Regulation

SEC Fines Ethiopian Utility Over Bond Offering

Ethiopian Electric Power failed to register a $5.8 million bond offering to the Ethiopian diaspora in the United States.
Matthew HellerJune 9, 2016

Ethiopia’s state-owned electric utility has agreed to pay nearly $6.5 million to settle U.S. charges that it improperly sold bonds to U.S residents of Ethiopian descent to fund a dam project.

The Securities and Exchange Commission on Wednesday said Ethiopian Electric Power (EEP) violated U.S. securities laws by failing to register the bond offering, which raised about $5.8 million from more than 3,100 U.S. residents from 2011 to 2014.

As part of a settlement, the utility will pay $5,847,804 in disgorgement and $601,050.87 in prejudgment interest, according to an SEC administrative order. Investors can receive distribution payments from the disgorgement fund up to a maximum of their principal loss plus interest owed to them.

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“Foreign governments are welcome to raise money in the U.S. capital markets so long as they comply with the federal securities laws, including registration provisions designed to ensure that investors receive important information about prospective investments,” Stephen L. Cohen, associate director of the SEC’s Division of Enforcement, said in a news release. “This settlement ensures that investors get all of their money back plus interest.”

EEP began construction of the Grand Ethiopian Renaissance Dam in April 2011. To help finance the project, it offered bonds in the United States through television and radio advertisements targeted at the Ethiopian diaspora, and through events sponsored by the U.S. Embassy of Ethiopia in Washington, D.C., and other major U.S. cities.

“EEP did not register its bond offering with the commission, and there was no available exemption from the requirement that the offering be registered,” the SEC said.

U.S. residents bought the bonds in denominations of $5 to $10,000, for total investments per investor ranging from $50 to $1 million. Nearly two-thirds of the investors reported they were U.S. citizens.

The five-year bond carries an interest rate of LIBOR plus 1.25%. “Although the bonds generally have not yet reached maturity, to date most of the bondholders have not received periodic interest payments,” the SEC noted.