The Investor Protection Fund Shaping Local Investment Landscape

The Investor Protection Fund (IPF), created by the Securities and Exchange Commission of Zimbabwe (SECZ) in 2010, is playing a key role on the local investment landscape. The IPF’s purpose is to provide compensation to protected investors who have suffered losses, which have occurred when a licensed contributor to the Fund is unable to meet their liabilities. This failure might be due to insolvency or malpractice.

Statutory Instrument (S.I.) 83 of 2017 sets out the rules that guide the operation of the IPF. According to this S.I., a protected investor is a holder of a security which is dealt with by a contributor to the IPF, a person for whom a contributor holds a security, or a person who has a complete and unconditional right to obtain a security from a participating firm.

In addition to the role it plays in compensating protected investors, the IPF together with SECZ are jointly responsible for the education and protection of investors in securities and capital markets. In order to fulfil this mandate, the two bodies have been collaborating over the past few years. Together, they create and execute programs that help capital markets products to become more familiar and accessible to all Zimbabweans. The IPF is highly committed to investor education and has partnered with SECZ in crafting and implementing an investor education strategy.

The IPF is managed by a Board of Directors consisting of six non-executive directors with diverse competencies. This Board was appointed by SECZ in terms of section 86C of the Securities Amendment Act (Number 2) of 2013. The IPF’s Board members currently represent 6 institutions: Judiciary, SECZ, Zimbabwe Association of Pension Funds, Zimbabwe Stock Exchange, Public Accountants and Auditors Boards and Ministry of Finance and Economic Development. In 2019, the IPF Board created an Investor Education and Awareness Committee to ensure a systematic and strategic approach to investor education. This will ensure that the IPF continues to help raise awareness and build the public’s knowledge on how to invest on the capital markets.

Eligible protected investors who wish to make a claim for compensation must lodge an application for compensation with the Fund Administrator, Comarton Consultants (Private) Limited. The maximum amount of compensation paid out at any one time must not exceed ten percent of the market value of the Fund’s assets at the time the payments become due. In the event of multiple claims, the amount paid to each protected investor will be reduced proportionately.

In order to make a claim, the claimant must provide proof to the Board that they suffered a loss, and the loss was as a direct result of malpractice on the part of the contributor or of the insolvency of the contributor. Further investigations are then carried out by SECZ, resulting in submission of findings to the IPF Board for evaluation and judgment. All valid claims are assessed for the compensation payable, and payment will be done within three months. An application for compensation will be rejected by the Board if it is made twelve months after the malpractice or insolvency unless there is a valid explanation for the delay. The application will also be rejected if the protected investor is responsible for their loss, or if the claim is found to contain material inaccuracies or omissions.

This article was written as part of the Securities and Exchange Commission of Zimbabwe’s Investor Education Campaign in partnership with the Investor Protection Fund (IPF). For more information contact: seczim@seczim.co.zw

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