Frequently Asked Questions

 

Introduction

In recognition of the key role played by capital markets in economic development, the Government of Zimbabwe, through the Ministry of Finance, has embarked on an initiative to bring efficiencies to the Zimbabwean Capital Markets through the use of Information and Communication Technologies (ICT) and the implementation of international best practice. The efficiencies gained will facilitate high volume; efficient trading with enhanced risk management will increase market attractiveness to investors.

One of the initiatives is setting up a Central Securities Depository (CSD) and Chengetedzai Depository Company (CDC) has been mandated with setting up the depository. The CSD will facilitate storage and trading of shares in electronic form and this addresses the issues and risks associated with paper securities. It is important that the investing public understands the operations of the CSD and enjoys its many benefits. The following FAQ section provides a response to concerns that investors may have regarding holding securities in electronic form.

What is the Central Securities Depository (CSD)?
A Central Securities Depository is a computer system that facilitates holding of securities in electron accounts (book entry system) in contrast to paper certificates. The CSD is very similar to a bank and an account in the CSD operates in a similar manner to a bank account.

Why should I open a securities account?
You need to open a CSD account for the following reasons:

  • Purchasing Securities – Your CSD account will be credited when you purchase securities. If you do not have a CSD account you will not be able to purchase securities on the ZSE.
  • Selling Securities – You CSD account will be debited when you sell securities.

Who should I contact to open a CSD account?
You should contact your Stockbroker, Custodian or Transfer Secretary

Can I open multiple accounts, that is, with more than one Participant?
Yes, you can open accounts with several participants if you so wish. The CSD can however give you your total investments in the form of a statement.

Is it possible to close an account with one Stockbroker and transfer the securities to another Stockbroker?
Yes it is, you a complete an inter account transfer form to authorise the transfer.

How long does settlement of trades in securities take?
Shares purchased will be credited to your CSD account on settlement day which is transaction day plus five working days (T+5), that is, if you purchase shares on Monday, they will be credited to your account on Friday, subject to payment being made for the same. If you sell shares, payment will be made to you on settlement date through your Broker. Once the CSD is fully operational, the settlement cycle may be reduced to T+3, which is a global standard.

When I purchase or sell securities, how do I know my account has been credited or debited on the sale of the securities?
The Stockbrokers sends a deal note to you, confirming the purchase or sale and a monthly statement detailing your transactions will keep you informed of your investment portfolio.

Can I open a joint account?
If required you can open joint accounts, it is similar to opening joint accounts in a bank.

Can I convert my securities in the CSD to a paper certificate?
Yes, the process is known as a “Withdrawal”. You could request your participant to do so by completing a withdrawal form. However, there is no advantage in you converting the securities into paper certificates since you will have to convert them back into electronic form when you intend to trade, and the process will attract a charge.

How do I convert the paper certificates I hold into electronic form within my CSD account?
The process of converting paper certificates (scrip) into electronic form and crediting you CSD account is known as a “dematerialisation”. You need to complete a deposit form and submit the same, together with the relevant certificates to your Participant (Stockbroker, Custodian or Transfer Secretary). Your Participant will retain the original and return the duplicate to you. You are advised to retain a duplicate copy of the deposit form handed over to the participant  for your records. Your Participant will forward the original documents to the Transfer Secretary of the issuer of the securities. The Transfer Secretary will authenticate the certificate, that is, confirm that it is genuine and that you are the lawful owner before depositing your securities in the CSD. The original certificate is then cancelled and kept in safe storage. From this point of the dematerialisation process, you CSD account will show a credit balance in respect of the securities deposited.

What are the benefits of the CSD?

  • Safe keeping – paper certificates can be misplaced, lost, stolen, damaged by water or fire. It is not so with securities in the CSD. Just like a bank, the CSD will ensure the safety of your portfolio through various measures that include ICT security and strict procedures on accessing the accounts – just like in a bank.
  • Securities in the CSD can be sold at anytime and hence trading will be faster.
  • A CSD eliminates the risk of fake certificates since only those certificates authenticated by the Transfer Secretary will be deposited.
  • A CSD also reduces the paperwork involved in the trading of securities.
  • A CSD enhances service delivery and quality through improved operational efficient.