SECZ appeals Renaissance Securities ruling

SECZ appeals Renaissance Securities ruling
Published: 21 November 2013
THE Securities and Exchange Commission of Zimbabwe intends to appeal to the Supreme Court against a High Court ruling dismissing its directive to stop the liquidator of Renaissance Securities from disposing of investors' shares held in nominee accounts.

SECZ lost the earlier legal battle to prevent Renaissance Securities liquidator Mr Phibion Gwatidzo from selling shares registered in nominee accounts during liquidation. The unclaimed nominee account shares are valued at over $700 000.

The shares at the centre of the dispute are registered under Renaissance Nominees, and SECZ argues they should be directed to registered custodial services companies, Old Mutual and ZB, it has assigned to keep unclaimed shares.

In the appeal against the High Court ruling (reference case HC 6262/13), Mr Gwatidzo is cited as first respondent, First Transfer Secretaries as second, Mast Stockbrokers as third and the Master of the High Court as the fourth respondent.

SECZ had given a directive that all registered firms dealing in securities should not execute transactions for entities under suspension or whose licence was cancelled after the liquidator tried to sell the unclaimed nominee account.

Renaissance had its securities trading licence cancelled in January this year and was later liquidated after failing to meet minimum capitalisation requirements.

According to SECZ's notice and grounds of appeal, the commission contends that Justice Makoni erred in her judgment of November 11, 2013 after ruling that securities regulator could only contest the liquidator's actions through the court of law.

Further, SECZ argues that the judge was also wrong in finding that the liquidator had done all that was necessary to identify the rightful owners of the scrip, but to no avail and had the right to sell them for the benefit of the company in liquidation.

"Wherefore, appellant prays that the whole judgment of the court a quo be set aside and the directive by the appellant be upheld," SECZ said in the notice of appeal.

SECZ contends the judge took a narrow view in the application of the law and seems not to have enquired into how trading is conducted and the protection that a nominee account is supposed to enjoy, hence the decision to contest the ruling.

The fear is that if the ruling is allowed to stand, investment would fly out of domestic market and Zimbabwe's ranking as a safe and properly regulated market will plummet.

In dismissing SECZ's argument, the judge noted the point to be decided was whether or not the regulator had the power to give the directive it did to the securities dealers and transfer secretary not to sell or register the transfer of the shares.

She noted that Section 4 of the Securities Act as amended, where SECZ derives authority to provide "high levels of investor protection" under subsection (1) (a) sets out objectives only and SECZ's functions are set out in subsection (2).

The judge said there are no powers set out in the provision and that the legislature gave SECZ some functions to perform, but without the attended powers.

Further, the judge determined that this distinction means that where SECZ wishes to enforce its decisions or directives it has to approach the courts of law.

This was because the provisions did not provide for what happens when a directive given by SECZ is not complied with. She reasoned that SECZ should therefore resort to the courts, as the Securities Act has no provisions to cover this.ยท

The judge reasoned that SECZ should have approached the court, in terms of the Companies Act under which the liquidator was appointed and in terms of which he is acting.

She agreed with the applicant's submissions. Further, the judge said SECZ's actions were arbitrary in that it did not give Mr Gwatidzo the opportunity to be heard.

On whether the liquidator could sell the shares she said nominees rank as ordinary creditors in any liquidation process and this is what should happen in this case.
- herald

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