the Administrative Tribunal may substitute the order or decision as
it considers appropriate.

7/ The Administrative Tribunal shall serve a copy of the decision on an appeal

on each party to the appeal within 7 (seven) days of the making of the
decision.

8/ The Administrative Tribunal’s decision shall include the reasons for the
decision and the findings on material questions of fact, and reference to the
evidence or other material on which those findings were based.

9/ The decision of the Administrative Tribunal on an appeal shall come into

operation upon giving of the decision or on such other date as may be
specified by the Administrative Tribunal in the notice of the decision.

75. Appeal to the Federal High Court

A party to a proceeding before the Tribunal who is dissatisfied with the decision of
the Tribunal may, within 30 (Thirty) days after being served with notice of the
decision, file a notice of appeal, on question of law only, to the Federal High Court.

PART EIGHT
PUBLIC OFFERING AND TRADING OF SECURITIES
76. Registration of Securities

1/ A publicly traded security shall be registered, prior to the offer or placement,

by the Authority.

2/ he issuer of a security or his representative must sign and file a statement of

registration, with the Authority, in the prescribed form relating to the security
together with the prescribed fee.

3/ The Authority shall determine, by directive, information required for

registration statements.

4/ The registration of securities shall not apply to any of the following class of
securities:
a) Offering of securities issued by the Government of Ethiopia;
b) Sale of securities under court judgments or rulings;
c) Sale of securities of asset management companies in case of
bankruptcy or insolvency;
d) Securities offered in private placement; and
e) Any other class of securities that the Authority shall, from time to
time, determine as exempted securities, by directive.

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 5/ Privately issued securities shall not be publicly traded.

6/ The Authority shall determine requirements for private placement of securities

in a directive.

7/ The Authority shall determine registration statement requirements for an

emerging growth company by directive.

8/ The Authority shall determine, by directive, registration statement

requirements for securities traded in over-the-counter markets.

77. Prospectus for Securities Issued by Companies

1/ An issuer of securities shall obtain approval from the Authority for its
prospectus prior to issuing or advertising any securities for a public offering.

2/ The prospectus under sub-article (1) of this Article shall be accurate,

sufficiently clear, comprehensive and reasonably specific and timely.

3/ Notwithstanding sub-article (2) of this Article, the Authority may issue

specific requirements of the prospectus, including advertisement of public
offerings, in a directive.

4/ The Authority may refuse the prospectus for any of the following reasons:
a) the prospectus is not in accordance with the provisions of the
commercial code, this Proclamation, or any other requirements to be
issued in a directive by the Authority; or
b) the prospectus contains any inaccurate or incomplete statement that
may influence the decision of the subscriber.

5/ 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.

78. Ongoing Disclosure Obligations

1/ An issuer of securities that are the subject of a public offer, or which are
publicly held, shall inform the Authority, members of the issuer and other
holders of its securities as soon as reasonably practicable of any information
relating to the issuer and its subsidiaries, if any, that:
a) is necessary to enable them and the public to appraise the financial
position of the issuer and of its subsidiaries; and
b) is necessary to avoid the establishment of a false market in its
securities, or might reasonably be expected to materially affect market
price of its securities.

2/ All issuers of public offerings shall disclose their audited financial statements
in accordance with directives issued by the Authority or rules issued by the
securities exchange and approved by the Authority.

43
 3/ The Authority may require the securities exchange to take all necessary
actions to urge listed companies to expedite the disclosure of any material
changes that may occur in any of these companies.

4/ Any person may, for a fee specified by the Authority, have access to or obtain
copies of periodic publications, reports, information and statements kept at a
securities exchange, which was announced or disclosed.

5/ Once registered securities are issued, the issuer must keep the public informed
of all matters which affect the value of the securities, immediately upon their
becoming known to the directors of the issuer, by placing an advertisement in
a newspaper of general circulation and by reports to the Authority and to any
securities exchange on which they are listed.

6/ Notwithstanding sub-article (5) of this Article, the Authority may issue

additional requirements regarding disclosure of material information in a
directive.

79. Offer of Asset-Backed Securities

1/ An offer of asset-backed securities shall be made only if they are issued by a

special purpose vehicle.

2/ The Authority shall issue a directive regarding rules and regulations:

a) on products and activities related to securitization and asset backed
securities; and
b) with respect to issuer of an asset backed security to disclose, for each
class of security, information regarding to the asset backing that
security.

3/ The Authority may prescribe, by directive, the contents of a prospectus or

offering memorandum taking into consideration on the classification of the
issue or offer and the nature of the assets backing the securities or such other
factors that the Authority may consider appropriate.

4/ A person shall not issue, offer for subscription purchase, or invite the
subscription or purchase of asset-backed securities to the public or to
restricted investors, except in accordance with this Part or approval by the
Authority.

PART NINE
DISCLOSURE OF INTERESTS
80. Definition

For the purpose of this Part, an “Interested Person” means any person who has an
interest that represents five (5) percent or more in the capital of a company listed on
an Exchange, whether directly, indirectly, or in alliance with others.

81. Submitted Information

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 1/ An interested person shall, within a period of 5 (five) days from acquiring the
interest, send an authenticated and signed statement to the Authority, the
exchange where the securities are traded, and to the issuer of those securities.
2/ The Authority shall determine, in a directive, the information content of the
statement in sub-article (1) of this Article.

3/ Any share company listed on an exchange shall disclose the names of

interested persons and any change in their shareholding.

4/ The Authority may specify, in a directive, procedures and timing for the
disclosures under sub-article (3) of this Article.

5/ The exchange in which a security is listed shall announce the information

received concerning the disclosures of interests under sub-articles (1) and (3)
of this Article immediately upon receipt thereof as specified by directive of
the Authority.

6/ A person under the obligation of disclosure shall be held liable for any
damages incurred by the Authority, the exchange or a third party as a result of
a failure to disclose the interest according to the provisions of this
Proclamation and directives issued by the Authority.

82. Notification of Changes

1/ An interested person and a share company listed on an exchange shall report

to the Authority and the exchange on which securities are traded of any
changes in any interest, subject to disclosure under Article 81 of this
Proclamation, that exceeds more than 0.5 percent of the issuer’s capital within
a period of 10 (ten) days as of the date of the change.

2/ The reporting under sub-article (1) of this Article remains mandatory until the
change results in a decline of the interest to below 5 percent of the capital.

83. Register of Disclosure

1/ Any share company listed on an exchange shall maintain a special register for
the disclosure of the members of the board of directors, executive directors,
and managers, which involve all statements and information determined by
the Authority, and shall include all data related to remunerations, salaries,
incentives, and other financial benefits as included in the report of the general
assembly.

2/ Any stakeholder shall have the right to access the register under sub-article (1)
of this Article during regular working hours

PART TEN
ACQUISITION AND PROTECTION OF MINORITY INTERESTS

84. Definition

45
 For the purpose of this part, “acquisition offer” means the offer, or solicitation to
offer, or request to own the majority percentage of a listed company that enables the
offeror, directly or indirectly, to control the board of directors of the company.

85. Acquisition Offer

1/ A person shall not make or pursue an offer in respect of an acquisition of the

securities of any company except in accordance with the conditions prescribed
by this Proclamation or the directives issued by Authority or any other law.

2/ The person, wishing to submit an acquisition offer, shall submit copies of the
offer documents, along with the relevant information to the Authority,
securities exchange, and the issuer of the securities subject to the acquisition
offer.

3/ The offeror shall not take any further steps in the acquisition process before
obtaining the Authority’s approval.

4/ The Authority shall, within a maximum period of 10 (ten) days, review the
application and offer documents and issue its decision.

5/ The Authority may refrain from issuing its approval pursuant to sub-article
(4) of this Article if:
a) the offer does not comply with the provisions of this Proclamation and
related directives issued by the Authority;
b) the application fees are not included in the offer;
c) the offeror fails to submit the necessary documents in accordance with
the provisions of this Proclamation and related directives issued by the
Authority; or
d) the offer includes incorrect or incomplete statement, which shall have
an influence on the decision of the shareholders of the company.

6/ A person who acquires, directly or indirectly, more than the required majority
percentage of the shares admitted to trading of a listed company shall within
30 (thirty) days from the date of acquisition submit an offer to purchase all the
remaining shares traded in the exchange.

7/ The Authority shall issue a directive determining the required majority

percentage to apply to sub-article (6) of the Article.

8/ Any shareholders adversely impacted under sub-article (6) of this Article may
challenge the resolutions of the General Assembly of the listed company, as
per relevant provisions of the Commercial Code, if such decisions harm the
interests of the minority.

9/ Sub-article (6), (7), and (8) of this Article shall not applicable on the
following cases:
a) Acquisition in consideration of the public interest and in the interest of
the remaining shareholders;
b) Gaining the stated percentage when the company increases its capital
and some shareholders refrain from subscription;
c) Gaining the stated percentage because of debt restructure;

46
 d) Gaining the stated percentage because of an inheritance, a will or a
judicial ruling; and
e) Such other cases as provided in a directive issued by the Authority.

10/ Any exemption decision issued by the Authority under sub-article (7) (a) of
this Article shall be written and reasoned.

11/ In the case of sub-article (7) (d) of this Article, the person shall regularize its
situation within not more than 2 (two) years as from the increase.

12/ An issuer whose shares are the subject of an acquisition or takeover shall,
within 7 (seven) days from receipt of the offer, submit a response to the
Authority stating its opinion and recommendations to the shareholders.

13/ Existing investors of the company being offered for takeover or acquisition
shall be፡
a) given a reasonable time to consider the proposal;
b) supplied with adequate information to enable them to assess the merits
of the proposal;
c) as far as practicable, given a reasonable and equitable opportunities to
participate in any benefit accruing to the shareholders under the
proposal; and
d) given fair and equitable treatment in relation to the proposal.

PART ELEVEN
COLLECTIVE INVESTMENT SCHEMES
86. Legal Form

A Collective Investment Scheme may exist in any of the following forms:

1/ Investment companies such as mutual funds;

2/ Limited partnerships; or

3/ Any other such forms or mechanisms under the commercial code, which the
Authority decides to include as a collective investment scheme.

87. Registration of Collective Investment Schemes

1/ Securities or units pertaining to a collective investment scheme shall not be

managed or sold unless the Scheme has been registered by the Authority and
the registration has been announced to the public in a widely circulated
newspaper.

2/ An application for the registration of a collective investment scheme shall be

made to the Authority in the prescribed form and manner and shall be
accompanied by:
a) application form,
b) application fee payable to the Authority,
c) constitutive document and most recent financial report, and

47
 d) such other documents and information as may be prescribed or as the
Authority may reasonably require.

3/ If, after considering an application in terms of sub-article (2) of this Article,

the Authority is satisfied, the Authority shall register the scheme and shall
notify the applicant in writing accordingly.

4/ The Authority shall issue a directive on types of the schemes, on issuance and
redemption of investment units, asset valuations, pricing controls, and
disclosure requirements of collective investment schemes.

88. Collective Investment Scheme Operator

1/ Any person acting as a collective investment scheme operator shall meet

minimum requirements for licencing with regard to:
a) Risk management mechanisms,
b) Internal controls,
c) Accounting procedures,
d) Corporate governance,
e) Appropriate and sufficient human and technical resources,
f) Minimum capital requirements, and
g) Any other requirements to be determined by directive of the Authority.

2/ The Authority may issue directive regarding ongoing requirements for

collective investment scheme operators with minimum standards regarding:
a) Due diligence in the selection of collective investment scheme
investments;
b) Acting in the best interest of collective investment scheme investors
and in accordance with the principles of fair treatments;
c) Identification and managements of conflicts of interests, especially
with regards to related party transactions; and
d) Procedures for orderly winding up of collective investment schemes
businesses.

3/ Collective investment scheme operators shall keep books and records in

relation to transactions involving collective investment scheme assets, and all
transactions in collective investment scheme shares or units.

4/ A collective investment scheme operator shall report to the Authority any

information relating to material changes in its management or organisation or
investor rights or in the operations of the collective investment scheme.

5/ A collective investment scheme operator shall separate its own assets from
collective investment scheme assets.

6/ Collective investment scheme investor’s assets should be protected from

losses or insolvency of collective investment scheme operator.

7/ In instances where the collective investment scheme operator is:

a) Failing to honour redemptions;

48
 b) Imposing a suspension of redemptions in a manner that is not
consistent with collective investment scheme Memorandum or
Articles of Association or contracts or prospectus; or
c) Deemed to be in violation of this Proclamation,
the Authority shall intervene and address the situation.

89. Rights of Collective Investment Scheme Investors

1/ A collective investment scheme operator shall give notice to investors of

material changes to investor rights notice before they take effects, in cases
where such changes do not require prior approval from investors.

2/ Before material changes to investor rights take effects, the investors should be
given the possibility to redeem their shares with no redemption fee, if they
choose to.

3/ Investors of a collective investment scheme are entitled to redeem their units

from a collective investment scheme in accordance with the Memorandum or
Articles of Association or Contract or prospectus, without giving prior notice.

90. Investment Advisor of a Collective Investment Scheme

Any person acting as an advisor for a Collective Investment Scheme shall comply
with the following:

1/ Be licensed by the Authority to act as an Investment Advisor;

2/ Act in the conformity with the regulations and procedures governing the
Collective Investment Scheme, which aims to achieve the unit holders’
interests;

3/ Exert reasonable care of the person that is protecting his own property when
offering investment advices;

4/ Maintain regular records according to the accounting systems related to the

collective investment schemes; and

5/ Submit periodic reports to the Authority, as requested and in accordance with

its directives.

91. Custodian of Collective Investment Scheme

1/ Collective investment scheme assets should be under the custody of an

independent party, a custodian, to whom such assets shall be identified as
clients’ assets.

2/ The custodian of a collective investment scheme shall be functionally

independent of the collective investment scheme operator and shall always act
in the best interests of investors.

3/ The Authority shall specify, in a directive, qualifying requirements for a

custodian in relation to:

49
 a) its financial and managerial capacity; and
b) its ability to protect the assets of the collective investment scheme by
separating these assets from the assets of the collective investment
scheme operator, of the investment advisor of the collective
investment scheme, and of the custodian itself.

92. Restrictions on Collective Investment Schemes

1/ The collective investment scheme is prohibited from carrying out the

following:
a) Grant credit;
b) Purchase any securities issued by the company managing the scheme
or any of its subsidiaries, except to the extent of the requirements
established by directive of the Authority in this regard; and
c) Purchase any securities of the entity, where the scheme’s advisor is
acting as the subscription manager or sales agent, except to the extent
of the requirements established by the Authority in this regard.

2/ A collective investment scheme may not appoint or replace an investment

advisor or custodian without consent from the Authority.

3/ After receiving request for appointment or replacement of a manager or

custodian from a collective investment scheme, the Authority shall notify the
applicant its reasoned decision within 30 (thirty) days from the date of receipt
of the request.

4/ Under sub-article (3) of this Article, if the Authority does not express
objection within 30 days, the appointment or replacement shall be considered
as having received the consent of the Authority.

PART TWELVE
PROHIBITED TRADING PRACTICES
93. Information Made Public

1/ For the purposes of this Proclamation, information is made public if it:

a) is published in accordance with the directives of the Authority or a
securities exchange for the purpose of informing investors and their
professional advisers;
b) is contained in records which by virtue of any enactment are open to
inspection by the public;
c) can be readily acquired by those likely to deal in any securities:
1) to which the information relates; or
2) of an issuer to which the information relates; or
d) is derived from information which has been made public.

2/ Information may be treated as made public even though it:

a) can be acquired only by persons exercising diligence or expertise;
b) is communicated to the public on subscription or payment of a fair and
reasonable fee;
c) can be acquired only by observation; or

50
 d) is published only outside Ethiopia.

94. Inside Information

1/ For the purpose of this Part “inside information” means information which is
specific or precise, has not been made public, and, if it were made public,
would likely have a material effect on the price of any securities.

2/ Securities are “price-sensitive securities” in relation to inside information, if

the information would, if made public, be likely to have a material effect on
the price including the value of the securities.

95. Insiders

1/ For the purpose of this Part, an “insider” means a person in possession of

inside information.

2/ For the purpose of sub-article (1) of this article, a person has information from
an inside source if that person has it through:
a) being a director, employee or shareholder of an issuer of securities;
b) having access to the information by virtue of his or her employment,
office or profession; or
c) the direct or indirect source of the information falls under a person in
(a) and (b) of this sub-article.

96. Insider Trading

1/ A person who has inside information is prohibited from trading in securities

if:
a) the securities are price-sensitive in relation to the inside information;
b) that person encourages another person, whether or not that other
person knows it, to deal in securities or their derivatives which are
price-sensitive in relation to the information in the possession of the
insider, knowing or having reasonable cause to believe that the dealing
would take place; or
c) that person discloses the information, otherwise than in the proper
performance of the functions of his employment, office or profession,
to another person.

2/ A contract shall not be void or unenforceable by reason only of the

commission of an offence under this Article.

3/ The Authority may issue additional provisions in a directive to regulate and

supervise insider trading activities.

97. Market Manipulation

A person shall not enter into or carry out, directly or indirectly, two or more
transactions in the securities of a company, or in other publicly traded securities,
which by themselves or in conjunction with any other transaction:

51
 1/ increase, or are likely to increase the price of securities with the intention of
inducing another person to purchase, or subscribe for, or to refrain from
selling securities issued by the same company or a related company, or such
other listed securities;

2/ decrease, or are likely to decrease, the price of securities with the intention of
inducing another person to sell , or to refrain from purchasing, securities
issued by the same company or a related company, or such other listed
securities; or

3/ stabilize, or are likely to stabilize, the price of securities with the intention of
inducing another person to sell, purchase, or subscribe for, or to refrain from
selling, purchasing or subscribing for, securities issued by the same company
or by a related company, or such other listed securities.

98. False Trading

1/ A person shall not create or cause to be created, or do anything with the

intention of creating a false or misleading appearance of active trading in
volume and prices of securities.

2/ Without prejudice to the generality of sub-article (1) of this Article, a false or

misleading impression of active trading in and prices of securities is created
for the purpose of this section if a person:
a) enters into or carries out, directly or indirectly, any transaction for the
sale or purchase of securities which does not involve a change in the
beneficial ownership of the securities, or offers to do so; or
b) offers to sell securities at a price which is conspicuously the same as
the price at which he has made or proposes to make, or knows that his
counterpart has made or proposes to make, an offer to buy the same or
conspicuously the same, number of securities.

99. Fraudulent Transactions

A person shall not induce or attempt to induce another person to subscribe for, sell or
purchase securities by:

1/ making or publishing any statement, promise or forecast that is false,

misleading or deceptive;

2/ concealing any material facts; or

3/ recording or storing in, or by means of, any mechanical, electrical or other

device, information that is false or misleading

100. Use of Manipulative Means

A person shall not, directly or indirectly, in connection with any transaction with any
other person involving the subscription, purchase or sale of securities:

1/ using any device, scheme or artifice to defraud the other person; or

52
 2/ engaging in any act, practice or course of business which is fraudulent,
deceptive, or likely to defraud or deceive that other person.

101. False or Misleading Statements

1/ A person shall not make false or misleading statement, directly or indirectly,

for the purpose of inducing the subscription for or sale or purchase of
securities by another person or maintaining, increasing, reducing or stabilizing
the price of such securities.

2/ Without prejudice to the generality of sub-article (1) of this Article, a person

shall not make any statement which:
a) at the time and in light of the circumstances in which it was made, is
false or misleading with respect to any material fact and which that
person knows or reasonably ought to know is false or misleading; or
b) by reason of the omission of a material fact, it is rendered false or
misleading and which that person knows or ought to know is rendered
false or misleading by reason of omission of that fact.

102. Front–Running and Other Trading Practices

1/ Any licensed person who has insider information on client orders with a price
differential or is aware of such orders and effects an own account transaction
in the securities concerned or in any related investments directly through any
other person, shall not take advantage of the price differential before the client
order is executed.

2/ A licensed person shall not deal ahead of his clients or mark the close or
excessively deal on behalf of clients.

103. Restrictions on Trading of Securities

A person shall not engage in trading of securities that are restricted by directive of the
Authority.

PART THIRTEEN
COMPENSATION FUND

104. Establishment of a Compensation Fund

1/ The Compensation Fund (hereunder called the “Fund”) is hereby established

for the purposes of granting compensation to investors who suffer pecuniary
loss resulting from the failure of a capital market service provider or securities
exchange to meet his contractual obligations and paying beneficiaries from
collected unclaimed dividends when they resurface.

2/ Where the Authority is satisfied that adequate arrangements, other than those
required under sub-article (1) of this Article for the protection of investors
exist, the Authority may exempt a securities exchange from the requirements
of that sub-article.

3/ The Compensation Fund shall consist of:

53
 a) such moneys as are required to be paid into the Compensation Fund by
licensed persons;
b) such sums of money as accrued from interest and profits from
investing Compensation Fund moneys;
c) such sums of money recovered by or on behalf of the Authority from
entities whose failure to meet their obligations to investors result in
payments from the Compensation Fund; or
d) such sums of money as are received for purposes of the Compensation
Fund from any other source approved by the Government.

4/ The Authority may reward any person who provides new and timely
information leading to the recovery of sums of money referred to in sub-
article (3)(c) of this Article. However:
a) this provision shall not apply to any officer of the Authority;
b) the reward payable under this Article shall not exceed three per cent of
the amount recovered; and
c) the reward referred to in paragraph (b) shall be paid before the
recovered sums of money are transferred to the Fund.

5/ Monies which have accumulated in the Compensation Fund may be invested

by the Authority.

6/ The following issues related to the Compensation Fund shall be determined by

regulation of the Council of Ministers:
a) Administration of the Fund;
b) Investment policy of monies of the Fund;
c) Minimum amount to be kept in the Fund, and provisions if the Fund is
reduced below the minimum amount;
d) Levies that may be imposed to meet liabilities of the Fund;
e) Manner of lodging claims against the Fund; and
f) Any other matter incidental to the establishment and maintenance of
the Fund.

105. Disbursements from the Fund

1/ The contributions to and payments out of the Fund shall be made in

accordance with directives to be issued by the Authority.

2/ Any disbursement from the compensation fund that is accountable to the

default of any licensed person is a debt due to the fund and is recoverable at
the suit of the Authority in any court of competent jurisdiction.

106. Assets and Liability of the Fund

The assets of the Fund shall be kept separate from all other properties and shall be
kept in trust for the purposes set out in this Part.

PART FOURTEEN
MISCLLANEOUS PROVISIONS

54
107. Criminal Liability

1/ Whoever operates or purports to operate as a self-regulatory organization

without being recognized as such by the Authority shall be punishable with a
fine of no less than birr 100,000 and no more than birr 150,000, and a rigorous
imprisonment of no less than 5 years and no more than 12 years.

2/ A person who establishes or launches a business as a securities exchange or a

derivative exchange or over-the-counter market without obtaining license
from the Authority under this Proclamation shall be punishable with a fine of
no less than birr 100,000 and no more than birr 150,000, and a rigorous
imprisonment of no less than 5 years and no more than 12 years.

3/ A person who knowingly deals in securities at or through unlicensed securities

exchange or a derivative exchange or over-the-counter market under sub-
article (2) of this Article shall be punishable with a fine of no less than birr
100,000 and no more than birr 150,000, and a rigorous imprisonment of no
less than 5 years and no more than 12 years.

4/ A person, other than a licensed securities exchange, who takes or uses, or has
attached to, or exhibited at, any place:
a) the title “securities exchange” or “stock exchange” or “derivatives
exchange”; or
b) any title which so closely resembles either of the titles specified in
paragraph (a) of this sub-article as to be likely to deceive,
shall be punishable with a fine of no less than birr 100,000 and no more than
birr 150,000, and a rigorous imprisonment of no more than 7 years .

5/ Any person who issues a security that has not been registered or is not
guaranteed by the Government or exempted by directives made under this
Proclamation from the requirements of registration of securities shall be
punishable with a fine of no less than birr 150,000 and no more than birr
300,000, and a rigorous imprisonment of no less than 7 years and no more
than 15 years.

6/ A person who performs a regulated capital market activity without license

from the Authority shall be punishable with a fine of no less than birr 150,000
and no more than birr 300,000, and a rigorous imprisonment of no less than 7
years and no more than 15 years.

7/ A person who deals in registered securities otherwise than through a licensed

securities exchange or over-the-counter market shall be punishable with a fine
of no less than birr 100,000 and no more than birr 150,000, and a rigorous
imprisonment of no less than 5 years and no more than 12 years.

8/ A person who deals in any securities otherwise than through a licensed dealer
shall be guilty of an offence and shall be punishable with a fine of no less than
birr 50,000 and no more than birr 100,000, and a rigorous imprisonment of up
to 7 years.

9/ A person who trades with inside information by contravening Article 96, sub-
article (1) of this Proclamation shall be punishable with a fine of no less than

55
 birr 200,000 and no more than birr 350,000, and a rigorous imprisonment of
no less than 7 years and no more than 15 years.

10/ A person who performs regulated capital market services or activities by

nominating a representative who does not hold an appointed representative’s
license shall be punishable with a fine of no less than birr 100,000 and no
more than birr 150,000, and a rigorous imprisonment of no less than 5 years
and no more than 12 years.

11/ A person who performs regulated capital market services or activities as a

representative without holding an appointed representative’s license shall be
punishable with a fine of no less than birr 100,000 and no more than birr
150,000, and a rigorous imprisonment of no less than 5 years and no more
than 12 years.

12/ A person who, for the purpose of obtaining or renewing a license in

accordance with this Proclamation, whether directly or indirectly, makes any
representation, in writing, orally or otherwise, which is false or misleading; or
obtained or renewed a license on the bases of false or misleading information
shall be punishable with a fine of no less than birr 150,000 and no more than
birr 300,000, and a rigorous imprisonment of no less than 7 years and no more
than 15 years.

13/ A person who enters or offers to enter into any agreement for, or with a view
to, acquiring, disposing of, or subscribing for, shares, units or other securities
representing an interest in a collective investment scheme that is not registered
in accordance with the provisions of this Proclamation, or establishes and
operates a collective investment scheme that is not registered in accordance
with the provisions of this Proclamation, shall be punishable with a fine of no
less than birr 300,000 and no more than birr 500,000, and a rigorous
imprisonment of no less than 10 years and no more than 20 years .

14/ A person who destroys, falsifies, conceals or disposes of, or causes or permits
the destruction, falsification, concealment or disposal of, any document,
which the person knows or ought to know is relevant to an inspection or
investigation under this Proclamation shall be punishable with a rigorous
imprisonment of up to 5 years.

15/ A person who:

a) engages in market manipulation or false trading or fraudulent
transactions or front running;
b) uses manipulative means to defraud or deceive that other person under
Article 101 of this Proclamation;
c) deals ahead of his clients or mark the close or excessively deal on
behalf of his clients; or
d) makes false or misleading statements, directly or indirectly, for the
purpose of inducing the subscription for, sale or purchase of securities
by another person of any company, or of any other listed securities, or
to maintain, increase, reduce or stabilize the price of such securities
under Article 102 of this Proclamation,

shall be punishable with a fine of no less than birr 200,000 and no more than

56
 birr 350,000, and a rigorous imprisonment of no less than 7 years and no more
than 15 years.

16/ Whoever, directly or indirectly, makes, circulates or publishes a prospectus

that he knows is false, with intent to induce other persons, whether ascertained
or not, to purchase a security, or deceive or defraud the shareholders or
creditors shall be punishable with a fine of no less than birr 200,000 and no
more than birr 350,000, and a rigorous imprisonment of no less than 7 years
and no more than 15 years.

17/ A person who under sub-article (4) of Article 104 of this Proclamation:
a) colludes with an officer of the Authority for the purpose of collecting
the reward;
b) while working at the Authority aids another person to get and provide
information; or
c) provides false information,
shall be punishable with a rigorous imprisonment of up to 5 years.

18/ Where the offences under this Article are committed by a body corporate, the
body corporate shall be punishable as follows:
a) Up to birr 500,000 for offences punishable with a rigorous
imprisonment of up to 5 years;
b) No less than birr 500,000 and no more than birr 1,000,000 for offences
punishable with a rigorous imprisonment of up to 7 years;
c) No less than birr 500,000 and no more than birr 1,500,000 for offences
punishable with a rigorous imprisonment of no less than 5 years and
no more than 12 years;
d) No less than birr 1,000,000 and no more than birr 2,000,000 for
offences punishable with a rigorous imprisonment of no less than 7
years and no more than 15 years; and
e) No less than birr 1,500,000 and no more than birr 2,500,000 for
offences punishable with a rigorous imprisonment of no less than 10
years and no more than 20 years.

19/ In addition to the penalties provided under Sub-article (18) of this Article, the
Court may, upon the application of the public prosecutor or on its
own motion, decide to dissolve the body corporate or confiscate its property.

20/ In addition to the imprisonments and fines imposed under this Article, the
proceeds of the crime shall be confiscated or recovered where relevant.

21/ Any sum of money collected through fines and confiscation or recovery of the
proceeds of crimes under this Article shall be transferred to the Compensation
Fund.

108. Administrative Measures

1/ Notwithstanding criminal conviction of a person under Article 107 of this

Proclamation, the Authority may impose administrative measure based on its
supervision or investigation report to revoke or suspend a license or order the
dismissal or suspension of senior personnel or board of directors of the
licensed person and/or impose fine on a person who contravenes the

57
 provisions of this Proclamation, or regulations or directives issued under this
Proclamation.

2/ The Authority shall specify the administrative measures under sub-article (1)
of this Article by directive.

109. Power to Issue Regulations and Directives

1/ The Council of Ministers may issue regulations necessary for the

implementation of this Proclamation.

2/ The Authority may issue directives necessary for the implementation of this
Proclamation and regulations issued pursuant to sub-article (1) of this Article.

2/ The National Bank of Ethiopia may issue directives necessary for the
implementation of Article 54 of this Proclamation and regulations issued
pursuant to sub-article (1) of this Article in matters related to central
securities depository and clearing for Government securities.

110. License Renewal

Any license granted under this Proclamation shall be renewed annually by paying
required fees to be prescribed by the Authority.

111. Administration of Employees

The employees and management of the Authority shall be governed by regulation to

be issued by the Council of Ministers.

112. Settlement of Disputes

1/ Without prejudice to Part Seven (7) of this Proclamation, disputes among

parties involved in the capital market concerning any civil matter arising
under this Proclamation shall be resolved by mediation.

2/ Where the disputes cannot be resolved through mediation as per sub-article

(1) of this Article, the matter shall be settled by arbitration.

3/ Without prejudice to provisions of the Civil Procedure Code relating to

appeals, the arbitral award under sub article (2) of this Article shall be final
and binding on the parties.

4/ The qualification and manner of appointment of arbitrators, the procedure of

the arbitration proceedings, and the payment of arbitration related costs shall
be determined by directive of the Authority.

113. Inapplicable Laws

1/ Article 2 Sub-Article (4) and Article 4 Sub-Article (1) paragraph (b) of the
National Payment System Proclamation No. 718/2011 are hereby repealed.

58
 2/ No, law or customary practice, inconsistent with this Proclamation, shall have
effect with respect to matters governed by this Proclamation.

114. Effective Date

This Proclamation shall enter into force on the date of its publication in the Federal
Negarit Gazette.

Done at Addis Ababa, this day of 2021

SAHLEWORK ZEWUDIE

PRESIDENT OF
THE FEDERAL DEMOCRATIC REPUBLIC OF
ETHIOPIA

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