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Reginald Sherekete
THE Securities Commission of Zimbabwe (SEC) and members of the ZSE met this week to discuss issues concerning the transformation of the capital markets and its viability.
But the meeting was adjourned after members of the ZSE requested time to establish common ground amongst its membership.
Members are expected to get back to the regulatory authority with details of their course of action.
This comes after SEC CEO Tafadzwa Chinamo last week summoned all members of the ZSE to attend the meeting following the non issuance of an operating licence to the ZSE after the exchange failed to submit its 2010 financial statements and a business plan with specific goals indicating the transformation and development of the capital market.
SEC also accused members of abandoning the exchange given its current state of affairs, saying they needed to be proactive in the development and running of the exchange.
“It is worrying that the Commission has not yet issued the ZSE an operating license due to the failure by the ZSE to provide the required information. Of particular concern to the Commission is the non-submission of the 2010 financial statements which would enable the Commission to verify the exchange’s capital adequacy,” Chinamo said in the circular to members.
Chinamo indicated that the ZSE was a licenced entity that needed to be issued with an operation certificate as specified in Section 30 of the Securities Act.
“The exchange is owned by the members and as such it is the responsibility of members to ensure its smooth running. Members have a responsibility to resource the ZSE and see to it that the necessary management structures are established and supervised for the day- to-day operations of the exchange,” said Chinamo. “As the Commission we have reason to conclude that members have abandoned this responsibility and we seek to establish members’ position.”
The ZSE, currently comprising of 19 broking firms, is facing viability problems owing to the liquidity crunch in the market.
SEC said it would take action against all firms facing viability challenges.
“Liquidity is low and income for most firms falls short of expenses. As regulator it is the Commission’s duty to ensure that only financially viable firms operate in the market,” Chinamo said.
Only three firms have met all SEC’s requirements including capitalisation and will soon be issued licences by way of public notice.
SEC also indicated that there were unclear admission procedures for new members.
There are currently about 30 brokers in the market while the last admission was three years ago.
The ZSE is believed to be sitting on applications.
“Given the important role members play in operating the exchange the Commission is concerned by the non-transparent manner in which new members are admitted. Several applications are awaiting approval months after submission resulting in a number of firms operating without two brokers as stipulated in the SEC rules,” Chinamo said.
“It is surprising to have a profession with 30 members only given that we have so many qualified people who can be licenced as brokers in Zimbabwe. I believe that if the membership grows the bigger the pool of ideas we have and this can increase the pace of transformation of the market,” a leading broker indicated.
Chinamo added that the current trading mechanisms employed by the ZSE were now outdated, inefficient and unacceptable in the modern era.
“The SECZ cannot wait any longer for promises of automation and modernisation and insist that members address this as a matter of urgency,” said Chinamo.
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