ZSE should play by the rules

Its first major dispute with SECZ was on the payment of investor protection levies, which the ZSE told stockbrokers not to remit to the regulator.
This follows reports that ZSE chief executive Emmanuel Munyukwi violated procedures when he allegedly tried to stop SECZ from addressing deficiencies in Ariston and RioZim circulars prior to shareholders’ meetings.
Differences between SECZ and ZSE stemmed from the fact that the former raised concern on certain information it felt was not disclosed in circulars containing critical details on their capital raising initiatives.
Ariston had already held its extraordinary general meeting and got shareholders’ approvals while RioZim was yet to hold a similar meeting of the owners to consider initiatives to raise funds for recapitalisation.
Ariston sought to raise US$10 million to recapitalise and retire debt while RioZim wanted approval on a combination of initiatives that would bring in US$55 million for capital and debt retirement as well.
To that end, SECZ felt that the two companies had not provided sufficient material information to enable shareholders to make informed decisions.
On Ariston, SECZ wanted clarity on breakdown of recapitalisation funds, capital expenditure programmes, disclosure on ownership of the firm’s estates, impact of the recapitalisation programme on the firm. It also wanted financial advisors IH Advisory to be dully licensed.
In the RioZim issue the regulator wanted more background information on GEM Raintree, the underwriters of its US$5 million rights issue and new investor, to be given US$45 million convertible debentures.
SECZ is a statutory body that regulates capital markets and therefore the supreme authority on issues relating to securities trading.
It must be clear to the Zimbabwe Stock Exchange that they are obligated in terms of the Securities Act to submit to SECZ directives.
SECZ is therefore mandated in terms of statutory provisions to ensure that investors are not prejudiced either deliberately or subconsciously.
And the concerns raised by SECZ are not new considering the authority is actually working on additional provisions in the Securities Act to compel firms to disclose all relevant financial information.
Further, SECZ said the companies misrepresented in the circulars that their documents had been approved by the ZSE listing committee.
It becomes mind-boggling why the ZSE should be perturbed when the regulator raises concerns as part of its mandate to ensure sound capital markets. There is no undermining of each other’s authority or wisdom here, but in all fairness, there is need to protect shareholders.
SECZ had taken issue from the fact that the ZSE prevented meetings, between itself, the ZSE listing committee, ZSE CEO and financial advisors meant to discuss concerns raised by the regulator.
It then had to hold meetings with the firms and their advisors and say an understanding was reached and RioZim would disclose the required information prior to its EGM. Ariston was also advised to follow suit and then reconvene the shareholders’ meeting sooner than later.
If the ZSE followed these simple instructions it would help the financially troubled companies and the shareholders a great deal while these firms would also undertake their initiatives in time as scheduled.
The ZSE should just follow and respect cardinal rules governing relevant procedures on issues where investors put huge amounts of money.
Its role should be limited to administrative issues at the bourse; regulatory issues are a preserve of SECZ, as provided for in terms of the law.
ZSE should ascribe to the principle of separation of power. The prior arrangement where it was both player and regulator was not best practice. An independent body has to maintain oversight of the bourse.