Ethiopia’s Capital Market Authority (ECMA) has issued new Supervision Guidelines aimed at enhancing transparency, investor protection, and market integrity as the country moves to establish a modern capital market.
The guidelines, dated October 2025, apply to a broad range of participants, including securities and derivatives exchanges, over-the-counter (OTC) markets, securities depository and clearing companies (SDCCs), capital market service providers, and self-regulatory organizations (SROs).
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The ECMA said the measures are part of efforts to “ensure investor protection, promote integrity and stability, and foster an orderly, fair, efficient, and transparent market.”
Hybrid Supervision Model
The regulator will adopt a hybrid model that blends compliance-based supervision with a risk-based supervision (RBS) framework, bringing its oversight approach in line with international standards.
While the compliance model focuses on checking adherence to directives, the RBS approach allows the ECMA to identify and address potential risks before they escalate. The framework uses tools such as stress testing and sensitivity analysis to assess vulnerabilities and guide regulatory focus toward high-risk entities.
Market participants are required to provide timely and accurate information and allow full access to their records during supervisory activities, the ECMA said.
Inspection Framework
The Authority will rely on both off-site supervision and on-site inspections to monitor regulated entities.
Off-site supervision will involve reviewing regulatory filings, financial statements, and market data, while on-site inspections—announced or unannounced—will assess governance, compliance, and operational soundness.
Annual inspections will target systemically important institutions such as exchanges, OTC markets, and SDCCs. Other service providers will be reviewed in line with the ECMA’s annual supervisory priorities.
The Authority may also carry out spot inspections to investigate complaints or suspected violations and targeted inspections to examine specific risk areas or emerging trends.
Compliance and Enforcement
The guidelines highlight key compliance areas, including financial soundness, governance, and business conduct. Regulators will assess capital adequacy, liquidity, board effectiveness, and risk management systems.
Entities must file regular reports covering financial performance, governance, and compliance—both in hard copy and through the ECMA’s online portal.
Failure to meet regulatory requirements could result in penalties, including fines, suspensions, or license revocations. Entities facing sanctions will have the right to appeal decisions, the ECMA said.
The new supervision framework is part of Ethiopia’s broader push to operationalize its nascent capital market, with the Ethiopian Securities Exchange expected to begin trading soon.
