Editorial Comment: Ball now in securities firms, licensed individuals’ court

to Securities and Exchange Commission of Zimbabwe comes with more power and clarity regarding its role in the economy.
Established in 2003 as a new concept in Zimbabwe to regulate stock exchanges and other exchanges that trade in securities, SECZ has been operating almost like a toothless bulldog.
SECZ also regulates the business of stockbrokers, investment managers and other professionals who deal in securities (financial investment instruments such as stocks and bonds bought or sold in financial markets) to ensure that markets are fair, efficient and transparent.
It also ensures that investors are protected against any malpractices.
However, for long, SECZ had failed to effectively stamp its authority resulting in numerous confrontations with the Zimbabwe Stock Exchange management and stockbrokers from which it often emerged bruised.
But the latest amendments have dealt with all the loopholes in terms of its powers and parameters, giving SECZ more muscle to deal adequately with issues within its purview.
Such issues as insider trading, disclosure requirements and adherence by markets to International Accounting Standards will now be effectively dealt with, as Zimbabwe seeks to attract more investment in the capital markets.
Tendencies of indiscipline in the market that had become the order of the day in the pre-2009 hyperinflationary environment still rear their ugly head hence the need for a more authoritative SECZ to regulate the field of play.
Any price-influencing or non-disclosure of information, where need be, will require prompt intervention by SECZ to regularise transactions.
Under the amended Act, the number of commissioners has now been increased to between seven and nine from between three and five.
These will be chosen from a spectrum of such expertise as accountants, lawyers and economists, giving the body more manpower to articulate the various and often complex issues to do with trading in the capital markets.
Presently, commissioners have been conducting executive duties, but these powers have now been transferred to the chief executive.
Commissioners will now become non-executive, with a policy-setting role.
Also of keen interest to investors will be the establishment of an Investor Protection Fund to compensate investors for losses incurred through malpractice by registered securities exchanges or through insolvency or winding up of an exchange.
Resultantly, all registered exchanges and licensed persons will be obliged to pay contributions to the fund which will be administered by a board of up to six members appointed by the Commission.
The fund should give confidence to investors in terms of the safety of their investments and compensation where such a need arises.
Furthermore, the amendments to the Act will oblige the Zimbabwe Stock Exchange to convert into a company governed by a board of directors. This has been long in coming.
The issue has been on the cards for more than a decade, but the time has come for the ZSE to operate along the lines of the Johannesburg Stock Exchange.
This will not only help modernise the ZSE but will induce confidence and ignite activity at a time trading has remained subdued, largely due to liquidity challenges and waning investor confidence.
Zimbabwe is considered one of the top emerging markets, but it has slipped in its rankings due to its failure to adapt to new trading systems accepted globally.
Another key provision of the new amendments is the fact that asset managers and other collective investment schemes previously regulated by the Reserve Bank of Zimbabwe will now be brought under the ambit of the Securities and Exchange Commission.
The new dispensation for SECZ should begin to show results even immediately.
The Commission should stamp its authority and deal with reports of irregular trading by some stockbrokers and other traders.
The SECZ chief executive’s role is no longer “ceremonial” hence we should see the incumbent up his game to regulate the capital markets in a manner that helps the economy attract both local and foreign capital.
Furthermore, the fact that listed securities will only be delisted with the approval of the chief executive, who should notify the Commission and the Minister of Finance when such cases arise, is a critical measure in safeguarding investments and ensuring discipline is upheld.
Recent announcements that Government will introduce more investment instruments should augur well for the economy and help attract savings. We commend Government for moving in the right direction in terms of re-activating the markets while ensuring they are effectively regulated.
The current global financial crisis should be a learning curve.
The onus is now on the securities firms and licensed individuals to play ball.