Securities and Exchange (Investor Protection Fund) Rules Gazetted

THE objectives of the Securities and Exchange Commission of Zimbabwe (SECZ) are outlined in section 4 of the Securities and Exchange Act (Chapter 24:25). One of its main objectives is to provide high levels of investor protection. In this regard, SECZ established diverse but closely interconnected mechanisms for investor protection which include the Investor Protection Fund (IPF).

The IPF was established in 2009 and formalised in 2013 with the publication of the Securities Amendment Act No. 2 of 2013.

The objective of the fund is to compensate protected investors for losses directly incurred as a result of malpractice or insolvency on the part of a person who is licensed or registered by SECZ.

Malpractice means theft, fraud, forgery, breach of trust or other dishonest conduct. The Securities and Exchange (Investor Protection Fund) Rules, Statutory instrument 83 of 2017 were recently published in the Government Gazette of July 21, 2017.

These rules provide for the operational procedures of the IPF. In terms of the rules, the Board of the IPF may postpone payment for compensation until the investor has exhausted his or her rights against the licensed or registered person or any other third person.

An application for compensation should be duly made within 12 months after the malpractice or insolvency of the licensed person.

Otherwise the investor would need to provide a reasonable explanation of the circumstances as to why the application was made after the twelve month period has expired. The investor should also not have been: a) responsible for, or b) directly / indirectly profited from the events relating to the business of the market player which resulted in its financial difficulties.

The total amount payable to protected investors in respect of malpractice or insolvency of a licensed person shall not exceed 10 percent of the total amount of the Fund. The IPF balance stood at $6,4 million as at March 31, 2017.