Stockbrokers have expressed concern with a clause in the new Securities Amendment Bill, passed in the lower house of parliament this week, relating to the corpus of the investor protection fund amid fears it could increase operating costs.
Report by Hazel Ndebele
The bill was passed on Tuesday without amendments but stockbrokers felt there was still need to consult further on this particular clause relating to the amount for the Investor Protection Fund.
The clause states the Investor Protection Fund will be financed through contributions from licenced members of the stock exchanges and licenced exchanges.
Giving oral evidence before the parliament portfolio committee on budget, finance, economic planning and investment promotion, ZSE acting CEO Martin Matanda said members of the ZSE were consulting further on Clause 86 of the Securities Amendment Bill to ensure there is an understanding on the implications of the proposed law to licenced members and the exchange in terms of cost.
He said members were still consulting with a view to coming up with another proposal. In other countries such as India, trading members contribute to the fund.
Imara Capital MD Sean Gammon said members would want to see legislation that does not add to the cost structures already burdening stock brokers in particular.
Gammon said costs of transacting on the ZSE were among the highest in the region, if not in the world.
He said government collects more money through taxes than the brokers.
The Investor Protection Fund was set up to safeguard the interests of the clients of the trading members on the exchange, who may have been declared defaulters or who may have been expelled under the provisions of the rules of the exchange.
The Investor Protection Fund may provide compensation against a genuine and bonafide claim made by any “client, who has either not received the securities bought from a trading member for which the payment has been made by such client to the trading member there against or has not received the payment for the securities sold and delivered to the trading member or has not received any amount or securities which is/are legitimately due to such client from the trading member”.
While the fund has amassed US$5 million, Matanda said very few accusations or claims have been made to the Investor Protection Fund since dollarisation started.
He also said there was still need to provide greater clarity on the definitions and terms references.