Uganda Securities Exchange fined for breach of rules
The Capital Markets Authority (CMA) concluded its investigations into the transfer of DFCU shares from Norfund, a Norwegian investment fund, to Norfinance which is a related company. The investigation was conducted in accordance with Section 19 of the CMA Act (as amended).
The CMA in its investigation found that the transaction should have been conducted as a private transfer and should not have been split into a private transfer and a public trade by the Uganda Securities Exchange (USE). The Authority also found that because the transaction was split into a transfer, sell and purchase, the fees paid by the client were excessive. CMA further established that the USE was conflicted in the manner in which it handled the transaction and that there was a violation of the USE trading rules (Rule 30 (5) and Rule 85), as well as violation of Regulation 14 of the Capital Markets Establishment of Stock Exchange Regulations.
The investigation concluded that African Alliance Uganda Limited, the broker involved in this transaction and acting on behalf of the client (Norfund) was not conflicted and acted in the best interests of the client.
In accordance with Section 99A of the CMA Act (as amended), which authorizes the CMA to impose and collect penalties by way of fees against any person for breach of the Act or any regulations under it, the CMA directed the USE to refund the client (Norfund) Ugx 220,380,222. CMA also imposed an administrative penalty of Ugx 19,272,149 on USE to be paid to the CMA.
USE accepted the above stipulated penalties and has since complied.
Further, in the interest of restoring investor confidence in the capital market, CMA refunded the commission received from this transaction to the client.