Unlocking Ethiopia's Capital Market: The Rise of SROs

Dive into Ethiopia's burgeoning capital market as we break down the freshly drafted recognition requirements for Self-Regulatory Organizations (SROs) by the Ethiopia Capital Market Authority (ECMA). Unravel the essence of financial capabilities, personnel skills, anti-money laundering protocols, and the all-important application process to become an SRO in Ethiopia.

The directive stipulates that the entity must have sufficient financial capacity and administrative resources to deal with a breach of the law or any other applicable guidelines. The ECMA will consider the operational and other risks to which the SRO is exposed, the amount and composition of the SRO's capital, the amount and composition of the SRO’s other financial resources, and the applicable rules and practices of the applicant in determining whether the applicant has sufficient financial capacity and administrative resources.

This requirement ensures that the SRO has the necessary resources to effectively carry out its functions and responsibilities. It also ensures that the SRO can effectively manage the risks associated with its operations and can comply with all applicable laws and guidelines.

The directive also requires that the personnel of the SRO, including those charged with managing and overseeing its governance and administrative affairs, have sufficient skills and experience. This requirement ensures that the SRO is managed and operated by competent individuals who have the necessary skills and experience to effectively carry out their duties and responsibilities.

The directive does not specify the exact skills and experience required, but it can be inferred that the personnel should have a good understanding of the capital market and the regulatory environment, as well as the specific operations and functions of the SRO.

The SRO must also ensure that it has adequate Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) procedures in compliance with the applicable AML/CFT legislation in Ethiopia and general international requirements. This requirement ensures that the SRO has effective measures in place to prevent and detect money laundering and terrorist financing activities.

The directive does not provide specific guidelines on the AML/CFT procedures, but it can be inferred that the SRO should have a comprehensive AML/CFT program that includes customer due diligence, transaction monitoring, reporting of suspicious transactions, and employee training.

The directive outlines the application process for recognition as an SRO. The application must be submitted to the ECMA via the digital Form S1 accessible on the website of the ECMA or such other channel or form prescribed by the ECMA as in effect on the date of filing the application. This requirement ensures that the application process is accessible, efficient, and manageable.

All applications and accompanying documents must be filed with the ECMA in the English and/or Amharic languages. If any information and/or document to be filed with the application is in any other language, then it must be accompanied by a certified translated version to English and/or Amharic. This requirement ensures that the ECMA can accurately evaluate the application and accompanying documents.

The directive provides for the termination of an application for recognition where the applicant fails or neglects to continue with the processing of the application for a period of thirty (30) consecutive calendar days without due notification to and approval of the ECMA. This requirement ensures that applicants are committed to the application process and that the ECMA can efficiently manage its resources.

The implications of these requirements for entities wishing to operate as SROs in Ethiopia are significant. The requirements ensure that only entities with the necessary financial capacity, administrative resources, and personnel can operate as SROs, thereby protecting the integrity of the capital market and promoting its efficient functioning.

Entities wishing to operate as SROs must carefully consider these requirements and ensure that they are fully prepared to meet them before applying for recognition. Failure to meet these requirements can result in the rejection of the application or the withdrawal of recognition.

In conclusion, the specific recognition requirements for SROs established by the ECMA offer a stringent and robust regulatory framework, thereby ensuring the integrity and efficient functioning of the capital market in Ethiopia. Aspiring SROs need to give due attention to these requirements and prerequisites before embarking on their application process.