Shareholders and the public have been following with interest the conduct of the Zimbabwe Stock Exchange (ZSE) with regards the Meikles Limited (Meikles) shares over the past two weeks. Meikles learnt of the suspension of the trading of its shares on the morning of Monday the 16th of February 2015. The ZSE at that stage informed Meikles that the reasons for the suspension would be formally communicated to Meikles before the end of that day. Meikles did not receive formal notification of the suspension until Tuesday, the 17th of February 2015 at 2.05pm, despite a total of 4 letters being written to the ZSE by the Company Secretary requesting the formal notification.
Meikles initially sought an amicable resolution of the issues pertaining to the suspension of the trading of its shares as it was immediately clear to Meikles that the suspension had been carried out in a manner that flagrantly violated both the rules of natural justice and the specific and unambiguous requirements of Section 1.5 of the ZSE Listing Requirements, under whose provisions the ZSE had purported to have carried out the suspension. To that end Meikles requested an audience with the ZSE to discuss this issue but the consequent meeting did not produce a resolution. Meikles then approached its Legal Practitioners and instructed them to communicate to the ZSE and demonstrate to them the illegality of their actions. When there was no response from the ZSE, Meikles approached the courts as a last resort.
The matter was set down for hearing on Monday, 23rd of February 2015 at 10.00am. Meikles’ representatives included the Company Secretary Mr Tabani Mpofu, accompanied by Advocate Thabani Mpofu and Mr Jacob Mutevedzi of Mutamangira and Associates Legal Practitioners to the High Court. Upon arrival they were informed that the ZSE had lifted the suspension of the trading of the Meikles’ shares with immediate effect, a development which led to the curtailment of the legal proceedings without argument. The ZSE never at any stage before the court date proffered any response to the arguments raised by Meikles in the court application.
The ZSE has since publicly acknowledged the illegality of its actions in suspending the trading of the Meikles’ shares on the 16th of February 2015.
When Meikles’ initial efforts to resolve the issue with ZSE failed to produce an amicable settlement, Meikles wrote to the Securities and Exchange Commission (SEC) pointing out the illegality of the ZSE’s action and seeking its intervention. In total Meikles, through its Legal Practitioners, wrote three letters to the SEC before the court date of Monday, 23rd of February 2015, all relating to the conduct of the ZSE. In response to Meikles’ complaint on the illegal nature of the suspension of the trading of Meikles’ shares, the SEC informed Meikles that it had requested an explanation from the ZSE which it expected to receive within a period of 7 days.
On Thursday, 26th of February 2015, two events of considerable concern to Meikles occurred. The first was that the ZSE posted an advertisement in The Herald in which it admitted to having acted illegally in its suspension of the trading of the Meikles’ shares. In addition the Chief Executive Officer of the ZSE, Mr. Alban Chirume, who is the author of the advert, revealed that the illegal suspension of the trading of the shares of Meikles was done with the approval (and therefore prior knowledge) of the SEC. The second event was that Meikles received, just before mid-day, a long letter from the SEC in which many questions and allegations were posed to Meikles, some of which relate to events that occurred almost a decade ago. The SEC letter, authored by its Chief Executive Officer Mr Tafadzwa Chinamo, also stated that the letter would be published in the media notwithstanding the fact that Meikles, had not yet had the opportunity to respond to the questions.
After the revelation by the ZSE that the SEC had approved the illegal suspension of the trading of the Meikles’ shares, Meikles established that a representative of the SEC was part of the panel that implemented and effected the illegal suspension of Meikles.
Meikles wishes to draw the attention of the public to the provisions of the Securities and Exchange Act which created the SEC and which therefore guides the operations. Section 111 of the Securities and Exchange Act enjoins the SEC to observe the rules of natural justice in the carrying out of its functions. The Act states that the SEC shall take all reasonable steps to ensure that every person whose interests are likely to be affected by the exercise of its functions is given adequate opportunity to make representations in the matter.
Information in the public domain which has been presented in unambiguous terms by the ZSE suggest that the SEC was in violation of the dictates of the Securities and Exchange Act when it approved the illegal suspension of Meikles well knowing that Meikles had not been given a chance or opportunity to make submissions on the matter. This information suggests that, contrary to the clear provisions of Section 111, the SEC failed to take all reasonable steps to ensure that Meikles was given a fair opportunity to make representations before the suspension was effected. The implications of this are very serious.
As indicated above, Meikles’ Legal Practitioners wrote to the SEC complaining about the failure of the ZSE to adhere to the dictates of the ZSE Listing Requirements. The SEC‘s response as mentioned above was to indicate that it would institute investigations into the matter. In light of the information that has since surfaced to the effect that the SEC approved the illegal suspension, the response by the SEC to Meikles’ Legal Practitioners is of concern as it gave the impression that the SEC was uninvolved in the illegal process that saw the suspension of the trading of the Meikles’ shares. In addition Mr. T. Chinamo of the SEC indicated, in his letter to Meikles of 26th of February 2015, that the SEC was in the process of engaging the ZSE to establish how it handled Meikles’ suspension amongst other issues. It is difficult to fathom how the SEC proposes to investigate or seek an explanation from the ZSE for a decision that it approved. The unavoidable questions that arise are, was the SEC entirely sincere in its handling of the complaint lodged by Meikles? Should the SEC not have disclosed to Meikles that it had participated in the process that led to the unlawful suspension of the trading of the Meikles shares? Was the SEC not misleading Meikles when it purported to be instituting an investigation on the ZSE’s conduct, when it had full knowledge of the events and circumstances surrounding the suspension of the trading of Meikles’ shares and when it had actually approved the suspension that Meikles were complaining of? These questions unavoidably raise integrity issues on the SEC’s part.
The SEC has taken a full page advertisement in The Herald edition of 26th of February 2015 to publish its letter to Meikles. This was done before Meikles had been accorded the opportunity to respond to the numerous questions that were raised therein. This is of major concern to Meikles. This is so because the letter from the SEC makes sweeping allegations which it seeks to convey as fact to the public even before it has received a response from Meikles on the allegations. The letter, for instance referred to the lack of transparency on Meikles’ part in the investment with Mentor Limited and reference is made to promises and commitments to shareholders not being honoured by Meikles. The very tone of the letter is one that suggests that the SEC have reached the conclusion that indeed Meikles committed offences whose extent the SEC now only seeks to establish. Meikles is of the view that the conveying of the allegations referred to above in the manner that suggests that these allegations are indeed fact, amounts to a violation of Section 111 of the Securities and Exchange Act as the SEC has reached a conclusion and published it, without having had the benefit of submissions from Meikles. The public is left wondering why the SEC has posed these questions when it has reached a conclusion on the matters concerned.
Meikles questions the propriety of trial by public media that the SEC has instituted. Meikles submits that the decision to publish the questions runs the real risk of being interpreted by the public as a publicity stunt by SEC to publicly smear Meikles even before Meikles has presented its side of the story. The public trial that the SEC has set in motion can only have a detrimental effect on the integrity of the process itself.
The issues raised in this statement do not only affect Meikles but all the entities listed on the stock exchange who expect impartiality, integrity and professionalism from the institutions that have the mandate to regulate their activities. In addition, the manner in which the statutory regulators conduct their issues in the business sphere directly affects Zimbabwe’s ability to attract investors. It is therefore imperative that these institutions and regulators retain at all times the highest standards of integrity in the exercises of the decisions that they are empowered to take in order to bolster investor confidence in the country. To that end Meikles will be seeking the Government’s intervention as it is of the view that the illegal suspension of the trading of Meikles’ shares by the ZSE with the approval of the SEC and the manner in which the SEC has dealt with Meikles’ issues, as referred to above, have a detrimental effect on Zimbabwe’s ability to attract the much needed investment into the country.
Meikles has noted all the questions that have been publicly raised by the SEC and would like to assure the public that these will all be addressed fully and that Meikles will be able to demonstrate that the allegations made by the SEC are without basis. Meikles has referred this matter to its Legal Practitioners who will communicate with the SEC in response to all the issues raised. The public is assured that Meikles declines the invitation to respond to the questions raised by the SEC through the newspapers.