Economy
Ethiopia's New Investment Fund Rules Establish Clear Framework for Collective Savings
StockMarket.et · 3 hours ago · Read the Full Story on StockMarket.et
AI SUMMARY
The Ethiopian Capital Market Authority has issued Directive No. 1150/2026 to regulate collective investment schemes and protect ordinary savers.
- The Ethiopian Capital Market Authority released Directive No. 1150/2026 on the Operation of Collective Investment Schemes in September 2026, spanning 137 pages and 176 articles.
- The directive defines key entities including the scheme, the licensed professional operator, the independent custodian, and public schemes versus alternative investment funds.
- No fund can accept public money until officially registered by ECMA following a thorough document review.
- Every fund must renew its registration certificate annually.
- Funds must put at least 30% of their capital to work within six months of approval.
- Governance is split between three distinct guardians: the operator who decides, the custodian who holds assets, and the board that supervises.
- Operators may invest up to 10% of the fund's capital and must lock it in for two years.
- Custodians hold cash, shares, and title deeds completely separate from their own assets and must report rule violations to ECMA within 24 hours.
- Every fund requires a board of at least five voting members, with a majority independent of the operator.
- Major changes such as new investment types or higher borrowing require approval from investors holding two-thirds of the fund.
- Funds are generally capped at investing no more than 20% of their assets in any single company, though government bonds and bills are exempt.
- Unit Investment Companies allow investors to join or leave on any working day based on net asset value calculations.
- Redemption cash must reach the investor within five business days, and late payments incur fines starting at 100,000 birr plus 10,000 birr for each extra day.
- Public funds must provide retail investors with a Key Investor Information Document and an ECMA-approved prospectus detailing risks and fees.
- Directors and managers are jointly liable to compensate investors if a prospectus contains false or misleading information.
- Funds must submit compliance reports to ECMA at least every six months.
- ECMA holds enforcement powers ranging from warnings and suspensions to blacklisting repeat offenders.
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