HomeNewsGovt announces new CSD law

Govt announces new CSD law


GOVERNMENT has gazetted a new statutory instrument (SI) giving legal effect to the setting-up of the country’s first ever Central Securities Depository (CSD) following delays that have slowed down changes as capital markets embark on far-reaching reforms.

Report by Bernard Mpofu

According to the piece of legislation published on May 10, the new CSD will among other issues maintain insurance policies, set up a $500 000 guarantee fund as well as provide safe custody of certificated securities.

Participants in the CSD according to the SI may include holders of securities custodial licences, brokerage firms, transfer securities and the Reserve Bank of Zimbabwe.

Chengetedzai, a consortium of local businessmen, in 2010 won the tender to run the CSD, but the takeoff was mired by haggling and undercapitalisation. The crafting of the new law comes at time when government has already hinted that it plans to operationalise the system by June this year.

A CSD is an organisation holding securities either in certificated or  uncertificated (dematerialised) form to enable book entry transfer of  securities.

“The Securities Commission, in consultation with the operator of the central securities depository concerned, shall from time to time determine the paid-up capital and the net capital to be maintained by any central securities depository, and shall notify the depository, in writing, of any such determination, giving the depository reasonable time within which to comply with it,” reads the statutory instrument in part.

The Zimbabwe Stock Exchange currently utilises a call-over system to execute trades. Critics say paper-based operations of the exchange were fraught with inherent risks. Clearance and settlement is done between stockbrokers with payment against delivery of physical scrip on a T+7 calendar days basis.

“The assets of a guarantee fund shall consist of an initial contribution of at least five hundred thousand United States dollars, made by the central securities depository concerned, and contributions shall be determined by the operator of the depository and approved by the commission . . .,” further reads the statutory instrument.

“A central securities depository shall at all times maintain one or more insurance policies to cover loss or damage from computer crime, involving theft or criminal damage to the depository’s computer system and theft, damage, falsification or alteration of any record or data kept within the depository’s computer system . . .”

The operator of CSD, the SI further states, should also ensure that the insurance policies maintained by it are available for inspection by the equities markets regulator.

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