Under the Statute, the functions of CMA are:
- The development of all aspects of the capital markets with particular emphasis on the removal of impediments to, and the creation of incentives for longer term investments in productive enterprises.
- The creation, maintenance and regulation through implementation of a system in which the market participants are self regulatory to the maximum practicable extent, and of a market in which securities can be issued and traded in an orderly, fair and efficient manner.
- The protection of investor interests.
- The operation of a compensation fund
CMA is governed by a Board of Directors which formulates policies for the Authority. Committees of the Board have been set up to deal with specific aspects of policy and these include the Legal and Market Supervision Committee; Finance and Administration, Research and Market Development and Audit. The day-to-day operations of the Authority are the responsibility of the Chief Executive Officer and his/her staff.
Legal and Regulatory Framework
Section 102 of the CMA Act (Cap. 84) empowers CMA to make regulations prescribing any matter required or permitted by the Statute to be prescribed for carrying out or giving effect to the Statute.
To-date, rules and regulations have been promulgated covering prospectus requirements, establishment of Securities Exchanges, conduct of business, advertisements, maintenance of registers of interests in securities, accounting and financial requirements and licensing of market operators. Guidelines for the issuance of corporate bonds and commercial paper have also been published. In addition, documents covering procedures for companies going public and an investor's guide to shares and public flotation have been issued.
Licensing of Broker/Dealers and Investment Advisors
From the start, the CMA adopted a licensing policy designed to ensure that capital markets in Uganda will have the capability to mobilize savings from domestic, regional and international markets. In this regard, CMA's licensing policy concentrates on the following three criteria:
- Investor protection
- Financial viability
- Potential to develop the securities market
There are several firms licensed to carry out broker/dealer and investment advisory services; and several other firms or individuals licensed as investment advisors only.
Approval of Exchanges
The Uganda Securities Exchange (USE) Limited was approved by CMA in June 1997 as the only approved securities exchange in Uganda. This became the 17th licensed Securities Exchange in Africa. The members of the Exchange are from the private sector. Securities Exchange listing rules, rules and regulations governing members, operations and trading rules have been approved and adopted. The USE is currently operating an automated system of trading.
Various securities are currently being traded on the Exchange including the local and cross border listings. In addition, corporate and government bonds have been traded on the exchange.
CMA also approved a second Exchange, Altx Exchange Limited which is expected to provide a securities and derivatives market for the East African region using an automated platform based on the GEMX technology.
Future supply of products to the Exchanges is expected to come from the privatization of state enterprises, private sector company listings, and issuance of bonds by Government, corporations and local/municipal authorities.
Significant progress has been made in the area of regional co-operation through a forum known as the East African Securities Regulatory Authorities (EASRA), which brings together the securities regulators and securities exchanges in Burundi, Kenya, Rwanda, Tanzania and Uganda. EASRA's objective is to harmonize the securities laws and infrastructure of capital markets in the East African region leading to common training and conduct of business standards, and cross-border listing of companies within the region. The cross listings mentioned above are a result of this initiative.
CMA recognizes that enhancing public education and awareness about securities is an important part of its mandate. We have no doubt that public education is one of the most effective regulatory tools. CMA has therefore developed and will continue to develop public education programs whose ultimate goal is to have all Ugandans benefit from participation in the capital market. CMA believes that only through knowledge and awareness can it hope to achieve effective investor protection, can investment professionals provide the best service and can investors understand risk and choose the right investment product.
Investor Compensation Fund
An Investor Compensation Fund (ICF), for the purpose of granting compensation to investors who suffer pecuniary loss resulting from the failure of a licensed broker or dealer to meet his/her contractual obligations has been established by the CMA as required by the statute. Annual contributions to the fund are made out of the Authority budget and from market practitioners. The aim of the fund is to enhance investor confidence in the newly created markets. CMA will be exploring other ways of funding the ICF as the market grows.