The Securities Commission cancelled the licences of Interfin Securities and Remo following the suspension and investigations of the stockbroking firms.
Rufaro Zengeni (from Interfin Securities) and Mahomed Mahmed (Remo) also had their licences cancelled.
However John Motsi and compliance officer Rezana Ibrahim both from Remo and Edmund Mupfapairi and Cuthbert Kwashirai retained their licences on condition that they would operate under supervision from a senior broker for year.
Members of the public who purchased shares on the ZSE through Remo Investment Brokers and Interfin Securities should ensure that the shares are registered in their own names and delivered to them. Those who do not wish to take custody of their shares are encouraged to use licensed custodians for safekeeping.
According to a statement from SEC chairman Willia Bonyongwe, Interfin contravened Sections 24:25 of the Securities Act by carrying out activities not authorized in terms of the securities dealing firm licence after securing funding and on lending to third parties. The firm admitted to engaging in these transactions especially money market deals that fall under the Banking Act.
Interfin Securities management also had an account with Stanbic Bank whose purposes were deposit taking and funds disbursements in contravention of the dealing firm licence.
Interfin was also found guilty of abuse of clients assets in that is used clients’ shares as security for its borrowings instead of keeping them in safe custody.
The judgment also notes that the Agency Agreement signed on January 1 2009 allegedly executed by Interfin Securities and Interfin Banking Corp cannot be an authentic document as one of the witnesses to that agreement Zengeni was still an employee at EFE Securities. SEC says this was an attempt to regularise and cover up the illegal activities.
Remo also carried out activities not authorized in terms of the securities dealing firm licence, thus acting outside the definition of the licensable activity . The dealing firm licence was issued in terms of Section 38 (1). The Commission found that Remo secured funding from Interfin Securities by abusing the dealing firm whose business is-
“ Brokering or dealing in securities, that is to say-
Entering into an agreement on behalf of another person to acquire, dispose of , subscribe for or underwrite a security; or
Offering to enter into an agreement referred to in subparagraph (i) or attempting to induce someone to enter into such an agreement. “
Remo failed to record the transactions relating to the borrowings and lendings in its accounts, resulting in non-disclosure in the financial statements. The firm failed to provide plausible reasons for such non-disclosure while merely pointing out that the non-disclosure was not meant to mislead. Commission found that in fact this was the purpose of the non-disclosure, especially in the absence of a Nominees register that would have aided the firm by providing records.
Further, the Commission concluded that Remo was not being truthful by saying that the borrowings were meant for Cold Power and other associates because these are separate legal entities that could access borrowings directly from the market, without the assistance of the Remo interface. Instead Remo Investment Brokers that is not a shareholder in Cold Power borrowed from Interfin.
Mahmed was found to be an unfit person to function as its principal securities dealer. This in turn renders the firm as unfit and improper to hold a dealing firm licence.
In terms of the fit a proper test, Mahmed failed in his ability to perform efficiently, honestly and fairly all the functions athourised by the licensed, as provided in subsection (2) (a) (iii). Further his reputation, character, integrity and reliability has become questionable. Due to Mahmed’s position as both director, shareholder and principal broker, Remo’s own standing becomes questionable too, in terms of subsection( 2) (c) (ii).
The Commission found that Remo failed and or concealed the true shareholding structure of Eastern Alliance Development Holding, the alleged beneficial owner of the shares, with the same shareholding as Remo. Mahmed‘s explanation that Dominion Nominees Limited is the sole shareholder in Eastern Alliance does not prove Mahmed and other Remo shareholder ownership of the entity, neither does the acknowledgment provided. The furnished document demonstrates that Dominion Nominees are the sole shareholders in Eastern Alliance, not Mahmed.