Are there any risks associated with investing in capital markets?

Yes, although there are many advantages for investors, as well as the possibility of higher profit, investing in capital markets carries a lot of risks which include:

  • Risk of loss – The capital market does not have guaranteed returns especially when investing in ownership instruments such as shares and unit trusts. If dividends are not paid because the company’s performance is negative and the share price falls at the same time, the investor can incur significant financial losses in the form of capital losses. Moreover, in company liquidation, the shareholder is ranked last in the order of payments out of the liquidation assets.
  • Capital market performance is highly depended on the general macro and micro economic environment which the ordinary investors have no control over, for instance, Government policies with a negative impact on capital market operations
  • Unethical practices – Investors are not involved in the day to day operations of companies they would have invested in and their investments would be left in the hands of the company management and directors which can mismanage the investments.

If I am aggrieved by the action of a licensed player, how do I lodge a complaint?

If you feel you have been treated unfairly or aggrieved by the actions of an intermediary in any way, it is your right to lodge a complaint. The first step is to try to resolve the matter with the intermediary concerned – if nothing is resolved then you can lodge your complaint directly to SECZ.

What are Capital Markets?

These are financial markets that deal with the trading of securities such as shares, bonds, derivatives and commodities. Capital markets provide an avenue where companies can raise funds (capital) to expand on their businesses or establish new ones by issuing these securities to the public. In Zimbabwe, capital markets are currently dominated by the Stock market.

What are securities dealers?

These are capital market professionals who are licensed by SECZ to buy and sell shares on behalf of investors. Individual investors are not allowed to directly trade on the Zimbabwe Stock Exchange (ZSE), instead they go through these licensed securities dealers. They are the only ones authorised to trade in securities on the ZSE trading floor. A list of licensed securities dealers can be obtained from ZSE or SECZ websites or offices.

What are the investor protection mechanisms that are available in the capital markets?

One of the objectives of SECZ is to provide high levels of investor protection; as such SECZ has put in place various investor protection mechanisms which include:

  1. Regulation of all capital market players and activities – through licensing of capital market players, SECZ knows and monitors the activities of each and every market player and flushes out unscrupulous players. Continuous supervision of capital market players ensures that only strong institutions that uphold high ethical standards are allowed to operate.
  2. Establishment of an independent Investor Protection Fund – SECZ facilitated the establishment of the Investor Protection Fund that is meant to provide an additional layer of protection for investors and offer some reimbursement for losses suffered as a direct result of a licensed player becoming insolvent.
  3. Existence of a Guarantee Fund – The guarantee Fund that is administered by the Securities Exchange is meant to guard against settlement failures by the members of the exchange (i.e. securities dealers).
  4. Professional Indemnity cover – All capital market players are mandated to have this insurance cover to cover against losses resulting from negligent or dishonesty of any of the staff of the licensed player.

What is the role of the Securities and Exchange Commission of Zimbabwe (SECZ)?

As an apex independent regulator of Zimbabwe’s capital markets, SECZ’s main aim is to promote, develop and regulate capital markets through formulation and implementation of appropriate rules and regulations to guide capital market operations. Investor Protection and Investor Education are also at the core of SECZ’s activities.

What legal Instruments govern capital market operations in Zimbabwe?

Capital market operations are governed by the following pieces of Legislation:

  • Securities Act [Chapter 24:25]
  • Securities Amendment Act, 2013
  • Asset Management Act (Chapter 24:26)
  • Collective Investment Schemes Act (24:19)
  • Statutory Instrument 100 of 2010, Securities (Registration, Licensing and Corporate Governance) Rules, 2010
  • Statutory Instrument 63 of 2013, Securities (Central Securities Depositories) Rules
  • Statutory Instrument 172 of 1998, Collective Investment Schemes (Internal Schemes) Regulations. Any other rules and regulatory directives that may be issued by SECZ from time to time

What rights do I have as a Capital market investor?

As a capital market investor, it is your right to:

  • Participate in decision making of companies that you would have invested in through exercising your voting rights at AGMs and EGM (i.e right to approve company transactions such as (, the right to approve or disapprove the sale or purchase of company assets, the right to amend the memorandum, the right to approve payments of dividends, issue of bonus shares, rights issues etc.)
  • Question management
  • Adequate, equitable and timely disclosure of accurate material information for informed decision making purposes
  • Claim what is due in the form of dividends / scrip certificates when declared or falls due.

When was SECZ established?

SECZ was established in 2008 by the Government through the Ministry of Finance in terms of an Act of Parliament, the Securities Act [Chapter 24:25]. This marked the end of self regulation in the capital market industry.

Which capital market instruments can one invest in?

One can invest in financial instruments like Shares and or Collective Investment Schemes (Unit Trusts). The bond market is not active at the moment.

Shares

Shares represent part-ownership in a business concern. If you buy shares of a listed company, you become a shareholder and become vested with shareholder rights which include attending Annual General Meetings and have a vote in how company’s affairs are run. To invest in shares, engage licensed securities dealers. A list of licensed Securities dealers is available on the SECZ website.

Unit Trust

This is a professionally managed pool of funds from a group of investors that share the same investment objectives. These funds are pooled together to buy a diversified portfolio of products (or product mix) on the investments market. Each investor has a proportional stake in the portfolio based on how much money he or she contributed. The word “unit” refers to the portion or part of the Portfolio that is owned by the investor. To invest in unit trusts, approach licensed investment managers.

Which Capital market players are regulated by SECZ?

SECZ regulate and license persons who trade or deal in or manage securities and these include:

  • Securities dealers & dealing firms (commonly referred to as stockbrokers)
  • Securities Transfer Secretaries
  • Securities Custodians
  • Securities Investment Advisers
  • Securities Investment Managers
  • Securities Trustees
  • Central Securities Depositories
  • Depository Participants
  • Securities Exchanges (also known as Stock Exchanges)
  • Such other licensees as may be prescribed in rules

Why should the public invest in capital markets?

  • Source of raising long term funds,
  • Investors approach the market to create wealth through investing in instruments traded on the market (e.g. capital appreciation and dividend payment)
  • Diversification of Investments – Investing in the capital market is a way of diversifying one’s investment portfolio as one can invest in a number of different securities thereby reducing the risk of investing
  • Guaranteed of investor protection – When one invests in capital markets and deals with licensed entities, he or she is guaranteed of investor protection as the market is highly regulated
  • Safe custody of securities – An investor can choose to lodge his/her securities with a licensed custodian and eliminate the risk of losing the share certificates
  • Access to professional advice and management of securities through the use of licensed Investment Advisers and Managers who have the expertise in researching in many different investment opportunities