THE Securities Commission of Zimbabwe (SECZ) has launched investigations into suspected cases of share price manipulation involving three Zimbabwe Stock Exchange (ZSE) counters, The Financial Gazette’s Companies Markets (CM) can report.
Sources said the capital markets regulator has undertaken a probe into the three counters after their share prices gained an average of 20 percent within a week last December.
Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency.
Section 96 of the Securities Act, a piece of legislation regulating Zimbabwe’s capital markets, outlaws price manipulation, stating that “no person shall, by means of any false statement or fictitious or artificial transaction or device, maintain, inflate or depress, or cause fluctuations in, the price of any securities on a registered securities exchange.”
The law further states that anyone found guilty of price manipulation could face jail sentence of up to five years or a fine.
SECZ Chief Executive Officer, Tafadzwa Chinamo, confirmed to CM that an investigation into movement of share prices of some counters during the festive season was currently going on.
“We are carrying out an investigation on price manipulation on some stocks following a suspicious movement of some stocks in December. This highlights the need for a CSD (Central Securities Depository) and we are optimistic that we should have it running this year. It also shows the need to amend the Securities Act which the minister undertook to do this year,” said Chinamo.
The SECZ has been planning to set up a Central Securities Depository to improve transparency and integrity of the ZSE.
Chinamo declined to name the counters which were under investigation but said the commission was working with the ZSE in this exercise.
The Securities Commission has been agitating for the automation of the domestic bourse whose trading is currently a call-over system.
An observation of a trend that emerged in December indicates that a handful of ZSE-listed companies recorded remarkable share movements towards the end of the year despite having a lukewarm performance throughout the year.
Sources said the three ZSE companies under investigation are two financial services groups and a mining company. The investigation, according to sources, could also implicate fund managers who invest on the ZSE on behalf of institutional investors such as pension funds.
“Some fund managers could be implicated because some of them would want to portray a rosy picture of counters they invest in on behalf of investors. For example, any pension fund would want a good return from equities when the year comes to an end. But what is suspicious though is who would want to buy stocks at a higher price towards the end of the year only for them to tumble in the new year?,” said a source familiar with the developments.
The ZSE has 77 listed companies, with 75 actively trading. Three counters – Barbican, David Whiteheaed and Steelnet – are currently suspended. Statistics show that out of the quoted companies, about 10 of them constitute 65 percent of the total value of the exchange.