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Licensing Requirements for Securities Investment Adviser in Ethiopia

Introduction

With the imminent launch of the Ethiopian Securities Exchange, Ethiopia’s capital market is set to undergo significant transformation. For stakeholders, understanding the roles, regulations, and requirements governing Securities Investment Advisers is crucial. This guide explores the eligibility criteria, responsibilities, and restrictions associated with Securities Investment Advisers within Ethiopia's regulatory framework. This guide is compiled from the Capital Market Service Providers Licensing and Supervision directive No 980/2024 of Ethiopian Capital Market Authority.

Eligibility Criteria for Securities Investment Adviser License

To apply for a Securities Investment Adviser License in Ethiopia, the following entities and individuals are eligible:

  • Entities: Share companies, private limited companies, one-person private limited companies, general partnerships, limited partnerships, or limited liability partnerships must hold a valid certificate of commercial registration and/or investment permit issued by the appropriate government body.
  • Individuals: Applicants must be at least 18 years old and meet the competency requirements for a Research Officer as specified in the Competency Framework for Capital Market Service Providers.

Authorized and Prohibited Activities of Securities Investment Adviser

Securities Investment Advisers are authorized to:

  • Provide investment advice, including the preparation of Capital Market analyses.
  • Issue reports and analyses on investments.
  • Offer other services as defined by the regulatory Authority.

However, they are prohibited from:

  • Engaging in the maintenance or management of investors' funds.
  • Providing automated investment advisory services unless licensed specifically as a Securities Robo Adviser.

Advertisement Restrictions on Securities Investment Adviser

Securities Investment Advisers must adhere to strict advertising standards to prevent misleading statements:

  • Advertisements must not contain untrue statements or be misleading.
  • Testimonials and references to past profitable recommendations are restricted unless fully compliant with specified conditions.
  • Any representation of graphs, charts, or formulas must include prominent disclosures about their limitations.
  • Statements offering free reports or services must ensure there are no hidden obligations.

Appointed Representatives for Securities Investment Adviser

Entities licensed as Securities Investment Advisers must appoint a qualified Research Officer, licensed by the Authority, to ensure effective governance and compliance.

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