1 August 2012

Zimbabwe: RBZ to Lose Fund Managers

THE Reserve Bank of Zimbabwe (RBZ) could lose control of the country's asset management companies if Parliament approves the Securities Commission of Zimba-bwe (SECZ) amendment Bill, The Financial Gazette's Companies & Markets (C&M) heard this week.

The Bill is currently under consideration.

As at January 13 2012, the RBZ supervised 16 asset managem-ent companies who had all complied with its US$500 000 minimum capital requirements.

SECZ says as-sets under the ma-nagement of asset management companies ran-ged between US$500 million and US$700 million.

This week, C&M heard that some asset managers had discussed the issue of supervision in the past year and agreed that the central bank should cede control to SECZ.

On Monday, SECZ chief executive officer Tafadzwa Chinamo confirmed that the Bill sought amendments to the supervision of fund managers.

"It was always going to be like that," Chinamo said.

"When the RBZ took over regulation of asset management companies, there was (no capital markets regulator). So when SECZ was set up, the intention was for SECZ to regulate asset managers. Until the current Bill, we have not been regulating fund managers," he said.

Chinamo said the central bank had supervised asset management companies bec-ause some of them transacted in the money market but following the establishment of the capital markets regulator, it was imperative to transfer supervision of all capital market pla-yers under SECZ.

Equity market analyst, Ranga Makwata, said while there was nothing wrong with the RBZ supervising asset management companies, transferring supervision to SECZ would be the right thing.

"It makes sense that SECZ regulates asset management firms," he said.

"In fact asset management companies have been pushing for SECZ to supervise them because their business is capital market related than banking," he said.

"There RBZ is preoccupied with banks because that is its specialisation, its template is on banks," he said.

SECZ has caused shock waves since establishment about three years ago.

It has sometimes proposed controversial changes to the capital markets, including operations of the Zimbabwe Stock Exchange and listed companies.

At a recent conference, the regulator questioned the motive for a series of planned rights offers by publicly listed companies, saying money raised in prior cash calls by several listed firms had not been fully accounted for.

Many agree.

Threatening a crackdown on wrongdoers, Chinamo told a meeting of finance executives organised by the Association of Certified Chartered Accountants (ACCA) last month that companies could have abused funds raised from shareholders, pointing out that the level of disclosure on the domestic market was too shallow to prevent abuse of minority interests.

"In the next three months, we will see a number of rights issues. Where did the last money (raised from previous rights issues) go? Things are happening in this market that boggles the mind," Chinamo said.

Indeed several firms that undertook rights issues since dollarisation in 2009 have indicated they might come back to the market for fresh capital.

In several instances, the purpose for which the rights issues were undertaken failed to materialise, leaving the companies as vulnerable as they were before the rights issues.

Chinamo said this was a very worrying development.

He blamed the current disclosure requirements for listed companies, saying they allowed abuse of minorities who often did not have insight into the key details involved in the management of their companies.

As a result, he said, SECZ was in the process of putting in place measures to force companies to make comprehensible disclosures.

"The problem is minorities are the ones who suffer. You ask people to put money (into companies) but you don't tell them what is happening to their money," he said.

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