CMA bill seeks more investor protection

The Capital Markets Advisory Council (CMAC), an institution that regulates capital markets activities in Rwanda wants investors on the Rwanda stock exchange to be given more protection through the establishment of the Investors’ Compensation Fund. The plan is contained in the new bill establishing the Capital Market Authority (CMA) that is currently being deliberated on by the parliamentary Standing Committee on Budget and National Patrimony.
Stock brokers at the ROTC market: new law seeks to protect investors against poor practices of finacial intermediaries.
Stock brokers at the ROTC market: new law seeks to protect investors against poor practices of finacial intermediaries.

The Capital Markets Advisory Council (CMAC), an institution that regulates capital markets activities in Rwanda wants investors on the Rwanda stock exchange to be given more protection through the establishment of the Investors’ Compensation Fund.

The plan is contained in the new bill establishing the Capital Market Authority (CMA) that is currently being deliberated on by the parliamentary Standing Committee on Budget and National Patrimony.

The legislative proposal will also pave way for the establishment of the Rwanda Stock Exchange (RSE) that will replace the Rwanda Over-The-Counter (ROTC) market. 
In the new plan, the Fund aims at securing and addressing investor claims against financial intermediaries that are members of CMA. The bill states that such claims must be in connection with the investment services financial intermediaries provide.

Defending the bill before the committee, Robert Mathu, the Executive Director of CMAC said the Fund would be a legal entity under the CMA but with its own management.

“The Fund’s intervention comes when there have been a loss incurred by an investor as a result of probably the stockbroker’s carelessness,” Mathu told the committee.

The bill, which comes as part of many reforms in capital markets regulation, is also set to increase the credibility, stability and development of the capital markets business in Rwanda by providing compensation to the clients of financial intermediaries, he said. 

The Chairperson of the Parliamentary Standing Committee on Budget and National Patrimony, Constance Mukayihi, proposed that a certain percentage should be deducted from the investor during any form of transaction on the stock exchange.

Some of the likely functions of the Fund would be to collect payments from all legal entities that have been licensed to perform activities as investment intermediaries and pay out compensation to the clients of the investment intermediaries up to the amounts stipulated in the regulations of the Fund.

Other details regarding the establishment of the fund will be determined by its internal regulations that are also expected to pass through the parliament.

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