THE Securities and Exchange Commission of Zimbabwe (SECZ) is yet to conclude investigations into British-born tycoon, Nicholas Van Hoogstraten’s Messina Investments (Private) Limited for alleged insider trading involving shares in CFI Holdings, the Financial Gazette can report.
This is now more than three months after the investigations commenced prompting market analysts to remark that the probe could turn out to be the longest ever investigation to have been handled by the securities and capital market regulator, judging by the slow pace of the investigation.
Last month, the Financial Gazette reported that Van Hoogstraten’s investment vehicle was at the centre of investigations after it allegedly bought shares in CFI Holdings during its closed period which started in July 2015.
The closed period will only end once it has released its financials.
SECZ chief executive officer, Tafadzwa Chinamo told this publication this week that investigations were still ongoing.
“The investigation is still ongoing, but I can tell you that we are at an advanced stage of coming up with a conclusion on the matter,” said Chinamo.
Insider trading is considered the most serious crisis of public confidence on any exchange.
In the case of the Zimbabwe Stock Exchange (ZSE), it is a test for the regulator that had difficulties in bringing to account investors, traders and stockbrokers that engage in insider trading.
Insider trading is the buying and selling of securities while one is in possession of privileged and confidential information, which is not available to the general investing public.
Thus one would be gaining an unfair advantage over everyone else and could earn millions of dollars in profit.
This can disrupt the smooth functioning of the capital markets whose efficiency is largely dependent on transparency.
Owned by Van Hoogstraten, Messina, along with EFE Nominees and Zimcor, form the three investment vehicles through which the businessman controls close to 22 percent of the CFI stock.
CFI has since been suspended from trading its shares on the ZSE to allow for investigations into trades conducted during the closed period.
The suspension took effect on January 29. It has since emerged that the shares that are at the centre of the suspension were acquired by Messina Investments.
The alleged insider trading involves a CFI Holdings stock worth US$189 529,45.
The suspicious market activity occurred on January 21 when Messina Investments bought 3 313 452 CFI shares at US$0,0572 each.
The conglomerate is still to publish its audited financial statements for the year to September 30, 2015, about three months after the deadline.
ZSE insiders said the conflict of interest allegations arises from the fact that a key member of Van Hoogstraten’s team, Shingirayi Chibanguza, sits on the CFI board as a non-executive director.
Chibanguza also represents Van Hoogstraten on the boards of several other companies, among them Hwange Colliery Company Limited and Rainbow Tourism Group (RTG).
What the ZSE and SECZ are trying to establish is whether Chibanguza had influence in the decision by the British-born tycoon to acquire shares in CFI during the closed period.
There are fears that insider trading might have once again reared its ugly head amid heightened fears that failure to eliminate the practice would see some individuals enjoying inflated returns.
Since dollarisation in 2009, cases of alleged insider trading have included those dealing with the floating of shares for Econet Wireless Holdings and dividends for First Mutual Life, where businessmen were hauled before the courts.
They were accused of having abused privileged information and misrepresented facts to reap handsome rewards.
RTG and Afre Corporation’s shares were also suspended from trading on the ZSE following allegations of insider trading.
The regulators were focused on a US$12 million loan to Patterson Timba, formerly executive chairman of Afre, by businessman, Jayesh Shah, for which Timba, pledged shares in the two companies as securities.
Shah later sought conversion of the debt into equity.
SECZ is using the Securities Act and the Prevention of Corruption Act to deal with cases of alleged insider trading. Loopholes in these Acts have, however, resulted in individuals successfully challenging the law and going scot-free.
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