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SEC clashes with firms over US$12 000 registration fee

THE Securities Commission of Zimbabwe (SEC) has clashed with securities firms over requirements that companies that operated before the formation of the statutory body should re-apply for registration and pay a fee of US$12 000, the Zimbabwe Independent has learnt.

The commission has since threatened to revoke licences of firms that are challenging the fresh registration as unlawful. 
In a circular to stockbrokers dated September 17, SEC chief executive officer Alban Chirume says all licensed securities dealers must furnish the commission with academic qualifications, birth certificates, police clearance and professional qualifications.
The circular reads: “Please be reminded that failure to lodge your applications during this transitional period will result in your current licence that authorises you to conduct licensable and regulated activities having no force or effect upon the expiration of the deadline. To avoid business interruption, we urge you to take immediate action to regularise your licence.”
Chirume says should an application be rejected, “even in instances of a simple omission to the required documents”, the commission will forfeit 25% of the application fee.
“Please be advised that, should the application be rejected, even in instances where it is on the basis of a simple omission to submit the required documents, 25% of the application fee will be forfeited,” the circular reads. “It is therefore imperative to ensure the submission of complete documents with your application. Please note the commission is available for any one-on-one clarification on any issue. It is our wish that the migration is smooth, painless and quick.”
But the ZSE and members of the stock exchange argued through their lawyers, Kantor & Immerman that SEC misunderstood the law and cannot demand further registration and fee payments.
Addington Chinake of Kantor & Immerman wrote back to Chirume on September 30 saying: “Having looked at the facts and the law, we respectfully draw your attention to the following provisions of the Securities Act, 17 of 2004 (chapter 24:25) … (3) Every person who, immediately before the fixed date, was a registered stockbroker under the repealed Act shall be deemed to be the holder of a licence issued on the fixed date authorising him  or her to trade or deal in the same securities, and subject to the same terms and conditions as he was permitted to immediately before the fixed date.”
The fixed date, Chinake argued, is defined as being the date, in terms of sub-section (2) of section (1) the Act came into operation. The statutory body became operational on June 1 2008.
The ZSE and its members argued that any stockbroker or its members registered before June 1 2008 is “deemed licensed”.
“Accordingly, your demand that members of the Zimbabwe Stock Exchange ‘apply for licensing’ is bad in law. Consequently, the demand for a licence fee is also fatally flawed. In the circumstances, we have advised members of the Zimbabwe Stock Exchange and the ZSE that your demand is illegal,” reads Chinake’s letter.
Chinake threatened to seek a declaration confirming his point at law and an urgent application to prevent SEC from stopping operations of his clients.
He added: “Finally, your threat that Section 121 is voided by your statement that “the deemed licence under which you presently operate shall cease to be of any force or effect” is bad in law. Any attempt to stop the lawful operations of members of the Zimbabwe Stock Exchange on the basis set out in your letter, will be resisted and, if necessary, an urgent application filed for urgent relief by the members and the Zimbabwe Stock Exchange to protect their interests. We trust this will not be necessary.”
However, the commission boss further threatened members of the ZSE saying they had not heeded SEC’s circulars.
In another letter dated September 27, Chirume wrote: “Our circular of the 16th of August 2010 aforementioned gave the 30th of September 2010 as the deadline by which SEC should be in receipt of your application … we notice that there are three days left from the date of this letter, to the lapsing of the deadline. This serves as the last reminder that unless we receive your application as a securities dealer, complete with all the relevant documents and proof of payment fees, at the latest on the 30th of September 2010 any business that you conduct shall be unlawful.”
This is not the first time the securities commission has clashed with ZSE since the commission came into existence in June 2008. Last year, the commission fought with ZSE over the administration of an investor protection levy. SEC claimed it should administer and collect the funds while the ZSE argued it was not necessary to have another parallel investor protection levy.
Sources say at least eight companies had paid SEC, but will soon claim that money back.
“About eight guys paid out of fear of being victimised. We have instructed our lawyers to claim that money,” a source said.

Chris Muronzi

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