Senior Business Reporter
THE Securities and Exchange Commission of Zimbabwe is seeking to directly regulate listed companies in order to attain full membership of the International Organisation of Securities Commissions (IOSCO), a senior executive has said.
IOSCO is an association of organisations that regulate the world’s securities and futures markets. The international organisation, which was set up in 1983 brings together the world’s securities regulators and is a global standard setting body for capital markets.
In his presentation during the SECZim annual general meeting in Harare last week, the securities exchange commission acting chief executive officer Mr Gerald Dzangare said the country was not yet at the table of IOSCO and was just an associate member.
“IOSCO has legislative amendments it has demanded from SECZim for Zimbabwe to be promoted from associate membership to full IOSCO membership. The requirement from IOSCO for Zimbabwe to be a full member is that SecZim has direct access in regulating listed companies, not indirectly regulating them through stock exchanges,.
Apart from the above, it is hoped that full IOSCO membership will attract investors and this has huge capital market development opportunities.
Mr Dzangare said amendments to the Securities Exchange Act (Chapter 24:25) to give effect to IOSCO recommendations following review of the SECZim laws and FATF (Financial Action Task Force) recommendation on regulation on regulation of virtual asset service providers.
He said a draft statutory instrument aligning the collection of Investor Protection Fund levy in terms of section 86G of the Act has already been sent to the market for stakeholder input.
“IOSCO requirements on SECZim to directly regulate listed companies will not only make Zimbabwe become a full IOSCO member, but will strengthen Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT) and Countering Proliferation Financing (CPF.)”
The above are measures put in place to combat money laundering, terrorist financing and proliferation of weapons of mass destruction.
So far, the country has two bourses namely the Zimbabwe Stock Exchange and the Victoria Falls Stock Exchange (VFEX) which directly regulate listed firms.
Responding to written questions from this paper yesterday, Mr Dzangare said a key requirement of IOSCO is that for any securities regulator to effectively protect investors, the regulatory authority should have direct access to the securities themselves and these securities are shares issued by listed companies.
“This is why SECZim has to have access to listed companies if it is to fully contribute to the national requirement of re-engagement which is also achieved through Zimbabwean organisations becoming members of international organizations like IOSCO.
“As soon as the amendments giving SECZim access to listed companies are passed as law then SECZim qualifies to join IOSCO and Zimbabwe becomes a full member of IOSCO,” he said.
It is hoped that once SECZim directly regulates listed firms, the ZSE and VFEX will focus on their core business of listing companies and driving economic growth while the regulatory aspects of capital markets are done by the regulator.
“The commission’s role will be to approve the issuance of and any subsequent changes to the securities by the issuing companies whilst the exchanges shall be responsible for the listing of these securities on their respective exchanges.
“Both the SECZim and the exchanges will have a role to play in the protection of investors with regards to the disclosure of information required and ongoing obligations by the Issuers.
“The quality and standard of reporting and accountability by listed companies will significantly improve and these world standard disclosures are what investors require for decisions,” he said.
Presently, SECZim regulates listed companies through exchanges.
Mr Dzangare said in order to protect an investor as required by its Act, SECZim has to act through an exchange.
This, he said, not only is the process long and against the ease of doing business efforts of the country, it also significantly limits SECZim’s ability to protect investors.
He said this limitation makes SECZim a weak regulator as it has to regulate through an exchange and this limitation according to IOSCO cannot give Zimbabwe full IOSCO membership.
Asked about the impact of lack of direct access by SECZim to listed companies, Mr Dzangare said:
“Investors are not adequately protected and the level of indiscipline among listed companies tends to be high because the exchange, though regulating the listed company, is a private company, which must not lose its customer to the listed company. This creates a conflict for the exchange and hence investor protection is compromised. This is why IOSCO insists on regulators having direct access to listed companies.”
He said ordinary membership further gives eligibility to be a signatory to the IOSCO Multilateral Memorandum of Understanding (MMoU).
The MMoU allows for cooperation in developing, implementing, and promoting adherence to internationally recognised and consistent standards of regulation, oversight and enforcement in order to protect investors, maintain fair, efficient and transparent markets, and seek to address systemic risks.
“It enhances investor protection and promotes investor confidence in the integrity of securities markets, through strengthened information exchange and cooperation in enforcement against misconduct,” he said.
At present there are 55 companies listed on the ZSE while VFEX, which was operationalised last year has four counters namely Bindura Nickel Corporation, Caledonia Mining Corporation, Seed Co International Limited, and Padenga.
“The decision to list for a company takes time and thereafter the process of listing also takes a bit of time.
“It is not an overnight thing but with the incentives the Government has put in place there will be more listings on the VFEX this year,” said Mr Dzangare.