SecZim, ZSE stand firm on new directive

HARARE – The Securities and Exchange Commission of Zimbabwe (SecZim) and the Zimbabwe Stock Exchange (ZSE) have separately filed opposing papers against a High Court application by Chengetedzai Depository Company (CDC) seeking to nullify SecZim’s directive on the migration of deposited securities following the licensing of multiple Central Securities Depositories (CSD’s).

SecZim and ZSE are responding in their capacities as the first and second respondents respectively to the lawsuit.

SecZim, after licensing the Zimbabwe Stock Exchange Depository Company, issued a directive with the aim of ensuring a smooth migration of deposited securities from one CSD to another.

According to CDC, the directive by SecZim was issued without the Applicant (Chengetedzai) and other interested parties and stakeholders first having been afforded the right to be consulted to make representations and give input thereon as per the decision making process prescribed by Section 111 of the Securities and Exchange Act (Chapter 24;25).

CDC also noted that the SecZim directive unlawfully interferes with the proprietary rights of securities depositors/shareholders in respect of their deposited shares with a central securities depository.

Tafadzwa Chinamo, the SecZim chief executive officer, in his opposing affidavit, said the applicant (CDC) is the only party that is aggrieved by the directive and the grievances stems from the fact that another party was licensed as a CSD.

“As such, the Applicant no longer enjoys the monopoly it once had over the markets as the introduction of another CSD means that the Applicant can lose clients and revenue to the new competitor,” he revealed.

Chinamo added that the Directive was not issued under section 111 of the Securities and Exchange Act and the Applicant has been informed about this several times.

“It will not listen because it is clutching at straws in an attempt to hold onto its monopoly which has now come to an end.”

According to the opposing affidavit, there is no right that could have possibly been infringed by the Directive, but CDC is aggrieved on behalf of third parties.

“The deponent says so when he states,” The applicant is also aggrieved by the substance of the Directive in that it takes away the property rights of securities depositors/shareholders in respect of their shares deposited with a central securities depository,” said Mr Chinamo.

After the Directive was issued, a Group of seven investors filed an urgent chamber application at the High Court for stay of the implementation of the SecZim directive on migration of registers of shares between central security depositories.

The application was, however, struck off the urgent matters roll on November 11, 2021.  Mr Chinamo said it is absolutely illogical to allege that a shareholder has a right to determine where the record of its shareholding in a listed company should be kept.

“That is the function of a company and the obligation is specifically placed on the company secretary.

“Most companies outsource this to transfer secretaries and parties like the Applicant simply deal with records of trades in those shares and for a person to allege that each individual shareholder has a right to determine which party keeps that record is simply nonsensical. It is also impractical” he said.

According to SecZim, the Directive was not issued in terms of Section 118 (6) of the Securities and Exchange Act and therefore does not need ministerial approval.

SecZim added that it was issued in terms of Section 4 of the Act as reads with Paragraph 21 of the First Schedule of the Act. “The first respondent (SecZim) is empowered to do so.”

Mr Chinamo also said the Directive simply gives guidelines on how the issuers that wish to migrate from one depository to another should act so that there is smooth transfer of data and maintenance of market integrity and this does not need ministerial approval.

Mr Justin Bgoni, the chief executive of the ZSE, which is cited as the second respondent, in his opposing affidavit, said the Applicant’s application is devoid of merit, as it is predicated on facts that do not disclose either a violation of Section 118(6) of the Securities and Exchange Act (Chapter 24:25), nor Section 134 of the Constitution of Zimbabwe.

He said the ZSE denies that the Applicant was denied a right to be heard that resulted in the Directive being issued was procedurally unfair.

“The record itself shows the extensive discussions and consultations that took place between the parties. ZSE denies that there was a legal requirement for the Applicant to be issued with any draft documents for comments.

“Consequently, no such right could have been violated, in the alternative, the Applicant itself concedes that such a process took place, but it is merely unhappy with the outcome,” Mr Bgoni said.

He said it is common cause that the Applicant is aggrieved with the directive, and the Applicant had sought to persuade other so called stakeholders to join hands with the Applicant in expressing certain grievances. – Herald