Investor protection fund grows to $957 million
The Investor Protection Fund (IPF) had a value of $957 million as at 31 December 2021, up from $150 million in 2020 largely driven by gains achieved on the stock market during the year.
The IPF is a creation of the Securities and Exchange Commission of Zimbabwe (SECZ) and was established in 2010, for the purpose of providing compensation to investors for losses suffered as a direct result of a licensed contributor being unable to meet their liabilities through insolvency, malpractice, or other cause.
Contributors, who are registered securities dealers, remit contributions to the IPF in the form of a levy of 0,025 percent of the gross amount of each trade on Zimbabwe Stock Exchange (ZSE). The levy is as per Statutory Instrument 108 of 2014.
Kenneth Supiya, the IPF administrator, said the fund is mainly invested in listed equities on the local bourse.
“The Fund had a value of ZWL957 million by the end of 2021 with an exposure of 81,57 percent towards listed equities,” he said in an interview.
According to the IPF, the maximum amount of compensation paid out at any one time does not exceed ten percent of the market value of the Fund’s assets at the time the payments become due. And in the event of multiple claims the amount paid to each protected investor will be reduced proportionately.
Supiya said since inception, there have been two claims submitted against the Fund, both which were submitted in 2017 for losses which occurred in 2010 and 2012.
“One claim was valued at USD4 million and the other USD600,000 at that time. Both were rejected as the losses occurred prior to the establishment of the Fund,” he said.
At the Fund’s inaugural general meeting in 2020, the Fund said it was invested in companies with sound business models and has a small portion invested in property and offshore markets.
The fund noted that it would like to widen the pool of contributors to the fund to include other capital markets players like asset managers.
The Fund believed that widening of contributors would result in the increase in the size of the fund in terms of assets and coverage offered to investors which is deemed to improve investor confidence and thus would lead to increased participation.
According to the Fund, the establishment of the Investor Education and Awareness Committee in the fourth quarter of 2019 was a milestone in the growth of the Fund.
The main objective of the committee is to educate the general public about capital markets with the aim of increasing the number of retail investors, who in turn can benefit from investment returns should markets move in their favour.-eBusiness Weekly
