Treasury gazettes new stock trading laws
TREASURY has promulgated new regulations to operationalise the Government’s directive on tighter conditions on trading of securities on the Zimbabwe stock Exchange ( ZSE), which were announced by President Mnangagwa earlier this month.
This comes after the Government identified loopholes in sub-systems of the ZSE’s custodial functions believed to be part of activities fuelling parallel market activities.
Deficiencies in the systems allowed clients to sell shares and transfer the proceeds to third parties for speculative trading in forex.
Finance and Economic Development Minister Mthuli Ncube has since issued Statutory Instrument 103A to operationalise policy measures adopted by the Government to stymie speculative trading in the market, especially in the equities and currency markets.
“Where a holder of a securities dealer’s licence receives funds in his or her trust account from a person (“non-client”) who is not registered with him or her as a client, the holder shall (whether or not the identity of the non-client is known to him or her) immediately report that fact to—the Financial Intelligence Unit ( FIU) and the relevant exchange,” the SI read.
Malpractices by brokers on the ZSE formed part of illegal and speculative activities that fuelled depreciation of the Zimbabwean dollar through the transfer of funds between brokers’ sub-accounts, which has now been outlawed by authorities.
“In accordance with the instructions of the FIU— retain the funds pending forfeiture proceedings if the FIU informs the holder that there is a reasonable suspicion that the funds represent the proceeds of a serious offence as defined in the Money Laundering & Proceeds of Crime [Chapter 9:24];”
“Or return the funds to the non-client if the FIU informs the holder that there is no such suspicion as is mentioned in sub-paragraph (ii).”
The move clips the wings of rogue
and unleash attacks on the local currency in the parallel market.
The capital gains tax will remain at 2 percent for long term investors beyond 270 days. Research firm Morgan and Co last month warned the new measures by the Government would have a negative impact on trading volumes on the local stock market and an increase in trading costs via the capital gains tax increment.“The new measures only serve as a circuit breaker, and we envisage trading activity to gradually recover in the medium term given the limited Zimbabwe dollar investment options for retail and institutional investors,”The research firm said.
Takudzwa Mapfumo, a retail trader, said the measures targeting speculative traders were counterproductive as they made it hard for small market players to navigate the market and take positions when opportunities to do so arise. One broker, on condition of anonymity said, “From what I am seeing so far, market activity has slowed down and is likely to stay so for the week as traders digest the information released. But it is just short term as investors will return on the ZSE for value preservation.”
In order to deter people from trying to break the rules, civil penalties were also reviewed upwards by making appropriate legal changes in order to elevate some of the financial crimes to become criminal offences which automatically attract jail sentences.