The Securities and Exchange Commission of Zimbabwe (SECZ) has introduced a new capital framework, under which it has slashed minimum capital threshold for asset managers by 50% to US$250 000.
Under the new three tier framework, the firms should also have liquid capital equivalent to operating costs for three months or $250,000 compared to the previous $500 000 set by the Reserve Bank of Zimbabwe.
The liquid capital must to be placed with at least two independent financial institutions based on the asset manager’s choice and not be withdrawn without the consent of the SECZ.
A part of the new structure, asset managers must comply under a three tier system being the liquid capital equivalent, risk based capital allocation and available paid up equity shareholders funds approaches.
Additionally, the firms should also maintain positive working capital and liquidity ratio of 30%, which is equivalent to 30 percent of a company’s current liabilities.
The new requirements mean that the asset managers should have contingency measures such as insurance policies, have adequate and sound risk management, assessment and oversight systems.
However, the asset management firms wanted the core capital to be reduced to $150,000 or funds equivalent to the company’s operational costs for a minimum of 13 weeks.
SECZ said: "Where the Investment Management Company fails to comply with this directive, the Commission shall declare the Investment Management Company to be a defaulter. The Commission shall have the power, in terms of the Securities and Exchange Act, to reprimand, sanction, suspend and or cancel the registration of an Investment Management Company declared to be a defaulter."