THE impasse on the Zimbabwe Stock Exchange (ZSE) has spilled into 2009 with stockbrokers now advocating for the local bourse to be dollarised as investigations of alleged insider trading continue.
According to information to hand the stock broking community this week advocated for the stock market to be dollarised so that it reflects the true economic picture of the country and value of counters.
The stock market last resumed normal trade on November 17 after Reserve Bank governor Gideon Gono read the riot act to banks that were using fraudulent cheques to artificially inflate share prices.
The halt intensified after the country’s Securities Commission ordered stockbrokers to submit audited financial reports of their net worth by the end of December 2008.
The commission warned broking firms they would be closed if they failed to meet the deadline.
Contacted for comment ZSE chief executive Emmanuel Munyukwi could not shed much light saying normal trade would resume when investigation on various issues was complete and other demand looked into.
“There are still investigations being done (on the stock market) We do not have an exact date as to when normal trade would resume, there are also other demands that are being looked into,” said Munyukwi.
Trades on the bourse are now supposed to be backed by a letter of confirmation from a bank chief executive officer, something which Kingdom Bank said would prove difficult to implement as CEOs already have their hands full at the moment.
ZSE said it had observed acts of insider trading on the local bourse which has caused some counters to inflate, depress or cause fluctuation of shares.
In a statement to the Reserve Bank and Ministry of Finance signed by Munyukwi and chairman Seti Shumba, the local bourse said it was investigating all reported cases as it was a serious offence.
“The ZSE committee has also observed with concern that there are some relatively large institutions which have capacity and strategic macroeconomic information which is used to inflate, depress or cause fluctuations in the prices of securities in breach of the Securities Act (Chapter 24:25) Section 96 (2),” said ZSE.
“This is considered a very serious offence and will be subjected to investigation in order to determine complicity under the securities Act,” the stock exchange said.
The ZSE committee said it had not yet ruled on the issue of defaulting members that were revealed by the Reserve Bank last year.
“It (activities on the stock market) was simultaneously escalated to the public domain as the report was being brought to the attention of the committee,” the ZSE said.
The ZSE said the procedures as prescribed in Rule 11.01 for bringing this issue, as well as other complaints about members, has not been varied or waived.
“The ZSE committee has a primary duty to appraise the discovered evidence and then set out to prove the breach. The committee must then follow procedures as laid down in rules 11.01-11.12,” said the ZSE.
The stock exchange committee said it would consider the question of final re-admission of any defaulter in two different classes according to rule 11.12 namely:
(i) Cases of failure arising from default of clients or from other circumstances where no bad faith or breach of the rules and usage of the exchange has been practiced.
(ii) Cases marked by indiscretion and by failure to exercise reasonable caution on the part of the defaulter.
“The ZSE Committee will examine any such evidence provided in investigating the matter through normal channels,” the ZSE said.
The stock exchange committee also said it will call for all participants to be subjected to interviews regarding the circumstances of the alleged breach and weigh the evidence to establish the underlying motives for suspicious conduct and behaviour by the members as innocent, negligent or fraudulent.
“The quality of the evidence must be such that it is admissible in open court so as to provide a successful prosecution and ultimate conviction if the need arises,” the ZSE said.
The committee said it shall ensure that the rules of natural justice are applied and observed by taking all reasonable steps to ensure that every person whose interests are likely to be affected by the exercise of the functions is given adequate opportunity to make representations in pursuit of fairness and any probabilistic outcomes in terms of the rules.
Commenting on purchasing and settlement risk, the ZSE said a precedent was observed in the current difficulties in which bank cheques were dishonoured.
“This put the entire market at risk as there was no longer any guarantee, even by the designated authorities in the bank that their own paper and what they have signed for can be rendered disabled.
Therefore no other paper will be acceptable to stockbrokers for the purchase of shares,” said the ZSE.
The stock market was the safest form of investment last year, as they were looking at value creation and convenience of investment.
The economy is now dollarised, and many companies no longer sell by cheques or RTGS, and are demanding the scarce cash and foreign currency. Hence the goods market is not easily a tenable alternative for households and corporates with excess cash balances.
Therefore anyone with Zimbabwe dollars was faced with options of the money market with negative real returns, the property market that needs loads of money to enter or the convenient local bourse. That is why the stock market was the preferred option.
BY PAUL NYAKAZEYA