Investigations by the CMA
The Capital Markets Authority (CMA) is responsible for ensuring observance of its laws as well as the integrity of the capital markets. CMA has a statutory mandate by virtue of section 19 of the CMA Amendment Act 2016 to carry out Investigations.
The following are the grounds upon which the Authority may carry out investigations;
- Where the Authority has reasonable grounds to believe that there has been a contravention of its laws, license conditions, or directions made under its laws.
- Where the Authority has reasonable grounds for suspecting that it may be necessary to prohibit trading in securities under section 88 of the CMA Act Cap 84 (as amended).
- Where the Authority has reasonable grounds to believe that a person has contravened the provisions of the Companies Act, 2012 in relation to the securities of a company that are publicly held.
- Where the Authority has reasonable grounds to believe that a body corporate or any officer of that body corporate or any person may have contravened the provisions of its laws or any applicable listing rules.
- Where the Authority has reasonable grounds to believe that an approved person or key person may not be a fit and proper person to continue to be an approved person or key person.
- In the interests of persons who have transacted or may transact business with a licensed person.
- In order to maintain or enhance the integrity of the Ugandan capital markets.
- In order to provide assistance to a foreign regulatory authority.
The Investigation Process
i) (i) Commencement
Upon receipt of a complaint or discovery of any matter that may require investigation, the Chief Executive Officer (CEO) of the CMA will make an initial assessment of the seriousness of the allegations and determine whether the matter warrants an investigation. The Authority may notify the person about the general subject matter of the investigation and give a person under investigation the opportunity to be heard. (ii) Gathering and analyzing of information
The Department of Market Supervision will obtain information regarding the matters raised. This information is then analyzed using applicable legal principles. An investigation plan is then drawn to ensure appropriate procedures for taking evidence and techniques to be employed during investigations.
In tandem with section 19 (2) of the Capital Markets Authority(Amendment) Act the Authority may appoint one or more competent persons,whether they are officers of the Authority or not, to conduct an investigation.The investigator may conduct interviews of officers, employees and representatives of the investigated person. The investigated person should provide all documents relating to the matter under investigation and if the documents claimed are not found inform the investigator to the best of their knowledge where the documents are. The investigated person should answer questions or make a statement during investigation. In more complex matters,the investigator will be assisted by other investigators appointed by the Authority. The Authority shall record the proceeding of interviews. The interviewee shall be required to sign his/her transcript of the interview. If he or she declines, the investigator will take note of the refusal.
The contents of the interview may be;
§ Relied upon by the investigator in preparing an Investigation Report. A copy of the transcript will be attached to the investigation report.
§ Relied upon by the Authority at any disciplinary hearing in relation to matters which were the subject of the investigation.
b.Duties of the investigator
The investigator will perform the following duties:
· Document and ascertain the relevant facts surrounding the circumstances being investigated;
· Write to any person concerned requesting copies of a particular document or any other information (including emails), which may be relevant to matters under investigations, and;
· Document and provide an opinion as to whether or not any breach - investigation has occurred.
c. Consideration of the investigation report
Following the completion of investigations, the investigator will prepare a report which will be forwarded to the CEO for consideration. A meeting of the relevant Board committee will be convened to provide feedback to the investigator on the investigations report and to highlight any areas that require further investigation. The Committee will prepare a recommendation to the Board on whether enforcement action should be taken or otherwise.
The Board will consider the report of the Committee for enforcement action or otherwise, and may approve, modify, alter or reject the Committee’s recommendations.
In the event that enforcement action is recommended, the affected persons shall be given reasonable opportunity to be heard before the action is taken.Invitations to affected persons to make submissions prior to enforcement action shall be issued under the hand of the CEO. The CEO of the Authority, acting on behalf of the Board, shall implement the decision of the Board.
Communication of enforcement actions to affected parties shall be as follows;
· Be in writing and signed by the CEO or person duly appointed to act in that capacity.
· Specify the provisions of the law in respect of which default or breach has taken place.
· Contain brief reasons for the action.
· Communication of enforcement actions shall be served to affected persons by delivering or tendering the communication to the person or their duly authorized agent or by sending it to the person by registered post to the last known residence or place of business.
· Where it is not possible to serve the communication of enforcement action as indicated due to distance or cost, the communication may be effected by public notice in at least one daily newspaper with nationwide circulation.
Rights and Responsibilities
All parties have rights and responsibilities during an investigation. These include;
1. 1. Confidentiality& Public Disclosure2. Natural Justice. The Authority shall in conducting investigations have regard to and comply with all the requirements of natural justice to the full extent of the application of those requirements as stipulated by the relevant Acts.
The Authority will treat information it obtains during investigations as confidential subject to the disclosure requirements of the law, and will seek to maintain the confidentiality of that information in accordance with its obligations under the Act. The Market Supervision Department shall ensure that reports and records of interviews are not disclosed to any persons without the written consent of the CEO. The Department will take all reasonable measures to protect from unauthorized use or disclosure, Information provided in confidence. The Authority will, during an ongoing investigation, refrain from commenting publicly on the substantive issues which are being examined in the course of the relevant investigation. Provided that the Authority may, where appropriate, confirm publicly through the CEO that a matter is the subject of investigation. Enforcement actions taken by the Board will be published on the CMA website.