An analysis of the role-players in the enforcement of the Zimbabwean insider trading laws

Author:Howard Chitimira, Pontsho Mokone
Position:Securities and Financial Markets Law, Faculty of Law, North-West University, South Africa/Doctoral (LLD) candidate, Securities and Financial Markets Law, Faculty of Law, North-West University, South Africa
Pages:134-156
SUMMARY

Insider trading is statutorily prohibited in Zimbabwe. This is primarily aimed at promoting public investor confidence, market efficiency and enhancing the integrity of the Zimbabwean financial markets. As a result, some activities that could amount to insider trading in the Zimbabwean financial institutions and financial markets are outlawed in the Securities Act 17 of 2004 [Chapter 24:25] as... (see full summary)

 
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An analysis of the role-players in the enforcement
of the Zimbabwean insider trading laws1
Associate professor Howard CHITIMIRA2
PhD. student Pontsho MOKONE3
Abstract
Insider tradin g is statutorily prohibited in Zimbabwe. This is primarily aimed at
promoting public investor confidence, market efficiency and enhancing the integrity of the
Zimbabwean financial markets. As a result, some activities that could amount to insider
trading in the Zimbabwean financial institutions and financial markets are outlawed in the
Securities Act 17 of 2004 [Chapter 24:25] as amended (Securities A ct). Despite these
comendable efforts, various flaws and gaps in the aforesaid statute ha ve somewhat
impeded the role and effectiveness of the anti-insider trading regulatory bod ies and
enforcement authorities in Zimbabwe to d ate. Given th is background, the article
investigates the role of the relevant enfo rcement authorities and other key role-players in
the detection, investigation and prosecution of insider trading activities in Zimbabwe. This
is done by discussing the role of the Securities and Exchange Com mission of Zimbabwe
(SECZ), the Zimbabwe Stock Exchange (ZSE) and the courts.
Keywords: insider trading, enforcement, role-players, detection, market integ rity.
JEL Classification: K22, K33
1. Introduction
Insider trading could be defined as a practice by which one person that
possess price or value sensitive non-public (confidential) information, concludes a
transaction in securities to which that information relates without sharing that piece
of information with those that do not possess it in order to gain an unfair advantage
over such persons.4 Notwithstanding the fact that insider trading is statutorily
1 This research article was supported in part, by the National Research Foundation of South Africa
(NRF), Grant Number: 106056. In this regard, the authors wishes to acknowledge and thank the
NRF for its valuable support. Moreover, the article was influenced in part, by Pontsho Mokone’s
doctoral thesis entitled: The Regulation of Insider T rading in Zimbabwe: Proposals for Reform
(LLD-Thesis, North West University, 2018), pp. 82-100. In this regard, she wishes to acknowledge
the expert input of Professor Chitimira.
2 Howard Chitimira Securities and Financial Markets Law, Faculty of Law, North-West University,
South Africa, howard.chitimira@nwu.ac.za.
3 P ontsho Mokone Doctoral (LLD) candidate, Securities and Financial Markets Law, Faculty of
Law, North-West University, South Africa, pontshophila@gmail.com.
4 C.P. Osode, ‘Defending The Regulation of Insider Trading on Basis of Sound Legal Orthodoxy: The
Fiduciary Obligations Theory Law’ in C. Okpaluba, (ed), Law in Contemporary South African
Society, Cape Town, New Africa Books South Africa, 2004, p. 303; also see sections 88 -94 of the
Juridical Tribune Volume 9, Special Issue, October 2019 135
regulated in Zimbabwe, there are still various flaws and challenges in the
enforcement of the anti-insider trading prohibition in terms of the Securities Act.5
For instance, the insider trading provisions in the Securities Act are relatively
inadequate.6 Moreover, regulatory bodies, enforcement authorities and/or other
role-players have inadequate resources to effectively and timeously detect,
investigate and prosecute insider trading activities in the Zimbabwean financial
institutions and financial markets.7 Another challenge affecting the enforcement of
the anti-insider trading prohibition is the lack of cooperation between regulatory
bodies and/or enforcement authorities and other role-players responsible for
enforcing the insider trading laws in Zimbabwe.8 Notably, such enforcement
authorities and role-players include the Securities and Exchange Commission of
Zimbabwe (SECZ),9 the Zimbabwe Stock Exchange (ZSE) and the courts.10 It is
submitted that these enforcement authorities should be equipped with adequate
resources in order to effectively curb insider trading practices in Zimbabwe. The
anti-insider trading enforcement authorities and related role-players should also
cooperate well with each other in order to effectively enforce the insider trading
provisions contained in the Securities Act. In this regard, it is important to note that
there are very few insider trading cases that have been successfully investigated,
settled or prosecuted in Zimbabwe to date.11 This flaw is prima facie proof that the
SECZ, the ZSE and the courts are currently grappling with the detection,
investigation and prosecution of insider trading activities in the Zimbabwe.12 For
Securities Act 17 of 2004 [ Chapter 24:25] as amended (Securities Act); D. Botha, ‘Control of
Insider Trading in South Africa: A Comparative Analysis’, 3 SA Merc LJ (1991), p. 2-3.
5 17 of 2004 [Chapter 24:25] as amended (Securities Act), see sections 88-94.
6 See sections 88-94 of the Securities Act.
7 See related comments by P. Saungweme, P. Ricardo, and B. Pradeep, ‘A Framework for Combating
Insider Trading on Developing Stock Exchanges: Evidence from the Zimbabwean Stock
Exchange’, 7(17) African Journal of Business Management (2013), p. 1630, 1635-1636; A.
Carvajal, and J. Elliott, ‘The Challenge of Enforcement in Securities Markets: Mission
Impossible?’, International Monetary Fund Working Paper WP/09/168 (2009),
https://www.imf.org/external/pubs/ft/wp/2009/wp09168.pdf accessed 23 September 2018, p. 12-32.
8 See related discussion by H. Chitimira, and V.A. Lawack, ‘An Analysis of the General Enforcement
Approaches to Combat Market Abuse (Part 2)’ 34(1) Obiter, (2013) p. 64, 65-76; A. Carvajal, and
J. Elliott, (2009) https://www.imf.org/external/pubs/ft/wp/2009/ wp09168.pdf, accessed 23
September 2018, p. 12-32.
9 Section 3 of the Securities Act; see further L. Bromberg, G. Gilligan, and I. Ramsay, ‘Insider Trading
and Market Manipulation: The SEC’S Enforcement Outcomes’, 45(2) Securities Regulation Law
Journal (2017), p. 109, 110-125; Q. He, and O.M. Rui, OM, ‘Ownership Structure and Insider Trading:
Evidence from China’ 134(4) Journal of Business Ethics, (2016), p. 553, 555-574.
10 Sections 88-94 of the Securities Act; see further H. Chitimira, ‘Overview of Selected Role -Players
in the Detection and Enforcement of Market Abuse Cases and Appeals in South Africa’, 1
Speculum Juris (2014), p. 108, 110-124.
11 This information was obtained from an interview that was conducted at the SECZ by the authors
with Mr T Mataruka (Legal and Licensing Officer of the SECZ) and Mr N Mahombera
(Surveillance and Risk Manager of the SECZ) on 29 June 2018. See related comments by T.
Frankel, ‘Insider Trading’, 71(3) SMU Law Review, (2018) p. 783, 790-797.
12 This information was obtained from an interview that was conducted at the SECZ by the authors
with Mr T Mataruka (Legal and Licensing Officer of the SECZ) and Mr N Mahombera
(Surveillance and Risk Manager of the SECZ) on 29 June 2018. See further M.A. Spitz, ‘Recent

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