Is SECZ going overboard?

Holdings Limited. There is already its past standoff with financial advisers for listed entities and transfer secretaries to elaborate SECZ’s departure from the core. But the latest fight with Lifestyle brings many issues to the fore, particularly that of jurisdiction, which is already a thorny one for many of Zimbabwe’s regulatory bodies.

Does SECZ regulate the Zimbabwe Stock Exchange or ZSE-listed companies? With the TN/Lifestyle deal, it seems plausible the commission believes the ZSE, which should regulate quoted companies, did a poor job. Otherwise, it wouldn’t have stepped in. In that transaction, SECZ has complained about many things including inadequate disclosures since the delisting of TN Bank, demerger and plans to delist Lifestyle Holdings.

The commission says it is acting in the interests of minorities. However, the same minority shareholders that SECZ claims to protect voted in favour of what they should be protected against.

“So, whose interests does SECZ represent?” queried Harare economist Mr Sichoni Takoleza. “SECZ seems to be another regulatory layer in the structure of the Zimbabwe landscape. Like other bodies, it is seeking space, relevance and justification.”

A few months ago SECZ brewed another shocker on licensing fees with share transfer secretaries, some of whom were in-house. Financial advisory firms who offer services to listed companies have also been harassed, yet those that handle transactions, big deals in some cases, for unlisted entities are left untouched.

For transfer secretaries, SECZ was demanding they meet a net asset base of US$150 000. Only three were licensed, and several other in-house share registrars resisted saying the commission had overstepped its boundaries.

That matter is still simmering. Analysts say the fees were ridiculous, and that the commission did not have jurisdiction over in-house transfer secretaries.
Last year, SECZ caused a stir after it moved to levy and license financial and business journalists in the country, at least US$2 000 per person annually. The move was roundly condemned as a cheap fund-raising gimmick, as journalists were already regulated by the Zimbabwe Media Commission, and paying.

“I don’t see the rationale of regulating an adviser, say, to FBCH (listed) yet an advisor to Stanchart (not listed in Zimbabwe), which is bigger is not regulated,” Mr Takoleza said.
“Financial advisors on indigenisation deals handled huge amounts of money but would not be regulated by SECZ because they are unlisted deals. The commission seems not to be doing much about developing financial markets.

“We would be happier reading about development of an SME market, bond exchange market, derivatives market as well as pricing of money market instruments.”
Mr Takoleza said while all these developments and more would not happen overnight, he had expected SECZ to open active discussions to that effect.
“From where I stand, it appears the SECZ is overshadowing the ZSE and not fulfilling its developmental mandate,” he charged.

But the commission’s acting chief executive, Mr Tafadzwa Chinamo, would have none of that. He said SECZ was acting within its mandate, and where the ZSE failed to fulfil its contracted duties, as with the TN/Lifeslyle case, they would step in, without apologies.

The TN deal was done wrongly, he said, and that the ZSE was not doing anything about it or that shareholders approved it does not make it right.
“Our mandate is clear and very broad. Essentially, it is to ensure properly functioning capital markets addressing such issues as fairness and transparency,” Mr Chinamo said in a recent interview.

“How we actually go about executing this mandate takes many forms. We sub-contract some of those functions to the ZSE. If we see that those things are not working right then we step in. There is nothing that stops us from examining further anything that we believe will compromise the integrity of our markets.
“Anything that threatens the integrity of markets is very well within our realm to do something about it.”

The Securities Act, which established SECZ five years ago, gives the commission a very broad mandate, and that makes it somewhat vague in its limitations. SECZ is the regulatory body for securities and capital markets in the country. Among its key functions include to encourage the development of free, fair and orderely capital and securities markets.

It is also responsible for promoting investor education and confidence; licensing, supervising and regulating securities as well as well licensed persons.
Objectives include that of preventing manipulation, fraud, financial crime as well as reducing systemic risk. A few years ago the Zimbabwe Investment Centre and the Export Processing Zones Authority were merged into forming the Zimbabwe Investment Authority after it came to light the entities were essentially one and were duplicating functions.