Harare — TA Holdings stockbroking arm, FMI Securities has stopped trading after its broker deserted the firm, as it emerged yesterday that most broking firms may have to beef up their broker teams or face the chop come December.

The Securities Commission regulations now demand that all broking firms have two brokers by December 31, 2010. However, most dealing firms are operating with one broker as fears mount that some firms will not open for business next year if they fail to comply with the new regulations.

The Zimbabwe Stock Exchange has 35 registered brokers of which only 26 are practising. This means the market needs more registered brokers to meet the new requirements. FMI acting managing director, Mr Runyararo Bude confirmed to Herald Business that the firm stopped trading a month ago and they were scouting for a substantive managing director and a broker.

"We are looking for a suitable managing director and once we have a substantive boss everything will be in place and we would be back on the market," said Mr Bude. Mr Arnold Dhlamini who was the broker and managing director at FMI, is alleged to have been lured by ABC Securities.

Stockbroking firms are also facing viability problems following reduced volumes on the local bourse and increased taxation by the regulating board, SEC. SEC introduced two modules that all brokers should possess before they renew their registration for the coming year.

According to the new regulations, dealers should pass the bond market and the derivatives market modules offered by the South African Institute of Financial Markets. Economists this week said some of the securities companies will simply close shop as others might be forced to merge their operations. Zimbabwe's financial sector also went through the same situation after struggling to meet the Reserve Bank of Zimbabwe capital requirements.

Institutions were encouraged to merge operations while some raised money through rights issues, debt and equity, resulting in underwriters getting a significant chunk in the country's financial institutions. Dealers who spoke to Herald Business yesterday said investors both local and foreign welcomed the coming on board of SEC as a positive note, which will create the necessary level of confidence among investors.

They, however, believe that as it sets up its regulatory framework, it needs to provide a reasonable transition period. "There are a lot of uncertainties, which are arising as a result of some of the new regulatory framework which, under any normal environment, are important but implementation needs to be managed well within a good transition time. "Expecting the broking community to overhaul by the December 31 might not be possible," said one broker.

SEC is also pioneering the establishment of a Central Securities Depository system to be launched before the end of the year. This will give birth to the establishment of a derivatives and bond market within the next three to five years. "As SEC is doing a good job we urge them to provide for a one year transition period for its new regulatory requirements to enable broking firms to adjust to the new regulatory environment," added the broker.