The statutory prohibition of market manipulation in Zimbabwe

• Author: Princess Thembelihle Ncube, Howard Chitimira
• Position: Faculty of Law, North West University, South Africa/Faculty of Law, North West University, South Africa, Howard
• Pages: 130-148

The statutory prohibition of market manipulation in Zimbabwe1

PhD. student Princess Thembelihle NCUBE2

Professor Howard CHITIMIRA3

Abstract

Market manipulation includes, inter alia, a practice that interferes or attempts to

interfere with the free and f air operation of the securities and financial markets by creatin g

an artificial, false or mislead ing appearance of th e price of, or market for, the relevant

securities, commodities or financial instruments. Consequently, market manipulation is

treated as an offence in many countries, including Zimbabwe. For instance, market

manipulation is expressly prohibited under th e Securities Act 17 of 2004 (Chapter 24: 25)

as amended (Securities Act 2004). In light of this and for the purposes of this article, the

adequacy of the statutory prohibition on market manipulation in Zimbabwe will be

examined. Accordingly, selected key elements, types, examples, penalties and definitional

aspects of the market manipulation offence under the Securities Act 2004 are discussed.

This is do ne to unpack and examine the adequacy of the Securities Act 2 004 in relation to

the combating of market manipulation in the Zimbabwean financial markets . It is hoped

that the recommendations enumerated in this article will enable policy makers to develop

optimal regulatory measures that promote investor protection and effectively combat

market manipulation in the Zimbabwean financial markets.

Keywords: market manipulation, financial markets, offences, pena lties.

JEL Classification: K22, K23

1. Introduction

Market manipulation is a sub-type of market abuse and it, inter alia,

includes a practice that interferes or attempts to interfere with the free and fair

operation of the securities and financial markets by creating an artificial, false or

misleading appearance of the price of, or market for the relevant securities,

commodities or financial instruments.4 Consequently, market manipulation is

treated as an offence in many countries, including Zimbabwe. For instance, market

manipulation is expressly prohibited under the Securities Act.5 In light of this and

1 This research article was supported in part by the National Research Foundation of South Africa

(NRF), Grant Number: 109232. In this regard, the authors wish to thank the NRF for its valuable

support. The article was also influenced in part by Princess Thembelihle Ncube’s Master of Laws

(LLM) dissertation entitled A Comparative Analysis of the Regulation of Market Manipulation in

Zimbabwe (North West University, 2018) 41-58. Accordingly, she acknowledges the expert input of

Prof Chitimira.

2 Princess Thembelihle Ncube - Faculty of Law, North West Un iversity, South Africa,

princessncube22@gmail.com.

3 Howard Chitimira - Faculty of Law, North West University, South Africa, Howard.Chitimira@nwu.ac.za.

4 Chitimira, 2015, PER Journal, pp. 112-113.

5 17 o f 2004 (Chapter 24: 25 ) as amended (Securities Act 2004), see ss 96 -99 read with ss 100-118;

Chitimira 2015 PER Journal 112-148.

Juridical Tribune Volume 10, Issue 1, March 2020 131

for the purposes of this article, the adequacy of the Zimbabwean statutory

prohibition on market manipulation will be examined. Accordingly, selected key

elements, types, examples, penalties and definitional aspects of the market

manipulation offence under the Securities Act 2004 are discussed. This is done to

unpack and examine the adequacy of the Securities Act 2004 in relation to the

combating of market manipulation in the Zimbabwean financial markets. It is

submitted that financial markets must consistently reflect the genuine prices and

value of the securities and financial instruments.6 Thus, the Zimbabwean financial

markets must be free from market manipulation to enable them to promote and

truly reflect the natural forces of supply and demand for the relevant securities and

financial instruments.7 Robust enforcement of the anti-money laundering laws

could curb market manipulation, market rigging and other illicit activities in the

Zimbabwean financial markets.8 This could also enable the Zimbabwean financial

markets to promote market integrity, investor protection and public investor

confidence.9

The provisions of the Securities Amendment Act10 that were enacted to,

inter alia, enhance the effectiveness of the Securities Exchange Commission of

Zimbabwe (SECZ) and extend its powers to increase investor protection are also

discussed.11 This is done to explore the flaws in the current Zimbabwean anti-

market manipulation statutory regulatory framework. In this regard, possible

measures that could be utilised to enhance the combating of market manipulation in

Zimbabwe are provided. The adequate regulation and enforcement of market

manipulation laws will give rise to fair and efficient financial markets.

Accordingly, it is hoped that the recommendations enumerated in this article will

enable policy makers to develop optimal regulatory measures that promote investor

protection and reduce systematic risk by effectively combating market

manipulation in the Zimbabwean financial markets.12

2. The definitional aspects

2.1 The definition of market abuse

Like the approach in South Africa,13 Namibia, Australia, the United States

of America (USA), the United Kingdom (UK)14 and many others, the term “market

6 Latimer, 1999, Asia Pacific Law Review, pp. 247-251.

7 Ibid, pp. 247-251.

8 Malaysian Securities Commission, Securities Commission Annual Report, 1997, 160; Davis Professional

Investor Rules 10-216.

9 Davis, Professional Investor Rules, pp. 10-216; Chitimira, 2016, Journal of Corporate and Commercial

Law and Practice, pp. 24-25.

10 2 of 2013 (Amendment Act), see s 22.

11 Nhavira, Mudzonga and Mugocha, 2013 Zimbabwe Economic Policy Analysis and Research Unit,

pp. 1-73.

12 Ibid; Fisher et al, The Law of Investor Protection, p. 278-736, for related discussion.

13 Ss 78; 80; 81 & 82 of th e Financial Markets Act 19 of 2012 (Financial Markets Act); see related

comments by Chitimira, 2014 Obiter, pp. 254-271.