Investor Protection-An Overview

Investors are the pillar of the financial and securities market. They determine the level of activity in the market. They put the money in funds, stocks, etc. to help grow the market and thus, the economy. It is therefore critical that their interests of the investors. It thus very important to protect investors from malpractices and safeguard the interests of the investors. Investor protection measures are in place to safeguard the investors from the malpractices in shares, the stock market, Investors are the most vital cog of the capital market. They not only determine the level of activity in the capital market but also the level of activity in the economy. It is imperative for the healthy growth of the economy that investors’ confidence in the market is maintained. C-TRADE cultivates investor knowledge in the marketplace by ensuring an understanding of the investing public in the rights and obligations of the investors and the issuers in which they invest. In Zimbabwe there are a number of mechanisms put in place to ensure investors’ interests are protected.

These investor protection mechanisms include procedures, regulations, and enforcement mechanisms put in place to ensure investors are given adequate protection for their investments, with the objective of providing the public with a transparent investment landscape. There are pieces of legislation that also govern the operations of capital market participants. Participants are mandated to make protection of investor rights and interests of paramount importance and a priority.

The regulator of the capital markets, Securities and Exchange Commission of Zimbabwe (SECZ), has put in place various investor protection mechanisms which include regulation and licensing of all capital market players. SECZ provides regulatory oversight on the activities of market participants.  The continuous supervision of capital market players ensures that only institutions that uphold high ethical standards are allowed to operate. The Securities and Exchange Act and the Collective Investment Schemes Act are some of the pieces of legislation that govern the operations of capital market participants.

Besides superintending over the legal framework that governs market players, SECZ is also available to every investor who may have a claim or complaint against any of the regulated entities. C-TRADE, as one of the regulated entities has its own complaints handling procedures designed to ensure adequate protection of investors, market participants and other stakeholders. These complaints handling procedures are very clear in terms of the complaints escalation processes that also recognise client confidentiality.

Investor protections matter for the ability of companies to raise the capital needed to grow, innovate, diversify and compete. Without investor protections, equity markets fail to develop and banks become the only source of finance. Economies that have dynamic capital markets tend to protect investors effectively. In these economies investors receive financial information they can trust, they participate in major decisions of the company, and directors are accountable for their managerial decisions. If the laws do not provide such protections, investors may be reluctant to invest, unless they become controlling shareholders.

A listed company needs to communicate effectively with its shareholders and the wider investing public. This helps current and prospective investors to understand the operations of the company and its future. Information can be in the form of public announcements by the company on upcoming events such as meetings or proposed transactions, release of annual financial reports (some entities can choose to also release half-year financials) or cautionary statements that are meant to give shareholders prior indications about possible significant upcoming transactions. Dissemination of such information can be through the press, printed circulars to shareholders or company website uploads. Social media has also become a very effective way of information dissemination.

C-TRADE publishes daily price sheets of securities listed on the exchange as well as annual and interim reports by issuers. This is all meant to make the marketplace more transparent, efficient and investor-friendly.

Investor protections matter for the ability of companies to raise the capital needed to grow, innovate, diversify and compete. Without investor protections, equity markets fail to develop and banks become the only source of finance. Economies that have dynamic capital markets tend to protect investors effectively. In these economies investors receive financial information they can trust, they participate in major decisions of the company, and directors are accountable for their managerial decisions. If the laws do not provide such protections, investors may be reluctant to invest, unless they become controlling shareholders.