Investors to be protected against BSE losses
Pauline Dikuelo | Monday May 9, 2022 06:00
The failure to meet these contractual obligations may stem from several reasons but the compensation is limited to failures due to dishonesty, insolvency, default, or liquidation of a participant. The fund valued at P28 million approved by Non-Bank Financial Institutions Regulatory Authority (NBFIRA) came into effect on April 7 this year. BSE, Central Securities Depository of Botswana (CSD) participants and so forth, will be required to contribute a sum of P5,000 per annum towards the compensation fund.
According to NBFIRA board chairperson, Motlalepula Kabomo, investor protection is an important feature of a well-functioning market adding that Botswana’s capital market remains a high priority on the government’s agenda as a vehicle for attracting foreign direct investment in the form of foreign issuers and investors as well as domestic listings. “Investor Compensation Fund paves the way for increased activity at the BSE in terms of increased liquidity, promotion of a diverse investor base, profitability for the Exchange as well as efficient mobilisation of financial resources to support economic growth,” she said All retail investors can prove a legitimate claim, and in order to make a claim, the claimant will be required to submit an application addressed to the Chief Executive Officer of the BSE through the prescribed application form within three years from the date of default.
The application shall include specific information about the claim and the information required will be duly stipulated in the application form. The total compensation paid from the compensation fund in any one year shall not exceed 50% of the balance available in the compensation fund. If at any time, the amount of the compensation fund is insufficient to pay all amounts that are due at that time, the Board of Trustees may determine that a levy of a specified amount be paid in equal proportion by all the participants.
“The fund will not cover default obligations, shortfalls, deficiencies or any other loss due to clearing and settlement of trade transactions by the CSDB, as such protection is provided for by the Settlement Guarantee Fund Rules,” she said. In the case of liquidation of the fund, the assets in the compensation fund shall be disbursed to the national bourse, and participants according to the proportions of their contributions provided the residual balances are sufficient