FAQs

• 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

SECZ regulates and licenses 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

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.

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
• Demand 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.

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
• S. I. 163 of 1998 (exemption regulations)
• S. I. 172 of 1998 (internal schemes regulations)
• S. I. 173 of 1998 (advertising of internal schemes regulations)
• S. I. 174 of 1998 (fees regulations)
• S. I. 175 of 1998 (unsolicited calls regulations)
• S. I. 176 of 1998 (Professional schemes regulations)
• Money Laundering and Proceeds of Crime Act (Chapter 9:24)

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

1. Regulation of all, SECZ monitors activities and flushes out unscrupulous players. Continuous supervision of capital market players ensures that only 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 negligence or dishonesty of any of the staff of the licensed player.

As an investor, it is your responsibility to:

• Deal with only licensed capital market players – When investors are dealing with licensed intermediaries they are assured of protection by the capital market regulator and can find recourse in case something happens
• Be informed – Know the capital market rules and regulation governing your investments and seek clarification from SECZ on grey areas.
• Keep track of their investments – It is the investor’s responsibility to monitor his or her investments. It is advisable to always:
  • Keep a record of your investments
  • Analyse your investments, valuing and rebalancing your portfolio
  • Look for value addition information-(from newspapers. Media etc.)
  • Look for information on the company you have invested in, this can be done by obtaining and analysing financial statements of the company
  • Update yourself with current information and what is happening around you as they may have an impact on your investments
  • Keep an eye on how the value of your investment changes depending upon fluctuations in the markets, economic issues and other factors
• Exercise your rights on your own or as a group