CSDs urged to ease migration process

THE Securities and Exchange Commission of Zimbabwe (SecZim) has directed the central securities depositories (CSDs) to ensure a smooth migration process of deposited securities from one CSD to another now that the number of service providers has been increased.

This follows licensing of multiple CSDs, which now includes Chengetedzai Depository and the Zimbabwe Stock Exchange Depository company.

SecZim chief executive officer,Tafadzwa Chinamo, said the directive was being issued in line with the commission’s mandate of regulating the capital markets.

The objectives include providing high levels of investor protection, encouraging free, fair, and orderly capital markets as well as reduction of systemic risks particularly in the trading, clearing and settlement ecosystem.

“Following the licensing of multiple Central Securities Depositories (CSDs), the commission hereby issues this directive with the aim of ensuring a smooth migration of deposited securities from one CSD to another.

“Migration process in terms of Section 159 subsections (1), (2) and (8) of the Companies and Other Business Entities Act (Chapter 24:31), “COBE”, the company, herein referred to as participating issuer of listed securities, is required to keep and maintain a register of its members at its registered office or its appointed agent(s).

“Where the participating issuer of listed securities elects to migrate from one CSD to another, there shall be certain steps to be followed,” he said.

A CSD is a facility that holds and administers securities as well as enabling transactions to be processed by means of book entry.

Chengetedzai Depository Company’s CSD commenced operations on September 8, 2014 while the ZSE’ CSD started operations with effect from 01 October 2021.

Mr Chinamo said in the event that a participating issuer elects to migrate, regulatory approvals are that in terms of section 218 of the COBE gives the board of directors of the company the responsibility to make decisions on all matters except to those reserved to the shareholders by COBE or by the company’s constitutive documents.

Subject to section 1(a), a resolution by its board of directors shall give the participating issuer the responsibility to appoint or change a CSD licensed in terms of the Securities and Exchange Act (Chapter 24:25) to maintain its electronic share register.

The participating issuer shall notify the CSD concerned in writing of its decision to appoint or move its electronic register and furnish the depositories with the requisite resolution(s) authorising such a migration of its securities.

The participating issuer shall publish a notice to shareholders on the migration to the new depository. The notice shall also specify the cut-off date to allow for all transfers, settlements including dematerialisations and rematerialisations to settle on the “effective date” being the migration date.
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On electronic transfer of securities, all investors whose securities are deposited with a transferring or terminating CSD shall have their securities withdrawn from the transferring CSD.

“The transferring CSD shall prepare an electronic file of all the securities holders and submit the file to the issuer’s Securities Transfer Secretary for reconciliation purposes and the issuer’s Transfer Secretary shall reconcile the electronic file of the withdrawn securities and the full securities register and thereafter submit the file to the assuming or
receiving CSD.”

According to the directive, reconciliation of investors’ records should ensure that on the effective date of termination, the transfer secretary and the terminating CSD shall ensure that the issuer’s share register is up to date.

As at September 30, 2021, the cumulative number of accounts opened on the Chengetedza CSD was 36 127. Local investors accounted for 95 percent of all accounts opened on the CSD.

According to Chengetedzai CSD update, the ZSE equities market capitalization gained by 30,32 percent, closing the month of September 2021 at $1,032 trillion.

Securities registered on the CSD accounted for 53,48 percent of total market capitalisation for dematerialised shares and their total was $552 206 billion in value.

During the month under review, a total of 431 deposits were processed by CDC compared to 275 in the month of July 2021 and this brought the cumulative number of deposits since going live to 91 396.

According to the ZSE, the CSD operations aim to improve operational efficiencies, reduce costs for participants and make it easier for retail investors to access the market.-The Herald