Arrangement of Sections
1. Short title
3. Application of Act to shares owned by Government
5. Interpretation in other laws to apply
6. Relationship with other laws
THE SECURITIES AND EXCHANGE COMMISSION
7. Securities and Exchange Commission
8. Board of Commission
9. Functions of Commission
10. Commission to regulate foreign capital markets operators and participants
11. Commission to prohibit certain activities by licensed persons
12. Commission’s powers over assets of licensed person
14. Delegation of functions
15. Notification of regulatory decisions
16. Chief Executive Officer
18. Other staff of Commission
19. Code of ethics
LICENSING OF SECURITIES EXCHANGES AND CLEARING AND SETTLEMENT AGENCIES
20. Establishing and maintaining securities market, securities exchange and clearing and settlement agency
21. Application for securities exchange licence and clearing and settlement agency licence
22. Consideration and grant of securities exchange licence
23. Consideration and grant of clearing and settlement agency licence
24. Refusal to grant licence
25. Validity of licence
26. Variation of licence
27. Cancellation or suspension of licence
28. Appeals relating to licences
29. Recognition of self-regulatory organisations
30. Delegation of powers to self-regulatory organisations
31. Rules for self-regulatory organisations
LICENSING AND REGULATION OF CAPITAL MARKETS OPERATORS
32. Licensing of dealers
33. Licensing of investment advisers
34. Licensing of share transfer agents and representatives
35. Regulation of other capital markets operators
36. Applications for licences
37. Consideration and grant of licences
38. Conditions for refusal to grant licences
39. Validity, terms and conditions of licences
40. Variation of conditions of licences
41. Revocation of licences
42. Annual fee
43. Appeals to Tribunal
44. Register of licences
45. Records kept by licensed person
46. Information to be supplied by licensed person
47. Annual reports
CREDIT RATING AGENCIES
48. Establishing and operating a credit rating agency
49. Consideration and grant of credit rating agency licence
50. Refusal to grant licence
51. Validity of licence and non-transferability, etc. of licence
52. Variation of licence
53. Cancellation of licence
54. Appeals relating to credit rating agency licence
55. Duties of credit rating agency
56. Code of conduct
57. Methodologies, models and key rate assumptions
60. Approval of external credit rating agencies
61. Rules for credit rating agency
REGULATION OF SECURITIES EXCHANGES
62. Power of Commission to give direction
63. Appeal against direction of Commission
64. Power of Minister to suspend business of securities
65. Management of securities exchange
66. Governance fitness standards
67. Exchange rules
68. Securities exchanges to assist Commission
69. Notification of changes and legal proceedings for misconduct
70. Annual reports
71. Amendment to exchange rules
72. Use of certain titles
73. Delegation of powers to securities exchange
74. Rules relating to securities exchanges
REGISTRATION OF SECURITIES, REGISTERED SECURITIES AND TRADING ON SECURITIES EXCHANGE
75. Registration of securities
77. Dealings in securities market not operated by securities exchange prohibited
78. Trading in listed registered securities
79. Trading in unlisted registered securities
80. Registered securities to be traded through licensed dealers
81. Continuing obligations for registered securities
82. Dematerialisation and maintenance of securities
84. Codes of ethics and governance for capital markets
85. Contract notes
86. Terms of settlement of bargains in securities, etc.
88. Accounts to be kept by licensed persons
89. Financial resources rules
90. Investment advisory contracts
REGULATION OF CLEARING AND SETTLEMENT AGENCIES
91. Power of Commission to give directions to clearing and settlement agency
92. Appeal against direction of Commission
93. Power of Commission to suspend business of clearing and settlement agency
94. Notification of changes and legal proceedings for misconduct
95. Annual reports
96. Co-ordination of clearing and settlement agencies
97. Asset segregation in securities account
98. Exercising control over participant’s account
99. Holders of record
100. Use of clearing and settlement agency as registered owner of securities
101. Transfer of securities into clearing and settlement agency
102. Transfer by record entry
103. Effecting transfer of pledge by record entry
104. Blocking account by record entry
105. Refusal to open account
106. Blocking account by Court order
107. Settlement of securities
108. Limitation on rights of participants
109. Withdrawal of securities
110. Closure of securities register
111. Access to clearing and settlement agency records
112. Incorrect entry by clearing and settlement agency
113. No liability in extraordinary circumstances
114. Insolvency of participant
115. Insolvency of clearing and settlement agency
116. Utilisation of collateral upon insolvency
117. Winding up order
118. Netting agreements and procedures
119. Rectification of record by Tribunal
120. Order of Tribunal
COLLECTIVE INVESTMENT SCHEMES AND VENTURE CAPITAL FUNDS
121. Authorisation and regulation of schemes
122. Restrictions on promotions
123. Authorisation of managers, trustees and custodian
124. Trustee or custodian to hold property
125. Authorisation of foreign schemes
126. Revocation of authorisation
127. Directions by Commission on revocation of authorisation
128. Rules for collective investment schemes
129. Authorisation of venture capital fund
130. Rules for venture capital fund
MERGERS AND TAKE-OVERS
131. Scope of Part
132. Take-overs or substantial acquisition
133. Creation of mergers
134. Consideration of applications for proposed take-overs and mergers
135. Power to investigate mergers or take-overs
136. Rules on mergers and take-overs
137. Reports by insiders
138. Prohibition of insider dealing
139. Prohibition on disclosing price-sensitive information
140. Offence of insider trading
142. Transaction not void or voidable
143. Exceptions to insider dealing
144. Defence of not soliciting information unavailable
AUDITING AND CORPORATE RESPONSIBILITIES OF LISTED COMPANIES
146. Filing of annual and periodic reports with Commission
147. System of internal control of companies
148. Commission to approve auditors of companies
149. Duty of auditor to report on internal controls of listed companies
150. Disclosure of quarterly earnings forecasts by listed companies
151. Duty of directors to disclose interests in securities of listed company
152. Register of directors’ interests in securities
153. Notification to Commission and securities exchange of directors’ interests
154. Duty of substantial shareholders to disclose shareholdings
155. Subsequent disclosures by substantial shareholders
156. Registration of substantial shareholders’ shareholdings
157. Notification to Commission and listing exchange of substantial shareholders
158. Unclaimed dividends
159. Penalties for contravention of Part
INFORMATION, INVESTIGATIONS, INSPECTIONS AND CO-OPERATION
160. Power of Commission to request information
162. Avoidance of duplication in investigations
164. Destruction of documents
165. Co-operation with other regulators
166. Liability for misrepresentation in prospectus
167. Liability for misrepresentation in other documents
169. Non-derogation from other rights
170. Action for rescission for misrepresentation in prospectus
171. Limitations on action
172. Leave to proceed
173. Notice of action
174. Restriction on discontinuation, etc. of action
175. Rights of Commission to bring representative action
176. Compensation Fund
177. Purpose of Fund
178. Compensation Fund Committee
179. Monies of Fund
180. Disbursements from Compensation Fund
181. Management of Fund
182. Limited liability of Fund and insurance by licensed persons
183. Recovery of disbursements from licensed defaulters
CAPITAL MARKETS TRIBUNAL
184. Establishment of Tribunal and jurisdiction
185. Members of Tribunal
186. Tenure of office of members of Tribunal
187. Funding and allowances of members of Tribunal
188. Appointment and functions of Registrar of Tribunal
189. Staff of Tribunal
190. Exercise of powers of Tribunal and procedure
191. Appeals to Tribunal
192. Notice of appeal
193. Hearings before Tribunal
194. Market misconduct proceedings
195. Appeal to Court of Appeal
OFFENCES ON IMPROPER TRADING PRACTISES
196. Penalty in substitution of penalty units
197. Fraudulent transactions
198. False trading and manipulation of the market
199. Use of deceptive statements, etc. as inducements
200. False statements to securities exchange, etc.
201. False or misleading statements on sale of securities
202. Damages for loss sustained
203. Failure to furnish information
204. Obstructing Commission, Chief Executive Officer, etc.
205. Fraudulent applications
206. Designation of compliance officer of licensed person
207. Commission’s power over licensed persons
208. Association of Capital Markets Operators
209. Disciplinary actions
210. Review by Commission
211. Codes and guidelines
212. Guidance notes, etc.
213. Access to documents
214. Control of advertisements
215. Offences committed partly in and partly out of Zambia
216. Continuing acts or offences
217. Actions by Commission on conviction of offence
218. Administrative penalties
219. Offence by body corporate or unincorporate body
220. General rules by Commission
222. Repeal of Securities Act and savings and transitional provisions
to regulate the capital markets so as to foster fair and efficient trading; to continue the existence of the Securities and Exchange Commission and provide for its functions and powers; to licence and regulate securities exchanges, clearing and settlement agencies and self-regulatory organisations; to ensure the financial integrity of transactions and avoidance of systemic risk in the capital markets; to provide for licensing and regulation of capital markets operators; to provide for licensing and regulation of credit rating agencies and protect the integrity, transparency and reliability of the credit rating process and credit ratings; to provide for registration of securities and conduct of securities business; to provide for regulation of collective investment schemes; to prohibit insider dealing in securities and other offences; to provide for mergers and take-overs of listed companies and companies whose securities are registered with the Commission; to provide for auditing and corporate responsibility of listed companies and companies whose securities have been registered with the Commission; to continue the existence of the Compensation Fund; to establish the Capital Markets Tribunal; to repeal and replace the Securities Act, 1993; and to provide for matters connected with or incidental to the foregoing.
[27th December, 2016]
Act 41 of 2016.
This Act may be cited as the Securities Act.
In this Act, unless the context otherwise requires—
“auditor” has the same meaning assigned to it in the Accountants Act;
“authorisation” means any consent, permission, recognition or capacity given or granted by the Commission to a licensed person—
(a) for carrying on business, a transaction or a series of transactions as a capital markets operator; or
(b) for doing any act or omitting to do any act incidental to business, a transaction or a series of transactions,
whether or not for a specific period;
“authorised person” means a person authorised to exercise the powers of the Commission as specified in this Act;
“bank” has the meaning assigned to it in the Banking and Financial Services Act;
“beneficial owner” means the ultimate owner of securities held in a securities account, excluding a nominee;
“blocked account” means an account that belongs to a holder of securities and which is the subject of a pledge, charge or judgment debt and in which the interest of the chargee, pledgee or judgment creditor has not been satisfied and notified to a clearing and settlement agency;
“board” means a board of a capital markets operator or company with registered securities in whom the management of the entity is vested;
“Board” means the Board of the Commission appointed in accordance with section 8;
“capital markets” means the market where securities are bought and sold;
“capital markets operator” means a person registered, authorised or licensed in accordance with this Act to perform specific functions in the capital markets, including a person or entity, whether incorporated in Zambia or not, who is granted or receives authorisation from the Commission, an intermediary, nominee or a person conducting a professional development or asset management programme;
“Chief Executive Officer” means the person appointed as Chief Executive Officer of the Commission in accordance with section 16;
“clearing and settlement” means the—
(a) process of preparing for settlement of a securities transaction which has been executed on a securities exchange;
(b) provision of clearing and settlement facilities; and
(c) determination of payment and delivery obligations of the parties to a securities transaction, whether or not on a net basis;
“clearing and settlement agency” means a company that is licensed in accordance with this Act to—
(a) be a depository of securities for purposes of clearing and settling securities transactions;
(b) provide clearing and settlement facilities;
(c) maintain records of trades in securities for purposes of settling claims for securities;
(d) maintain records of transfers and pledges of securities for purposes of permitting securities to be transferred by record entry; or
(e) hold security certificates deposited for purposes of permitting securities to be transferred by record entry,
excluding a dealer, bank or financial institution acting exclusively in the ordinary course of its business;
“clearing and settlement agency licence” means a licence granted to a company in accordance with section 23;
“clearing and settlement facility” means a system or mechanism provided by a clearing and settlement agency for the—
(a) holding of securities in dematerialised form;
(b) presentation and exchange of data or documents in order to calculate the obligations of the participants in the system and to allow for the settlement of obligations;
(c) transfer of securities; and
(d) clearing services or arrangements that mutualise or transfer among participants the credit risk arising from securities transactions,
excluding a clearing and settlement facility maintained by the Bank of Zambia, or an entity, facility, system or organisation that solely arranges or provides for—
(a) settlement, netting or novation of obligations resulting from agreements, contracts or transactions on a bilateral basis;
(b) settlement or netting of cash payments through an inter-bank payment system; or
(c) settlement, netting or novation of obligations resulting from a sale of a commodity;
“collective investment scheme” means a scheme in whatever form, including an open-ended investment company, where members of the public are invited or permitted to invest money or other assets in a portfolio and in terms of which—
(a) two or more investors contribute money or other assets to, and hold a participatory interest in, a portfolio of the scheme through shares, units or other form of participatory interest; and
(b) the investors share the risk and the benefit of investment in proportion to their participatory interest in the portfolio of the scheme or as determined in the trust deed;
“Commission” means the Securities and Exchange Commission continued in existence in accordance with section 7;
“committee” means a standing or special committee of the Commission established in accordance with section 13;
“commodity” means virtual and non-virtual commodities, such as agricultural commodities, gold, silver, platinum, gemstones, minerals, carbon credits, emission permits, emission allowances, and includes other products commonly known as commodities and which are prescribed by rules made by the Commission;
“company” has the meaning assigned to it in the Companies Act;
“contract note” means a document specified in section 85;
“control” means the control of a company by a person who—
(a) beneficially owns more than one half of the issued share capital of the company;
(b) is entitled to vote a majority of the votes that may be cast at a general meeting of the company, or has the ability to control the voting of a majority of those votes, either directly or through a controlled entity of that person;
(c) is able to appoint or to veto the appointment of a majority of the directors of the company;
(d) is a holding company and the company is a subsidiary of that company as provided for in the Companies Act;
(e) in the case of a company that is a trust, has the ability to control the majority of the votes of the trustees, to appoint the majority of the trustees or to appoint or change the majority of the beneficiaries of the trust; or
(f) has the ability to materially influence the policy of the company in a manner comparable to a person who, in ordinary commercial practise, can exercise an element of control referred to in paragraphs (a) to (e);
“Court” means the High Court for Zambia;
“credit rating” means an opinion regarding the creditworthiness of a licensed person, securities or an issuer;
“credit rating agency” means a person who provides credit rating services as provided in this Act;
“credit rating services” means the analysis, evaluation, approval, issuing or review of data and information for the purposes of credit rating;
“custodian” means a company authorised, in accordance with this Act, to have charge or custody of property, papers or other valuables;
“dealer” means a person specified in section 32 and who holds a dealer’s licence;
“dealer’s licence” means a licence granted to a company in accordance with section 37 authorising a company to carry on a business as a dealer;
(a) acquiring, disposing of, subscribing for or charging or pledging of, securities;
(b) underwriting securities; or
(c) making or offering to make with any person, or inducing or attempting to induce a person to enter into or offer to enter into, an agreement relating to—
(i) the acquisition or disposal of, subscription for or charging or pledging of, securities; or
(ii) underwriting of securities;
“debt securities” means debt created or acknowledged in an instrument which is issued or proposed to be issued by a company, including debentures, debenture stock, loan stock, bonds, certificates of deposit, commercial paper and notes;
“defalcation” means a default, act of embezzling, failure to meet an obligation, misappropriation of trust funds or money held in any fiduciary capacity and failure to properly account for such funds;
“dematerialised” means uncertificated securities which represent a share, or other interest in property, of a company or an obligation of the issuer that is not represented by an instrument but is registered on the issuer’s records;
“depository” means a place where money or other valuable is placed and kept for safekeeping;
“disgorgement” means an act of giving up profits, as a result of insider dealing obtained in accordance with an order of the court issued as specified in section 141;
“electronic” means the use of equipment for processing, digital compressing, storing and transmitting data or employing wires, radio, optical technology or any electromagnetic method for such purpose, and includes an electronic signature attached to, incorporated in or logically associated with other data and which is intended by the user to serve as a signature, and “electronically” shall be construed accordingly;
“electronic book entry system” means an electronic arrangement that permits the holding of securities, whether or not represented by scrip, and which permits the transfer of ownership or interest in those securities by electronic adjustments through securities accounts without physical movement or physical exchange of scrip or endorsement, and “book entry” shall be construed accordingly;
“electronic trading facility” means a trading facility that—
(a) operates by means of an electronic or telecommunications network; and
(b) maintains an automated audit trail of bids, offers and the matching of orders or the execution of securities transactions;
“exchange” means a securities exchange which is licensed in accordance with section 22;
“exchange rules” means rules made by a securities exchange and approved by the Commission;
“fit and proper” means the criteria set by the Commission in accordance with rules made under section 221;
“foreign collective investment scheme” means a collective investment scheme declared to be an authorised scheme in accordance with section 125;
“Fund” means the Compensation Fund established in accordance with section 176;
“insider” means a person who—
(a) is connected with a listed company in one or more of the following capacities—
(i) director of the company or of a related company;
(ii) officer of the company or of a related company;
(iii) employee of the company or of a related company;
(iv) independent contractor of the company who is involved in a professional or business relationship with the company;
(v) shareholder of the company or any person who has or can be considered to have a relationship with the company or shareholder;
(vi) member of the audit committee of the company;
(b) has inside information where the person knows that the direct or indirect source of the information was a person specified in paragraph (a);
(c) obtains inside information from a person specified in paragraph (b); and
(d) by virtue of having been connected with the company in any other way, possesses unpublished price-sensitive information in relation to the securities of the company;
“insider dealing” means trading in securities by an insider for the benefit of the insider or any other person;
“investment adviser” means a person specified in section 33 and who holds an investment adviser’s licence;
“investment adviser contract” means a contract entered into between an investment adviser and a client to, provide advice on the value of securities or investing in securities, or manage an investment or trading account of a client;
“investment adviser’s licence” means a licence granted to an investment adviser in accordance with section 37;
“investment company” means a company having, as its purpose, the investment of its funds with the aim of spreading investment risk and giving its members the benefit of the results of the management of those funds by or on behalf of the company;
“issuer” means a person or other entity that issues, has issued or proposes to issue, securities to the public in accordance with this Act;
“licence” means a licence granted in accordance with this Act and "licensed" shall be construed accordingly;
“licensed person” means a person who is granted a licence, as the case may be, in accordance with this Act;
“listed company” means a company whose securities have been registered with the Commission and which has been admitted to trade its securities on a securities exchange;
“listed securities” means securities of a listed company;
“listing exchange” means the securities exchange on which listed securities are traded;
“listing requirements” means the requirements, issued by a licensed exchange and approved by the Commission, which must be met before securities are listed on the securities exchange, traded or continue to be traded on the exchange;
“manager” means a person who—
(a) holds a dealer’s or investment adviser’s licence;
(b) directs the business, operations and affairs of a collective investment scheme; and
(c) is authorised in accordance with section 123;
“marked to market” means re-valued for purposes of the seller’s obligations at the current market value;
“market misconduct” includes—
(a) the use or disclosure of price-sensitive information contrary to this Act;
(b) engaging in improper trading practises as provided in Part XVIII;
(c) failure to comply with any provision of this Act; and
(d) a conviction of an offence under this Act;
“material change” means a change in the business, operations, assets or ownership of an issuer that could reasonably be expected to have a significant effect on the market price or value of the securities of the issuer, and includes a decision to implement a change made by the issuer;
“material fact” means a fact that significantly affects or could reasonably be expected to significantly affect the market price or value of the securities of the issuer;
“merger” means an amalgamation of two or more entities, where an entity, directly or indirectly, acquires or establishes control over the whole or part of the business of another entity or where two or more entities mutually agree to adopt arrangements for common ownership or control over the whole or part of a business, and includes an acquisition by an entity outside Zambia which affects Zambian entities;
(a) an untrue statement of a material fact; or
(b) an omission to state a material fact that is required to be stated or is necessary to prevent a statement that is made from being false or misleading in the circumstances in which it is made;
“netting” means the process of reducing multiple obligations for fewer settlement obligations or to a single settlement obligation;
“nominee” means a person authorised by a beneficial owner of securities to hold the securities in custody for that beneficial owner;
“officer” means an employee of the Commission;
“open-ended investment company” means a company whose articles of association authorise the acquisition of its own shares structured in such a manner that it provides for the issuing of different classes of shares to investors, with each class of shares representing a separate portfolio having a distinct investment policy;
“participant” means a person who receives services from a clearing and settlement agency, other than exclusively—
(a) through another person who is a participant; or
(b) as a pledgee, judgment creditor or beneficial owner; for whom a blocked account in a clearing and settlement facility has been established;
“participating clearing bank” means a bank which is assigned or appointed to provide banking and other facilities, to an exchange, a clearing and settlement agency and members of an exchange, to facilitate clearing and settlement functions;
“pledge” means a contractual interest in a security that is delivered to, retained by, or considered to be in the possession of, a creditor to secure payment of a debt or other obligation;
“price-sensitive information” means a material fact or material change that is not generally available or disclosed in relation to registered securities and if it were generally known, would likely materially affect the price of the securities;
“primary market” means the market in which securities are issued or traded for the first time, including a market where a company seeks to raise funds from investors in exchange for the company’s securities;
“prospectus” means a notice, circular, brochure, advertisement, publication or request issued in paper or other document, whether electronic or otherwise, inviting applications or offers from the public to subscribe or purchase, or offering to the public for subscription or purchase, a share in or debenture of a company or proposed company, and includes a statement attached to or intended to be read with the prospectus;
“public body” means the Government, a Ministry or department of the Government, the National Assembly, a local authority, parastatal, council, authority, the Commission or other body appointed by the Government or established by any other written law;
“public company” has the meaning assigned to it in the Companies Act;
“public debt securities” means loan stock, bonds and other instruments creating or acknowledging indebtedness by or on behalf of a public body or central bank;
“registered owner” means a person who is, or is presumed to be, shown on the securities register of an issuer as the owner of securities or holds a securities certificate issued by the issuer;
“registered securities” means securities that have been registered in accordance with section 75;
“repealed Act” means the Securities Act, 1993, repealed in accordance with section 222;
“reporting issuer” means an issuer—
(a) who has made an offer of securities, by way of a prospectus, before or after the commencement of this Act;
(b) who has made, by way of a merger, take-over or similar procedure, an offer for securities;
(c) whose securities are listed on a securities exchange in Zambia; or
(d) who has not less than 50 shareholders;
“representative” means a person who is employed by, or acts for, a dealer or an investment adviser and who performs for that dealer or investment adviser any of the functions of a dealer or investment adviser, other than the work ordinarily performed by accountants, legal practitioners, clerks or cashiers, whether or not remuneration is paid, and holds a representative’s licence;
“representative’s licence” means a licence granted in accordance with section 37;
“rules” in relation to a securities exchange, a clearing and settlement agency or a self-regulatory organisation means the rules governing the members, by whatever name called and wherever contained, and includes rules contained in the articles of association of the securities exchange, clearing and settlement agency or self-regulatory organisation;
“Secretary” means the person appointed Secretary to the Commission in accordance with section 17;
(b) debt securities;
(c) public debt securities;
(e) any rights, options or derivatives in respect of any such shares, debt securities or public debt securities;
(f) any rights under a contract to secure a profit or avoid a loss by reference to fluctuations in—
(i) the value or price of any shares, debt securities or public debt securities;
(ii) the value or price of a group of shares, debt securities or public debt securities; or
(iii) an index of shares, debt securities or public debt securities;
(g) unit trusts and interests under collective investment schemes;
(h) commercial paper;
(i) depository receipts;
(j) warehouse receipts; or
(k) any other instrument commonly known as securities or which are prescribed by rules made by the Commission,
excluding treasury bills, bills of exchange, promissory notes, certificates of deposit issued by a bank, or any other instrument prescribed by rules, made by the Commission, not to be securities for the purposes of this Act;
“securities certificate” means an instrument issued by, or on behalf of, an issuer that is evidence of an interest in securities;
“securities exchange” means an exchange established and operated by a company licensed to do so in accordance with section 22;
“securities market” means a place where, or facility, whether electronic or otherwise, by which—
(a) trading in securities is regularly undertaken;
(b) invitations are intended, or may reasonably be expected, to result, whether directly or indirectly, in securities transactions; or
(c) information is regularly provided on the prices at which, or the consideration for which, particular persons or particular classes of persons propose, or may reasonably be expected, to undertake securities transactions;
“securities transaction” means the process or system through or by which securities are traded;
“self-regulatory organisation” means an organisation that regulates the operations and standards of practise and business conduct of its members and their representatives and which is recognised by the Commission in accordance with section 29;
“senior management” means the chief executive officer, chief financial officer and executive director of a company, licensee or issuer, or any person performing similar functions;
“settlement” means the completion of a securities transaction, in accordance with this Act, through the final transfer of securities and monies between the buyer and seller;
“settlement guarantee fund” means a fund established by a clearing and settlement agency in accordance with paragraph (e) of sub-section (1) of section 23;
“shares” means an ownership interest or stocks issued or proposed to be issued by a company in the capital of the company;
“share transfer agent” means—
(a) a person who, on behalf of an issuer—
(i) creates and maintains the records of holders of securities issued by an issuer;
(ii) deals with all matters connected with the transfer, issue, cancellation and redemption of its securities;
(iii) safeguards securities and funds; and
(iv) distributes dividends; or
(b) a department or division, by whatever name called, of a listed company performing the activities referred to in paragraph (a), if at any time the total number of the holders of the company’s securities exceed a prescribed amount;
“short sale” means a sale of a security that the seller or seller’s principal does not own, or has not contracted for, at the time of sale or which requires the seller to borrow in order to make delivery;
“subsidiary” has the meaning assigned to it in the Companies Act;
“substantial shareholder” means a person who is the beneficial owner of, or is in a position to exert control over, not less than 15 percent of the shares of a body corporate;
“take-over” means the acquisition by a person of sufficient shares in a company to give the acquirer control over that company, and includes an acquisition by a person outside Zambia which affects Zambian companies;
“take-over bid” means an offer or invitation to treat made for the purpose of a take-over as provided in section 132;
“Tribunal” means the Capital markets Tribunal established in accordance with section 184;
“trust deed” means an agreement drawn up between the trustees and the managers, or between such persons approved by the Commission, for purposes of regulating the operations of a collective investment scheme, funds, debentures, bonds or other schemes approved by the Commission;
“trustee” means a person who is authorised by the Commission in accordance with section 123;
(a) a dealer who has temporarily purchased securities from an issuer with a view to offering or selling the securities for the issuer in connection with the distribution of such securities or participates or has a direct or indirect participation in any such undertaking, excluding a person whose interest is limited to a commission from an underwriter or a dealer which is not in excess of the usual and customary distributor’s or seller’s commission; or
(b) a person who is not a dealer but who obtains approval from the Commission to act as an underwriter in a particular transaction in compliance with rules prescribed by the Commission,
and “underwriting” shall be construed accordingly;
“units” means sub-divisions of a beneficial interest in the assets of a collective investment scheme or of any other scheme approved by the Commission;
“unit trust” means any scheme or arrangement in the nature of a trust where members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived under the trust;
“unlisted securities” means securities that are not listed on a securities exchange; and
“venture capital funds” means risk capital by investors to start-up firms and small and medium sized businesses with perceived high growth potential.
Notwithstanding any other provision to the contrary, this Act shall equally apply to public offerings of securities in a listed company owned by the Government.
(1) A transaction in government securities traded in the primary market shall be exempt from this Act.
(2) The Commission may, by notice in the Gazette and a daily newspaper of general circulation in Zambia, exempt a person or any securities from the application of this Act.
In this Act, unless the context otherwise provides, words and expressions used and which are not defined, but are defined in the Companies Act or Banking and Financial Services Act, shall have the meaning assigned to them in those Acts.
Where there is an inconsistency between this Act and any other written law, the provisions of this Act shall prevail to the extent of the inconsistency.
THE SECURITIES AND EXCHANGE COMMISSION
(1) The Securities and Exchange Commission, established in accordance with the repealed Act, is continued in existence as a body corporate, with a common seal, capable of suing and being sued and, subject to this Act, of performing all such acts as a body corporate may by law do or perform.
(2) The First Schedule applies with respect to the Commission and the Board.
(1) There is constituted the Board of the Commission which shall be responsible for the implementation of this Act and shall, subject to this Act—
(a) exercise the functions of the Commission as provided in this Act;
(b) oversee the administrative affairs of the Commission by putting in place effective, efficient and transparent systems of corporate governance and, in doing so, shall—
(i) ensure sound financial management structures and processes, including financial, risk management and internal audit controls;
(ii) provide strategic direction to the Commission and approve the annual work plan and activity programmes of the Commission as recommended by the Chief Executive Officer;
(iii) ensure that the Commission builds sufficient human resource, technical and scientific capacity within the Commission;
(iv) determine the structure and staffing levels of the Commission;
(v) approve the budget estimates of the Commission and ensure that the Commission receives adequate funding for its operations;
(vi) ensure the prevention of irregular expenditure, fruitless and wasteful expenditure, losses resulting from criminal conduct and expenditure not complying with the operational and financial policies of the Commission;
(vii) ensure that the members of the Commission, members of committees and officers act in a manner consistent with the objectives and functions of the Commission, the Commission’s corporate governance charter and this Act; and
(viii) ensure that officers perform their functions efficiently and effectively; and
(c) do every act or thing that is required to be done by the Board as specified in this Act.
(2) The Minister shall appoint seven persons as non-executive members of the Board from a nomination made by each of the following organisations—
(a) Bank of Zambia;
(b) Law Association of Zambia;
(c) Zambia Institute of Chartered Accountants;
(d) Zambia Chamber of Commerce and Industry;
(e) Ministry responsible for finance;
(f) Ministry responsible for justice; and
(g) Pensions and Insurance Authority.
(3) The Chief Executive Officer shall be an ex-officio member of the Board.
(4) The members of the Board shall elect, from amongst their number, the Chairperson and Vice-Chairperson of the Board.
(5) The Minister shall, when making appointments in accordance with sub-section (2), ensure that 50 percent of each gender is nominated and appointed as members, unless it is not practicable to do so.
(6) A person shall not be appointed or hold office as a member of the Board if the person—
(a) is an undischarged bankrupt;
(b) is of unsound mind; or
(c) has been convicted of an offence under this Act or of an offence involving fraud or dishonesty.
(1) The Commission shall create and promote conditions in the capital markets aimed at ensuring an orderly growth, integrity and development of the capital markets.
(2) Notwithstanding the generality of sub-section (1), the Commission shall—
(a) ensure compliance with this Act and regulations or rules made in accordance with this Act;
(b) licence securities exchanges, regulate the activities of securities exchanges and the settlement of securities transactions;
(c) licence and regulate capital markets operators;
(d) licence and regulate clearing and settlement agencies and other participants in the capital markets;
(e) licence and regulate credit rating agencies and provide conditions for the issuing of credit ratings;
(f) approve the constitutions, charters, articles, by-laws and rules governing and pertaining to securities exchanges, clearing and settlement agencies and other participants in the capital markets;
(g) promote and encourage high standards of investor protection and integrity among members of securities exchanges, capital markets operators, clearing and settlement agencies, self-regulatory organisations and other participants in the capital markets;
(h) support the operation of a free, orderly, fair, secure and properly informed capital markets;
(i) regulate the manner and scope of securities transactions;
(j) regulate margin requirements, capital adequacy requirements, disclosure and reporting requirements and clearing and settlement requirements, as may be prescribed;
(k) take all reasonable steps to safeguard the interest of persons who invest in securities and guard against illegal and improper practises as provided in this Act;
(l) authorise the establishment of collective investment schemes and other schemes;
(m) regulate the activities of managers, trustees and custodians;
(n) authorise and regulate the establishment of venture capital funds;
(o) consider and suggest proposals for the reform of this Act and rules and regulations made in accordance with this Act;
(p) promote and develop a system of self-regulation by securities exchanges, clearing and settlement agencies, self-regulatory organisations, other participants in the capital markets and capital markets operators, as may be prescribed;
(q) encourage the development of securities and securities exchanges and the increased use of such exchanges;
(r) provide, promote or otherwise support financial education, awareness and confidence with regard to financial products, institutions and services;
(s) prescribe certification standards and accreditation for licensees;
(t) co-operate with, provide assistance to, receive assistance from, and exchange information with, other regulatory bodies and trade organisations in Zambia and elsewhere; and
(u) exercise and perform such other functions as may be conferred or imposed upon it by or in accordance with this Act or any other written law.
(1) The Commission shall regulate foreign capital markets operators and participants operating in the Zambian capital markets.
(2) The Minister shall, by statutory instrument, prescribe the securities services that may be provided and the functions and duties that may be performed by foreign capital markets operators and participants in the capital markets.
(1) The Commission may, in writing, prohibit a licensed person from doing any of the following—
(a) entering into a securities transaction of a class or description specified in the notice or entering into the transaction otherwise than in circumstances so specified or to an extent so specified;
(b) soliciting business from persons of a specified class or description or from persons other than persons of such a class or description; or
(c) carrying on business in a specified manner.
(2) A prohibition notified in accordance with this section may relate to a transaction entered into, in connection with, or for, the purposes of the business in respect of which the person is licensed.
(3) Where a licensed person refuses to—
(a) comply with an order or directive of the Commission made in accordance with this Act;
(b) permit an inspection to be made as provided by this Act or obstructs such an inspection or where an inspection is instituted and shows that—
(i) the licensed person concerned conducts its business in breach of any written law or engages in a course of conduct that is unsafe or unsound;
(ii) for any reason the licensed person concerned is unable, or is likely to become unable, to continue its operations in the ordinary course of its business;
(iii) the capital adequacy of the licensed person concerned is less than the prescribed minimum; or
(iv) the licensed person concerned is insolvent,
the Commission shall take supervisory action against the licensed person.
(4) The supervisory action the Commission may take includes—
(a) taking possession of, or appointing a manager to run, the affairs of the licensed person;
(b) suspending the licence of the licensed person for a specified period not exceeding six months; or
(c) cancelling the licence of the licensed person.
(1) The Commission may, as regards an asset of a licensed person, whether in Zambia or elsewhere, by notice in writing—
(a) prohibit the licensed person from disposing of the asset or dealing with the asset in a manner specified in the notice;
(b) require the licensed person to deal with the asset in a manner specified in the notice; or
(c) prohibit the licensed person from pledging securities and other assets as collateral for borrowings.
(2) The Commission may, by notice in writing, require a licensed person to maintain, in Zambia, assets of such value as appears to the Commission to be desirable with a view to ensuring that the licensed person is able to meet that person’s liabilities in respect of the business to which that person’s licence relates.
(3) The Commission may, in writing, for the purposes of any requirement in this section, direct that assets of a specified class or description shall or shall not be taken into account.
(1) The Board may, for the purpose of performing its functions, constitute standing and special committees and delegate to the committees such of its functions as it considers necessary.
(2) The Board may appoint as members of a committee, constituted in accordance with sub-section (1), persons who are or are not members of the Board, who shall hold office for such period as the Board may determine.
(3) A meeting of a committee, constituted in accordance with sub-section (1), shall be held at such times and places as the committee may determine or as the Board shall direct.
(4) The Board may refer a matter to a committee, constituted in accordance with sub-section (1), for consideration of, or inquiry or management by, the committee.
(5) The Board may appoint a member of a committee to be the Chairperson of the committee.
(6) Where the Board does not appoint a Chairperson, in accordance with sub-section (5), the committee shall elect one of its members to be the Chairperson of the committee.
(7) Subject to this Act and any specific or general direction of the Board, a committee, constituted in accordance with sub-section (1), may regulate its own procedure.
(1) The Board may delegate to a committee or the Chief Executive Officer such of the functions of the Commission as the Board considers necessary or expedient for the better performance of the functions of the Commission.
(2) The Board may impose such conditions and issue such guidelines relating to the performance of a function delegated in accordance with sub-section (1).
(3) A delegation made in accordance with this section shall not prevent the Board from performing the function so delegated.
(4) A person who is directly affected by a decision of a committee or the Chief Executive Officer made in the performance of a delegated function may, by notice in writing to the Board, within 30 days after the person has been notified of the decision, request a review of the decision by the Board.
(5) The Board may, after due consideration of the decision that was the subject of review, as provided in sub-section (4), confirm the decision or make such other decision as the Board considers appropriate to the case, and shall inform the party requesting the review of the decision, giving the reasons for the Board’s decision.
(6) Notwithstanding that a person has requested a review of a decision, as provided in sub-section (4), the decision under review by the Board shall take effect immediately, but the Board may grant a stay until the review has been disposed of.
(1) The Chief Executive Officer shall give notice of, and publish, prescribed regulatory decisions in such form and manner as the Board may specify.
(2) A notice of a prescribed regulatory decision shall set out the regulatory decision and the reasons for the decision.
(1) The Board shall appoint a Chief Executive Officer of the Commission, who shall hold office on such terms and conditions as the Board shall determine.
(2) The Chief Executive Officer shall be responsible, under the general direction of the Board, for—
(a) the management and administration of the affairs of the Commission;
(b) the implementation of the decisions of the Board; and
(c) any other function assigned or delegated to the Chief Executive Officer by the Board or in accordance with this Act.
(3) Except as otherwise provided in this Act, where the Board has delegated to the Chief Executive Officer the power to grant, vary, cancel or renew a licence, recognition or authorisation, the Chief Executive Officer shall do so in accordance with—
(a) conditions specified in this Act;
(b) regulations issued in accordance with this Act;
(c) guidelines established by the Board; and
(d) any direction, in writing, not inconsistent with this Act, given by the Board.
(4) The Chief Executive Officer shall attend meetings of the Board as an ex-officio member and may address those meetings, but shall not vote on any matter.
(5) The Chief Executive Officer shall furnish the Minister, on approval of the Board, such information relating to the activities and undertakings of the Commission, as the Minister may require.
(1) The Board shall appoint a Secretary to the Board on such terms and conditions as the Board shall determine.
(2) The Secretary shall, under the general direction of the Chief Executive Officer, be responsible for the corporate secretarial affairs of the Commission.
(3) The Secretary shall perform such other functions as directed by the Board, under the general supervision of the Chief Executive Officer.
The Board may appoint, on such terms and conditions as the Board shall determine, such other professional, administrative and technical officers, inspectors, and other employees as may be necessary for the performance of the functions of the Commission.
(1) The Minister may, by statutory instrument, prescribe a code of ethics for the members of the Board.
(2) The Board shall prescribe a code of ethics for the Chief Executive Officer, the Secretary and other staff of the Commission.
LICENSING OF SECURITIES EXCHANGES AND CLEARING AND SETTLEMENT AGENCIES
(1) A person shall not—
(a) establish or maintain a securities market that is not a securities exchange in accordance with the requirements of this Act;
(b) establish, maintain or hold out as providing or maintaining a securities exchange unless that person is licensed in accordance with this Act; or
(c) assist in establishing or maintaining, or hold out as providing or maintaining, or carrying on a business as, a clearing and settlement agency that is not established and operated by a company licensed in accordance with this Act.
(2) A person that contravenes this section commits an offence and shall be liable, on conviction, to a fine not exceeding one million penalty units or to imprisonment for a term not exceeding 10 years, or to both.
(1) A company may apply to the Commission, in the prescribed form and manner, for a licence to establish and operate a—
(a) securities exchange; or
(b) clearing and settlement agency.
(2) An application made in accordance with sub-section (1) shall be accompanied with a prescribed fee.
(3) The Commission may require an applicant for a licence, as provided in this section, to furnish it with such further information as the Commission considers necessary for purposes of considering and granting the licence applied for in accordance with sections 22 and 23, as the case may be.
(4) If the Commission fails to respond within 180 days after receiving a complete application for a licence, in accordance with this Part, the application shall be deemed to have been accepted and the licence applied for duly granted.
(1) The Commission may, on receipt of an application for a securities exchange licence, as provided in section 21, grant a securities exchange licence to a company, if the Commission is satisfied that—
(a) the establishment of the securities exchange is necessary in the public interest, having regard to the nature of the capital markets;
(b) the applicant has sufficient financial resources, as the Commission may prescribe by rules, for the proper performance of its functions as a securities exchange;
(c) the applicant has, for the proposed securities exchange, at least five members who are engaged in carrying on the business of dealing in securities independently of, and in competition with, each other;
(d) the rules and practises of the proposed securities exchange are such as ensure that business conducted by means of its facilities shall be conducted in an orderly manner, so as to afford proper protection to investors;
(e) the rules of the proposed securities exchange make such provisions as the Commission considers satisfactory with regard to—
(i) efficient, honest, fair, competitive and informed trading in securities;
(ii) the qualifications for membership of the securities exchange;
(iii) the exclusion, from membership, of persons who are not of good character and business integrity;
(iv) the suspension or discipline of members of the securities exchange for conduct inconsistent with just and equitable principles in the transaction of securities or for contravention or failure to comply with the rules of the exchange or the provisions of this Act;
(v) the conditions governing securities transactions by members of the exchange and the class or classes of securities that may be dealt in by the members;
(vi) the carrying on of the business of the exchange taking into account the interests of the public; and
(vii) the prevention of a member of the exchange from resigning where the proposed exchange intends to investigate any matter affecting that member or any of the member’s representatives for the purpose of deciding whether to expel or to take other disciplinary action against that member;
(f) the applicant has satisfied the requirements set out in the Second Schedule; and
(g) the applicant has made such provision as the Commission considers satisfactory for—
(i) the clearing and settlement of dealings in securities to ensure the efficient, prompt and accurate settlement of securities transactions effected on the proposed exchange, and for the recording of such transactions;
(ii) the effective monitoring and enforcement of compliance with its rules, this Act and regulations or rules made in accordance with this Act;
(iii) investigating complaints in respect of business transacted by any of its members; and
(iv) promotion and maintenance of high standards of integrity and fair dealings by its members.
(2) The Commission shall not grant a licence to a securities exchange, unless the Commission has approved the appointment of Directors and senior management of a securities exchange.
(1) The Commission may, on receipt of an application for a clearing and settlement agency licence, as provided in section 21, grant a clearing and settlement agency licence to a company, if the Commission is satisfied that—
(a) the establishment of the clearing and settlement agency is necessary in the public interest, having regard to the nature of the capital markets;
(b) the rules of the proposed clearing and settlement agency contain satisfactory provisions designed to—
(i) develop and operate a prompt and accurate clearing and settlement system;
(ii) safeguard money and securities in its custody or under its control or for which it is responsible;
(iii) supervise and regulate its participants; and
(iv) provide that dealers, financial institutions and other clearing and settlement agencies may become participants in the clearing and settlement agency;
(c) the application is supported by a licensed securities exchange, to which the company is to provide clearing and settlement facilities;
(d) the clearing and settlement agency shall ensure that, as far as is reasonably practical, there are fair, transparent and efficient clearing arrangements for securities transactions;
(e) the clearing and settlement agency shall put in place measures, including the establishment of a settlement guarantee fund, to contain or manage any risks associated with its business and operations in a prudent manner;
(f) the clearing and settlement agency shall enforce compliance by its participants with its rules; and
(g) the clearing and settlement agency has sufficient financial, human and system resources to—
(i) establish and operate a fair, transparent and efficient clearing and settlement facility;
(ii) meet contingencies or disasters, including events such as technical complications occurring with automated systems; and
(iii) provide adequate security arrangements.
(2) The Commission shall not grant a licence to a clearing and settlement agency unless the Commission has approved the appointment of the Directors and senior management of the clearing and settlement agency.
(1) If the Commission is satisfied that an application for the grant of a licence, made in accordance with section 21, fails to comply with, or is contrary to, the requirements of section 22 or 23, as the case may be, or the other requirements of this Act or any regulations made in accordance with this Act, the Commission may, after giving the applicant an opportunity to be heard, refuse to grant the licence to the applicant.
(2) Where the Commission refuses to grant a licence to an applicant, the Commission shall inform the applicant of the reasons for the refusal to grant the licence.
(1) A licence granted, in accordance with section 22 or 23, shall be subject to the terms and conditions attached to it and shall be valid until revoked, cancelled or surrendered.
(2) A licence granted, in accordance with section 22 or 23, shall be subject to the payment of an annual prescribed fee and to compliance, by the licensed person, with the conditions of the licence and any provision of this Act or regulations or rules made in accordance with this Act.
(3) A licence granted, in accordance with section 22 or 23, shall not be transferred, assigned or encumbered in any manner.
(4) The Commission may impose such additional conditions on a licence as the Commission considers appropriate for the enforcement of the requirements of this Act and regulations or rules made in accordance with this Act.
The conditions of a licence granted in accordance with section 22 or 23 may be varied by the Commission after due investigation—
(a) on the operations of the securities exchange or clearing and settlement agency, as the case may be;
(b) in the interest of trade in the capital markets; or
(c) in the interest of investor protection.
(1) The Commission may, after due investigation, and after giving a licensed person the opportunity to be heard, cancel or suspend a licence granted in accordance with section 22 or 23—
(a) in the interest of trade in the capital markets; or
(b) due to contravention by the licensed person of this Act or regulations or rules made in accordance with this Act.
(2) Where the Commission cancels or suspends a licence, in accordance with this section, the Commission shall issue a notification of such cancellation or suspension in the Gazette and a daily newspaper of general circulation in Zambia.
(3) A cancellation or suspension of a licence, in accordance with this section, shall not affect the validity of a securities transaction made before the date of notification in the Gazette and daily newspaper of general circulation in Zambia.
(1) A person aggrieved by a decision of the Commission—
(a) to refuse to grant or suspend a licence in accordance with this Part;
(b) relating to any condition imposed on, or varying the conditions of, a licence; or
(c) cancelling a licence,
may, within 30 days after the date of the decision, appeal to the Tribunal.
(2) The decision of the Commission shall not be stayed by reason only of an appeal having been lodged with the Tribunal, except that the Tribunal shall, on sufficient ground shown, stay the Commission’s decision.
(1) The Commission may, on the application of a self-regulatory organisation, recognise the organisation for purposes of this Act, if the Commission is satisfied that it is in the public interest to do so.
(2) Subject to sub-section (1), recognition of a self-regulatory organisation, by the Commission, shall be in writing and subject to such terms and conditions as the Commission may determine.
(3) A self-regulatory organisation shall regulate the operations and standards of practise and business conduct of its members and their representatives in accordance with its by-laws, rules, policies, procedures practises and interpretations.
(4) A self-regulatory organisation shall appoint an auditor, approved by the Commission, to audit its financial affairs.
(5) The Commission may, if it is satisfied that it is in the public interest, approve a by-law, rule, policy, procedure, practise or interpretation of a self-regulatory organisation.
(6) A self-regulatory organisation may apply for the voluntary surrender of its recognition and the Commission may accept the surrender, subject to such terms and conditions as it may impose, if the Commission is satisfied that the surrender of the recognition is not prejudicial to the public interest.
(1) The Commission may, on such terms and conditions as it may impose, assign to a self-regulatory organisation any of the functions or powers of the Commission relating to the regulation of members of the self-regulatory organisation.
(2) The Commission may revoke, in whole or in part, a delegation of functions or powers made in accordance with sub-section (1).
(3) A person directly affected by the administration of a direction, decision, order or ruling made in accordance with a by-law, rule, policy, procedure, practise or interpretation of a self-regulatory organisation, may apply to the Tribunal for the determination of the direction, decision, order or ruling.
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