VFEX launches broker-controlled accounts Under broker controlled accounts securities dealing firms will perform all the services on behalf of investors, including opening accounts for investors and performing the necessary due diligence

Business Reporter
The Victoria Falls Stock Exchange Limited (VFEX), a subsidiary of the Zimbabwe Stock Exchange (ZSE), has introduced broker controlled accounts in order to ensure convenience in trading on the US dollar denominated stocks trading platform.

“VFEX is pleased to advise stakeholders on the introduction of broker controlled accounts with effect from July 1 2022 for the VFEX investors,” VFEX said in a statement.

A brokerage account is an arrangement in which an investor deposits money with a licensed brokerage firm, which places trades on behalf of the customer.

Although the broker executes the orders, the securities belong to the investors, who typically must claim as taxable income any capital gains incurred from the account.

VFEX said “The broker controlled account is opened by a VFEX registered stockbroker on behalf of their clients who wish to trade in securities on the VFEX, allowing the stockbroker to interact with a licensed custodian on behalf of the investors.”

According to the directive and international standards, the account will be registered in the beneficial owner’s name.

“The broker controlled model was necessitated by the need to simplify the account opening process for retail investors,” the statement read.

Broker controlled accounts deliver lower costs and easier account opening procedures for investors wanting to open a VFEX trading account.

This offers a one-stop-shop facility for the investor, given by opening an account with the custodian and transacting through a securities dealer, the broker- controlled model offers investors all the services under one roof to the convenience of the investor.

The securities dealing firms will perform all the services on behalf of investors and these include, among others, opening accounts for investors, performing the necessary due diligence exercise including the Know Your Customer (KYC) requirements.

It also includes day to day communication with the client, mailing of customer transaction statements at no cost and transacting on the stock exchange on behalf of the investor.

Investors under the broker controlled accounts issue instructions through their brokers, who shall in turn inform the custodian. The broker shall have view access rights to the portfolio holdings (by requesting from the custodian the consolidated holdings report), as well as to the funded position of the beneficial owners under their control. Reporting is done by the broker after requesting for information from the sponsoring custodian.

In cases of emergency, brokers can request for securities related information directly from the depository company, but only for those portfolios under their management. All reporting shall be in electronic form and the reporting frequency shall be agreed between the broker and the investor.

Prior to this, retail investors were dealing with stock brokers as opposed to other securities market intermediaries, as such, the broker-controlled model will make it easier for investors as they will ride on their existing relationship with stockbrokers.

In terms of operations, the stockbroker will open a trust account with a participating custodian that is in partnership with VFEX for settlement purposes and currently CBZ Custodial Services is the only custodian that has an agreement with VFEX to offer the service.

“The tripartite agreement between the stockbroker, VFEX and the custodian (settlement bank) stipulates that all assets bought under the broker controlled account belong to the beneficial owner. To this effect, stockbrokers are required to have a signed mandate with clients that they are allowed to open broker controlled accounts on behalf of participating investors,” ZSE said.


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