THE CAPITAL MARKETS QUARTERLY newsletter jan... · 2015-07-30 · has approved new ZSE listing requirements which shall be gazetted in order to have legal effect and new Investor

1 January - March 2015 SECZ Newsletter

Taking Stock of Milestones to Date

THE CAPITALMARKETS QUARTERLY

A publication by the SECURITIES & EXCHANGE COMMISSION OF ZIMBABWE January - March 2015

Hurdling Towards EffectiveModernisation

Navigating the New Era of Electronic Trading

Developing a Modern Securities Trading Infrastructure in Zimbabwe

Anti-Money Laundering and Combating Financing Of Terrorism

Corporate Governance and Shareholder Rights

2January - March 2015 SECZ Newsletter


Editor’s Note

News Update

Developing a Modern Securities Trading Infrastructure in Zimbabwe

Hurdling Towards Effective Modernisation


Anti-Money Laundering and Combating Financing Of Terrorism (AML/CFT) Requirements For The Securities Industry

From the Enquiry Desk

CONTENTS


Anti-Money Laundering and CombatingFinancing Of Terrorism (AML/CFT) Requirements For The Securities Industry

Developing a Modern Securities Trading Infrastructure in ZimbabweBy Kundai Msemburi

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By Tariro .P. Musikavanhu

By T. Nhundu


There has been a giant leap globally in sophistication of capital markets

operations in conformity with world standards. The Zimbabwe capital

market is no exception as it is transforming itself in line with global

trends, hence the recent operationalisation of the Central Securities

Depository for electronic settlement of securities transactions,

demutualisation of the ZSE into a private entity and the imminent

automation of the ZSE trading platform, among others.

In this issue, we turn the spotlight on modernization of capital

markets through assimilation of technological advances that increase

market efficiency and enhance information flow. The infrastructural

technologies rolled out by CDC and the ZSE are just the beginning as

they kick start a never-ending process of innovation that cultivates

and promotes fair and lucrative markets.

The Commission has also joined hands with the Financial Intelligent

Unit (FIU) in the fight against the evils of money laundering and the

financing of terrorism. Effective anti-money laundering and combating

the financing of terrorism frameworks are essential in mitigating

financial abuse for the integrity of capital markets. Cruise along with

us for these and other exciting discussions.

Thank you all for the incessant ride with us on our strategic journey of

enhancing Zimbabwe’s capital markets. We invite you to continuously

send valued contributory articles to the editor at [email protected]. You

can also visit our website, www.seczim.co.zw to share your views and

suggestions.

Happy reading and stay informed!

Tariro . P. Musikavanhu

EDITOR’S NOTE


UPDATESThe Zimbabwean capital market witnessed the demutualisation of the Zimbabwe Stock Exchange towards the end of

the quarter in line with best practice. In conformity with the provisions of the Securities and Exchange Act (Cap 24:25), the

ZSE is now a corporate entity with the stockbrokers and the Government holding 68% and 32% of the ZSE shareholding

respectively. The stockbrokers’ shareholding was equally split among the holders of the proprietary rights. The new ZSE

shareholders where officially given their share certificates on the 26th of March 2015.

As at 07 April 2015, the Commission had licensed the following players for the year ending 31 December 2015, In terms of

Part V (sections 38-49) of the Securities & Exchange Act [Chapter 24:25] and the Securities (Registration, Licensing and

Corporate Governance) Rules, 2010,:

13 Securities Dealing Firms 15 Investment Management Companies

36 Securities Dealers 3 Securities Transfer Secretaries

23 Securities Investment Advisors 1 Central Securities Depository

7 Securities Custodians

A comprehensive list is available on the SECZ website, www.seczim.co.zw. The investing public is strongly advised to use only

licensed players when transacting in the capital market sector.

ZSE Demutualisation Process Complete

Licensed Players


co-operative . Rationing access was generally

done through a combination of substantial

initial and annual membership fees, to ensure

self-selection by high-volume users. Non-

members naturally wished to benefit from the

network externalities of concentrated trading

activity (commonly referred to as ‘liquidity’) and

therefore paid members to represent their buy

and sell orders on the exchange floor. This is how

exchange members came to be intermediaries

(‘brokers’) for investor transactions.

The traditional model of an exchange as a locally

organized mutual association is a remnant of

the era before trading system automation. As

trading required visual and verbal interaction,

exchanges were necessarily designated

physical locations where traders would meet

at fixed times. Access to the exchange had

to be rationed to prevent overcrowding and,

when single price periodic call auctions were

prevalent, to ensure that simultaneous full

participation was physically feasible. This was

the case in Zimbabwe for a long time, with

two call auctions a day being done at the

Zimbabwe Stock Exchange (ZSE( premises via

open outcry. When trading resumed in 2009

(with the adoption of the US Dollar as currency)

after an economic-crisis induced hiatus, the call

auction was reduced to one per day.

Trading ‘systems’ were simply rules governing

the conduct of transactions, the ZSE was

then naturally run by traders themselves as a

Developing a Modern Securities Trading Infrastructure in ZimbabweBy Kundai Msemburi

“For a developing country such as Zimbabwe, the base requirements for fostering securitized investment are political stability, monetary stability and enforceable and transferable property rights.“


The economics of automated auction trading are radically different.

The placement and matching of buy and sell orders can now be done on

computer systems, access to which is inherently constrained neither by

location nor the numbers of desired access points. In fully competitive

‘market for electronic markets’, the traditional concept of membership

becomes economically untenable. As the marginal cost of adding a new

member to a trading network declines to zero, in becomes infeasible for

an exchange to impose a fixed access cost or ‘membership fee’. Rather

only transaction-based charging is sustainable. The transactions on

such electronic networks therefore, come to look much more like what

are normally considered ‘clients’ or ‘customers’ of a firm than ‘members’

of an association. Since an electronic auction system is a valuable

proprietary product, not costlessly replicable by traders, it is feasible

for the owner (in our case the ZSE) to operate it, sell access to it, as a

normal for-profit commercial enterprise. This contrasts with a traditional

exchange floor, whose value derives wholly from the physical presence

of traders. The demutualization of the ZSE has certainly paved the way

for it to operate as a commercial enterprise.

For a developing country such as Zimbabwe, the base requirements

for fostering securitized investment are political stability, monetary

stability and enforceable and transferable property rights. The

Zimbabwean government is working hard to ensure that these

requirements have been met in its show of commitment to developing

a market economy post hyperinflation and economic decline noted in

the period 1999 to 2008.

Zimbabwe is fairly developed as evidenced by an advanced financial

sector dominated by commercial banks, insurance companies and a

plethora of capital market participants. In our economy there is much

that government can and should do to put exchange operations (in our

case the Zimbabwe Stock Exchange) on the global efficient frontier.


compete to provide any of these services.

Trading systems and CSD systems feature

powerful network externalities meaning that

there will be effective competition between

service providers. This competition will spur

operational efficiencies which in turn should

lower transaction costs for investors on the

ZSE. This should also have the knock-on effect

of increasing turnover and access to securities

trading for both retail and institutional

investors.

SECZ has ensured that the competition is

real rather than just a legal fiction whereby it

barred institutional shareholders (ZSE included)

from owning a controlling stake in the CSD.

Foreign trading system and CSD developers

were actively encouraged to provide services

to the local market in collaboration with local

institutions where possible. The CSD for

instance has an international CSD system

provider as a partner whilst the ZSE also

engaged an international trading system

developer for its Automated Trading System

(ATS). Once these modernization projects

are fully implemented it is hoped that foreign

participation in our local securities market

will increase dramatically thereby enhancing

liquidity.

A modern telecommunications infrastructure

is important for taking advantage of the

latest trading and settlement technology:

in particular, to eliminate distance costs and

facilitate the widest possible network of direct

market participants. The CSD and the ATS are

envisaged as enabling such developments for

the benefit of all Zimbabwean citizens who

wish to invest on the ZSE.

“The ability to trade shares cheaply and efficiently will mean little if the companies issuing the shares are not subject to some base level of enforceable standards for disclosure and governance.“

structured in such a way that as part of the

indigenization program, all companies in the

mining sector for example, should be listed

either on the main board of the ZSE or on the

proposed ZEEM (SME exchange) board.

The government of Zimbabwe has established

a legal and regulatory structure for exchange

operations which is based on the functions

carried out in the market, rather than on

the institution of the exchanges. This will

allow companies to offer trading, listing

or other ancillary services but not require

them to be offered together by the same

institution. It will also allow companies to

The ability to trade shares cheaply and

efficiently will mean little if the companies

issuing the shares are not subject to some

base level of enforceable standards for

disclosure and governance. To this end SECZ

has approved new ZSE listing requirements

which shall be gazetted in order to have legal

effect and new Investor Protection Rules. All

these rules and requirements conform to the

global standards set out by the International

Organization of Securities Commissions

(IOSCO). Regulatory fragmentation can

represent a significant cost of doing business

across borders, however, governments are

encouraged to craft regulations with an eye to

maintaining compatibility

with EU and US standards.

To this end Zimbabwe’s

securities regulations and

requirements are being

crafted to fit into the

regional SADC framework

which is moving towards

the harmonization of

listings requirements with

the Johannesburg Stock

Exchange (JSE) providing the blueprint.

The privatization of state enterprises is a

powerful tool for assisting the growth of

securitized finance. These state enterprises

should be dressed up and restructured in

preparation for listing on public exchanges.

Distributing shares widely throughout the

populace is the most rapid means of creating

public companies, enfranchising citizens in

the development of the economy and kick-

starting fledgling exchanges. In Zimbabwe, the

Community Share Ownership Trusts should be


Random Fact:

The first stock exchange

in Zimbabwe opened in

Bulawayo in 1896. It was

however only operative for

about six (6) years. Other

stock exchanges were also

established in Gweru and

Mutare.


Modernization through embracing technological

advancements indeed makes doing business

faster, more efficient and transparent.

Unfortunately such benefits don’t just come

on a silver platter. One would wonder why?

But obviously because of some underling

challenges that need to be addressed alongside

modernization efforts. Obstacles are always

everywhere and anyhow hence one ought to

deal with them or else you slowly ebb off the

global map before you realise it while the rest

sail above the tide. Yes, even though it is not

easy, success loses its meaning if challenges

cease to exist. You can wait forever, but if you

don’t go out to look for it, amazing life changing

successes may never come your way. It is

indeed what you make it. “Every hurdler I know

has hit a hurdle hard, or fell over one. . . . Don’t

be afraid to fall, because you’re going to. It’s

what you do afterwards that matters.”-Laron

Bennett, 2004 U.S. Olympic Trials 400m hurdles

finalist.

Modernisation, as part of capital market

development, is not a smooth once off event

but it has to be an ongoing challenging but

progressive process towards a respectable

investment destination. I guess it wouldn’t feel

great as well to live a life without explorations

and challenges for such an experience is meant

to unravel a whole range of hidden talents in

every one of us for overall societal betterment,

the economy and the world at large.

Hurdling Towards Effective Modernisation By Grace Berejena

“Obstacles are always everywhere and anyhow hence one ought to deal with them or else you slowly ebb off the global map before you realise it while the rest sail above the tide.“


Remember, a hurdle is not meant to break an

athlete’s leg whilst running but is part of the

game just to make it fun and also a criterion

for defining the winner of that particular game.

When you come to think of it, technically, proper

hurdling simply means jumping over. I remember

reading that after all, a modern hurdle will

fall over if a runner hits it. There is no penalty

for hitting a hurdle as long as the hit was not

deliberate. So what does not kill should make

one stronger. Accomplishing efficient hurdling

should not rely mainly on raw speed, but proper

technique and well-planned and timely steps

leading up to and between each hurdle. Hence,

embracing technology for market development

is not just about outrunning faster opponents

but finishing a good race well!

In that regard, the Commission’s mandate is an

ongoing endeavour however made challenging

by an ever changing operating environment

to which the Commission, the market and its

stakeholder all must continuously keep up

abreast. Failure to do so means not just the

market but the nation at large loses out in

terms of the much needed capital flows.

Key amongst the market challenges observed

over the years include persistent liquidity

challenges, low subscription levels towards

recapitalisation efforts, viability challenges

(uncompetitive business models due to

obsolete equipment and lack of reinvestment)

which has significantly resulted in non

compliancy with continuing obligations hence a

number of delistings / suspensions witnessed

in recent years.

So what’s the way forward now that the rest

of the global capital markets is moving on? At

company level, bosses need to reinvent their

business models because it’s now clear that

the old way of doing things is not working

any more. There has to be a realisation that

borrowed capital is expensive and should be

accessed ONLY IF there is a strong case for

income generation to meet future repayment

commitments. This is when the role of capital

markets becomes visibly effective. Capital

markets release pressure on the banking

sector by matching long-term investments

with long-term capital. They are a fundamental

component of the financial sector toward

achieving a robust and sustaining economic

development.

Like it has been highlighted over and over

again, capital no longer has boundaries hence

the so called one giant global village where

all have to compete. In this regard, markets

now need serious shareholder activism that

promotes credible business strategies. Boards

and shareholders need to be more intrusive

and probe management on all major strategic

decisions. This will lead to more openness

and transparency on how these companies

are being run and hopefully save many of

them from the disasters that are so common

nowadays.

“Like it has been highlighted over and over again, capital no longer has boundaries hence the so called one giant global village where all have to compete.”


Current low local investor participation in

important matters of companies they are

invested in will see a lot of shareholders only

getting to know of the problems bedevilling

their companies when a liquidator is called in.

As a market, we are yet to resolve prevailing

limited disclosure levels in financial information

to shareholders. Remember, the global village

constitute information hungry investors in

exchange for the hard earned surplus funds!

SECZ has been trying to overcome the effects

brought about by the conflicting and outdated

legislation, in particular the Companies Act. The

lack of clarity and alignment with the changing

operating and regulatory environment has

contributed to some delistings witnessed on

the market. It has been a long time since the

market celebrated a new listing yet the market

and the country as a whole would be better

served with more listings. The Commission will

be in full support of the ZSE’s efforts towards

retaining companies on the official list while

creating an enabling environment for attracting

more listings.

“As the philosopher Aristotle first coined “the whole is greater than the sum of its parts” in trying to define the concept of synergy, surely we can collectively push our market to a higher level. “


Ultimately addressing all these challenges

needs the blessing of general macroeconomic

stability which is key in attracting investment.

There is also need to win back lost trust for the

restoration of lost investor confidence. This

key prerequisite cannot be underestimated

as it is critical for business planning purposes

and attracting both foreign direct and portfolio

investment.

As the philosopher Aristotle first coined “the

whole is greater than the sum of its parts”

in trying to define the concept of synergy,

surely we can collectively push our market

to a higher level. However, also bear in mind

that an enlarged global village comes with

even bigger risks and responsibilities to be

managed. Issues of investor protection

cannot be underestimated hence the need

for stronger risk management frameworks,

tighter regulatory and supervisory frameworks

and upholding corporate governance. The

moment one talks of tighter frameworks,

the importance of infrastructure also comes

to mind. Limited technological infrastructure

continues to hinder more efficient trading,

clearance and settlement.

So yes, let us all hurdle towards effective

modernisation for the betterment of our

market and the economy at large. Reggie

Towns once said that hurdling requires more

than just speed. It requires flexibility, strength,

and courage! So as we face challenges along

the way, always remember to be flexible and

allow for new ways of doing business. The

world is moving on hence it is no longer business

as usual lest we sink deeper in our comfort

zones!


Corporate Governance and Shareholder Rights By Tariro P. Musikavanhu

“Although many top managers pledge fealty to shareholders, their actions and their pay packages often bespeak other loyalties.”

Until recently, corporate governance practices

were not considered to have a major impact

on a company’s financial performance; as a

consequence, they drew little attention from

investors. However, corporate scandals such

as those at Enron in the United States, and

Parmalat in Italy, and our very own banking

scandals and implosions of 2003-2005,

have prompted investors to put a greater

premium on transparency, accountability,

and other sound corporate governance

practices. These scandals illustrate how the

absence of effective corporate controls can

put a company and its investors at great risk.

Although many top managers pledge fealty

to shareholders, their actions and their pay

packages often bespeak other loyalties. This

gap between rhetoric and reality has led to

repeated calls for shareholders to exercise

their rights in companies that they own. Today,

higher standards of corporate governance

are becoming obligatory for public companies

wanting to maintain investor confidence and

improve long-term performance world-wide.


A natural reaction to failure is to cry out for

change. It is a call out for things to be done

differently, and preferably better. Calls for

change in how businesses are governed, are

growing louder by the day and shareholders

hold the ultimate right to initiate these

changes. Broadly, corporate

governance systems

comprise the framework

of rules, relationships,

systems and processes an

organization has in place for

overseeing its direction and

management. An important aspect of

best practice in corporate governance deals

with shareholder rights. By their nature, public

companies are characterized by a separation

of ownership from control. In return for their

equity, the owners (shareholders) profit

from a company’s performance through

price appreciation and dividend distribution.

Shareholders delegate decision-making

rights to boards of directors who oversee the

company by setting policies and monitors

management performance. Directors in turn,

“Good corporate governance practice by companies alone is not sufficient and will not yield the desired results if shareholders themselves, as owners of companies, do not act on their rights to enhance firm value.”

delegate day-to-day responsibilities to the

corporate managers who are responsible for

implementing the policies assigned by the

board.

As a result of this separation of ownership from

control, a system of corporate governance is

necessary to align the incentives of all groups.

Sound governance practices should protect

shareholders and the value of their investment

in the company by holding managers

accountable for their

actions and ensuring that

directors and management

act in the shareholders’

best interests.

Good corporate governance

practice by companies

alone is not sufficient and will not yield the

desired results if shareholders themselves,

as owners of companies, do not act on their

rights to enhance firm value. Therefore, to

ensure that they meet their investment

objectives, shareholders should play their roles

and exercise their rights fully. One of the most

effective means of controlling management’s

behaviour is for shareholders to exercise their

‘corporate democracy’ through voting on major

issues that affect their investments.

“One of the most effective means of controlling management’s behaviour is for shareholders to exercise their ‘corporate democracy’ through voting on major issues that affect their investments.”

delegate day-to-day responsibilities to the

corporate managers who are responsible for

implementing the policies assigned by the

board.


Normally, these rights are proportionate to the

shareholder’s equity stake in the company.

Common voting rights include the right to elect

directors, and the right to vote on proposals for

fundamental changes affecting the company,

such as mergers or liquidations. Other rights

may include the right to vote on equity-based

compensation plans and approve Directors

and External Auditors’ appointments and

compensation among others.

Generally the responsible use of shareholder

rights attached to shares strengthens the

checks and balances within listed companies,

which is key to creating long term value for

the company and all its stakeholders, including

shareholders. Responsible behaviour does not

only mean that shareholders cast ‘informed’

votes at shareholder meetings, but also

includes the monitoring of companies activities

which includes among others, the maintenance

of an ongoing dialogue with company boards

through regular attendance of AGMs/EGMs.

Of late the media was awash with companies

reporting their 2014 year-end financial

performance and by 31 March 2015, the majority

had published their results in local newspapers

together with their AGM notices. Naturally,

the companies themselves are obligated

to send these reports to the shareholders

directly within stipulated timeframes. The

question here is, as shareholders, do we take

time to scrutinize these reports and take

note of issues that need further clarification

from the company? Do we take note of AGM

notices and finally take time to attend these

meetings and make meaningful contributions?

It’s high time that we come out of our comfort

zones as shareholders and take part in taking

management to task to enhance and maximise

our wealth.


• Requesting for redress in case of rights violation

• Monitoring news, economic situations, the company’s news and information.

• Make up one’s mind on how to vote and not blindly following others.

• Asking pertinent questions to the board.

• Prepare needed documents as evidence for shareholder identification to be able to attend the meetings.

• Adequately studying, before the meeting, the AGM/EGM Agenda items and all information relevant to their decision making.

• Shareholders who cannot attend should appoint proxies to vote on their behalf and should explicitly instruct these proxies on how to represent them. An appointed proxy has the same right as the shareholders.

• Attending every shareholder meeting, unless exceptional reasons arise.

Many companies collapse and at times management bleeds companies right under the shareholders’ noses, yet as owners, they silently complain

though with justification, of executives who pocket staggering paychecks while delivering mediocre results, without doing anything. To ensure that

shareholders meet their investment objectives, shareholders should fully play their roles and exercise their rights. Below are some of the AGM best

practices for shareholders:

Exercising one’s rights as a shareholder is

the most effective way of protecting own

investments and on the other hand, honoring

shareholders’ rights is one of the tenets of

sound corporate governance practice. Without

shareholders who are willing to take risks that

a bank would not, these companies may remain

stuck in low gear or never even get moving.


Anti-Money Laundering And Combating Financing Of Terrorism (AML/CFT) Requirements For The Securities Industry.

Zimbabwe is a member of the Eastern and

Southern African Anti Money Laundering Group

(ESAAMLG). ESAAMLG was formed at a meeting

held on 27 August 1999, in Arusha, Tanzania,

where Finance and Justice Ministers from

Botswana, Kenya, Mauritius, Mozambique,

South Africa, Tanzania, Uganda, Zambia and

Zimbabwe adopted and signed a Memorandum

of Understanding (MoU) that gave birth to the

organisation.

The launch of ESAAMLG was a result of

consultations that had been taking place

since 1995 on the need to develop a regional

mechanism to co-operate in the implementation

of anti-money laundering programmes in order

to address the threat of cross border crime

and money laundering. ESAAMLG currently

has 17 members with several other countries

having applied for and being considered

for membership. The members are Angola,

Botswana, Ethiopia, Kenya, Lesotho, Malawi,

Mauritius, Mozambique, Namibia, Rwanda,

Seychelles, South Africa, Swaziland, Tanzania,

Uganda, Zambia and Zimbabwe.

Under the ESAAMLG MoU, the signatory

countries agreed to:

By Tirivafi Nhundu

• Implement any other measures contained in

multilateral agreements and initiatives to which

member countries subscribe for the prevention and

control of the laundering of the proceeds of crime.

• Apply anti-money laundering measures to all

serious crimes; and

• Adopt and implement the 40 Recommendations

of the FATF;


This 1999 Memorandum was subsequently

revised and endorsed by the Council of

Ministers at their meetings in Livingstone,

Zambia in August 2005; Harare, Zimbabwe

in August 2006; Mombasa, Kenya in August

2008 and Mauritius in September 2011.

ESAAMLG is an associate member of the

Financial Action Task Force , which is an inter-

governmental policy-making body, established

in 1989 to examine and develop measures to

combat money laundering. The FATF’s goal is

to globally institutionalise effective AML/CFT

regimes that are responsive to the dynamics

of Money Laundering and Terrorism Financing

(ML/TF).

The FATF issued its first set of international

Anti-Money Laundering (AML) standards;

“The Forty Recommendations on Money

Laundering”, in 1990 and the Recommendations

have been regularly revised and updated in

line with the evolving global money laundering

and terrorist financing trends. For instance,

the FATF standards were reviewed in 2001 to

bring in the aspect of Combating Financing of

Terrorism (CFT), hence there was an addition of

9 Special Recommendations pertaining to CFT

(www.fatf-gafi.org)

In February 2012, the standards were

further reviewed and consolidated to 40

Recommendations covering both AML and CFT

issues. An additional aspect of combating the

proliferation of weapons of mass destruction

was added to the AML/CFT issues through the

new Recommendations adopted in February

2013. Although FATF calls them ‘standards’,

they are mandatory for implementation by

ESAAMLG member states and members of

other FATF Regional Free Style Bodies.

“Although FATF calls them ‘standards’, they are mandatory for implementation by ESAAMLG member states and members of other FATF Regional Free Style Bodies.”

• The 1988 UN Convention against Illicit Traffic in

Narcotic Drugs and Psychotropic Substances;

• The 1999 UN Convention on the Suppression of the

Financing of Terrorism; and

• The 2000 UN Convention against Transnational

Organised Crime;

The FATF standards are built upon a number of United Nations (UN) conventions and resolutions,

including:

These are all aimed at promoting international cooperation in preventing and containing drug

trafficking, domestic and cross border organised crime, corruption and the financing of terrorism.


Consequences for failure to implement FATF Recommendations

AML/CFT legal and institutional arrangement for Zimbabwe

Unlike other international standards which

countries may aspire to implement, the FATF

standards are compulsory for implementation

by all countries in the world. Countries that

fail to show sufficient progress and political

commitment in addressing their identified AML/

CFT deficiencies face not only censure by the

ESAAMLG Council of Ministers, but also face

FATF sanctions.

The FATF maintains and publishes a “black

list” and a “grey list” of countries that are

considered AML/CFT risk to other countries

and to whom various measures may be applied

depending on the category.

The ultimate FATF blacklist is for countries

that have refused to cooperate in addressing

their AML/CFT deficiencies and are therefore

considered a serious risk to the world’s financial

system.

The FATF “dark grey list” is for countries that

have agreed to rectify their identified AML/

CFT deficiencies but have then failed to record

meaningful progress in addressing those

deficiencies.

Zimbabwe is in the FATF “lower risk category”

where the country addressed most of the

serious AML/CFT deficiencies and has high

level of political commitment to address any

deficiencies. The country was removed from

the grey list after the FATF’s plenary meeting

that was done in February 2015 following the

recent AML/CFT legislative developments.

These lists are continuously updated such that

when a country makes reasonable progress

it can be moved to a lower risk category or

removed from the lists altogether while a

country that fails to make progress can be

escalated to a higher risk category listing.

FATF requires its member countries and

encourages other countries to require their

financial institutions to take prescribed

measures that make it virtually impossible

for businesses in the blacklisted countries to

transact with financial institutions around the

In line with Zimbabwe’s international obligations and the country’s commitment to play its part

in the national, regional and global fight against money laundering and terrorist financing, the

country put in place legal and institutional frameworks designed to make it more difficult for

criminals to use the country’s financial system to launder proceeds of their criminal activities or

to channel funds for the financing of terrorist activities.

world. With regards to the “dark grey list”,

the FATF urges its members to require their

financial institutions to exercise extreme

caution when transacting with financial

institutions and business entities from the

“dark grey countries”.


Obligation to file Suspicious Transaction Reports (STRs) to the FIU

The government enacted various pieces of legislation, among which include the following:-

Since 2011, Zimbabwe was one of the seven

ESAAMLG member countries under the FATF’s

International Review Group (ICRG) for Africa and

Middle East. Countries under the FATF’s ICRG

process are generally considered to be on the

“watch list” and are assessed three times per

year with respect to the progress that would

have been made in addressing outstanding

AML/CFT legislative deficiencies.

Following the enactment of a number of

laws that address the identified deficiencies

in the country’s AML/CFT laws, the FATF

resolved at their meeting held in France in

October 2014 that Zimbabwe’s laws are now

technically compliant to the FATF standards.

Focus was now on establishing if the laws on

paper are being implemented. It is against this

background that the FATF’s ICRG arranged an

onsite visit to Zimbabwe in January 2015 to

assess if Zimbabwe has begun the process

of implementing the provisions of the recently

enacted laws.

As such, all stakeholders including SECZ

and all its licenced entities were required to

demonstrate their understanding of AML/

CFT obligations under the Zimbabwean law.

Failure to demonstrate awareness of AML/

CFT obligations would mean that Zimbabwe

would remain on the FATF watch list and severe

financial sanctions would have been imposed

on the country.

i. Section 24 of the MLPC Act: All capital markets licenced institutions to maintain transaction records for at least 5 years, including record of

STRs filed.

ii. Section 25 of the MLPC Act: Every reporting institution to have the following:-

iii. Section 31 (1) and 33 of MLPC Act: No secrecy or confidentiality provision in any other law shall prevent an AML/CFT reporting institution

from fulfilling own obligations under the MLPC Act. No criminal, civil, disciplinary or administrative proceedings for breach of professional secrecy or

contract shall lie against every AML/CFT reporting institution for filing STRs

The Commission needs to sensitise every reporting institution on the requirement of this provision.

Bank Use Promotion and

Suppression of Money Laundering

(MLPC) Act [Chapter 24:24];

An AML/CFT compliance officer at

managerial level

Ongoing employee training and

awareness raising on AML/CFT

The Trafficking in Persons Act

[Chapter 9:25];

Suppression of Foreign and

International Terrorism Act

[Chapter 11:21];

A number a of sector specific

guidelines issued by the Financial

Intelligence Unit

Money Laundering and Proceeds of

Crime Act [Chapter 9:24];

AML/CFT internal policies,

procedures and independent audit

of the effectiveness of the AML/

CFT systemsNeed for a compliance roadmap for

the above requirements

Extradition Act [Chapter 9:08]; Statutory Instrument 76 of 2014

on Suppression of Foreign and

International Terrorism [Application

of UNSCR 1267 of 1999, UNSCR 1373

of 2001 and Successor UNSCRs]

Regulations, 2014;

i

iv

iv

iii

iv

v vi

ii

iii

iii


From the Enquiry DeskThank you for your enquiries. We do value your concerns.

Q1: Q3:

Q2:

A:A:

A:

Missing sharesMany years ago I acquired shares in various companies for

my parents through Kingdom Stockbrokers. I have just learnt that

this business was shutdown many years ago. Please can you assist

in how I can locate my parent’s portfolio and how they can monitor

their portfolio? It seems there was never any communication from

Kingdom to its clients notifying them of the procedure after it shut

its doors.

The shares were held at the following companies – Delta, Econet,

Dawn and Pearl.

Looking forward to your help.

Sydney

Securing assets with an Asset Manager

To whom it may concern

If an investor places for management a portfolio with an Asset

Manager and in turn appoints a custodian. How secure are the assets

in case of folding up of the Asset Manager? Also would you highlight

whether the investor should seek a Notarial General Covering Bond

(NGCB) for these assets? Is it a necessary cost to have both of

these arrangements (Custodian and the NGCB)?

Regards,

E.Ngunga

Procedure for buying sharesI have shares in Delta, Dawn Properties and Africa First

Renaissance Corporation. Please advise, I want to add/buy more

shares to add to my current portifolio and also buy from other

companies on the Zimbabwe Stock Exchange?

Thank you.

Warm regards

P. Chakwenya

Dear SydneyKindly get in touch with ZB or Old Mutual Custodial Services.

All shares that were unclaimed at the time of Kingdom’s closure

were transferred to the two custodians. Alternatively, you can do a

preliminary check on our website portal, to see if the shares were part

of those that were handed over to custodians as unclaimed shares.

Lastly, you can also approach the respective Transfer Secretaries

for the stocks to see if your parents’ names appear on the register.

Dear NgungaIn terms of Part VI (Trust Accounts) of the Securities and

Exchange Act, every licensed person who holds or receives any

money for or on behalf of clients is mandated to open a separate

trust account in which client’s assets are to be deposited. The

segregated assets are to be kept by a licensed custodian. In the

event of liquidation or folding up of the Asset Manager, the Trust

account funds do not form part of the company’s assets, hence

will not be attached by the company’s creditors. It is therefore not

necessary to seek a Notarial General Covering Bond (NGCB) for these

assets, as the client’ assets are generally kept separately from the

Asset Manager’s assets and can be accounted for at any given

point.

Dear P.ChakwenyaTo buy shares of companies listed on the Zimbabwe Stock

Exchange, you are advised to approach licensed securities dealers.

These licensed persons are responsible for buying and selling of

securities on behalf of investors. A list of licensed securities dealers

is available on SECZ website, www.secz.co.zw or alternatively the

ZSE website, www.zse.co.zw.


20 York Avenue, Newlands, Harare, Zimbabwe Tel: +263-4-776045, 776065, 776206

Fax: +263-4-776166 Email: [email protected]

w w w . s e c z i m . c o . z w

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THE CAPITAL MARKETS QUARTERLY newsletter jan... · 2015-07-30 · has approved new ZSE listing requirements which shall be gazetted in order to have legal effect and new Investor