ECMA Drafts Investor Compensation Fund to Attract Foreign Capital

Foreign portfolio investors in Ethiopia could soon receive compensation for financial losses caused by the failure of licensed capital-market service providers or market infrastructure. This provision comes under a new draft framework released last week by the Ethiopian Capital Market Authority (ECMA). The primary goal of establishing the Investor Compensation Fund is to open Ethiopia's emerging securities market to international capital and boost investor confidence. According to the ECMA, the fund will be integrated within a broader system that encompasses custody services, fund repatriation, foreign ownership limits, and foreign-exchange regulations. The authority emphasized that this new Compensation Fund is designed to complement and sit alongside these existing protective safeguards rather than replace them. This regulatory step represents a significant milestone in preparing the domestic financial market for foreign institutional investment.