Zim capital markets under threats from Ponzi schemes

Escrow Group CEO Collen Tapfumaneyi
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THE capital markets are under intense pressure from new unconventional investments, including ponzi schemes and gambling, experts disclosed this week, urging industry players to up their game to remain relevant.

This week, businessdigest learnt that some of these schemes used illegal ways of raising money and were harming capital markets’ reputation.

“They are attracting activity, wrong or right. It is that activity that we need in the capital markets,” Escrow Group chief executive Collen Tapfumaneyi told businessdigest.

“So, if someone comes up with an unorthodox pyramid scheme, obviously, they are raising some kind of funds which directly compete with the legitimate business that may want to raise the same funds.

“Yet, someone out there in the shadows is coming up with a scheme, getting people to subscribe and then they get scammed. These people obviously have an investment mentality and want a return on their investment and have excess liquidity that they want a return on.

“In this case, they are faced with an option of going to the capital market, buy shares or invest in an initial public offering, mutual funds or unit trusts.

“However, they give money to some clandestine guy who is running a pyramid scheme.” he said.

Tapfumaneyi said capital markets needed to streamline products so that they speak to the new breed of investors.

“They want efficiency, speed of execution. They want easy access, they want to access products on their everyday gadgets, they need immediate settlement and convenience,” he said.

“So, capital markets need to also ensure that they connect and match the efficiencies that characterise those markets and give them the security they need.”

Should the capital markets give investors the security as well as the adoption of the efficiencies and conveniences, Tapfumaneyi said they may start attracting traffic.

In Zimbabwe, a number of people have been victims of crypto-currency trading, as well as, ponzi schemes.In the US, the New York attorney general’s office describes a ponzi scheme as a pyramid scheme, also known as a chain distributor scheme, which is a fraudulent system of making money based on recruiting an ever-increasing number of “investors”.

Ponzi scammers involve sale of products or distributorships in an attempt to show legitimacy. This is done to sidestep regulatory agencies.The Escrow CEO said anchoring on technology was a critical success factor for the capital markets, as well as inclusivity and avoiding barriers to access.

“Technology has revolutionised the capital markets, making transactions and investments faster, more efficient and easier for participants,” Tapfumaneyi said.

“To achieve a sustainable evolving and successful capital market, inclusion also plays a critical role in ensuring that capital markets benefit reach a broader spectrum of market participants.

“Technological advances   that create barriers   for participants   must be   minimised and access to necessary technology and know-how should be provided.”

According to Tapfumaneyi, any gains in boosting people’s trust in investing would be undone if the schemes fail or if people are defrauded. – Zimbabwe Independent