CHAPTER 46:06
SECURITIES

ARRANGEMENT OF SECTIONS

   SECTION

PART I
PRELIMINARY

   1.   Short title

   2.   Interpretation

   3.   Application

PART II
POWERS OF THE REGISTRAR

   4.   Powers of the Registrar

   5.   Directives relating to stock exchanges

PART III
STOCK EXCHANGES

   6.   Prohibition against operating stock exchange without licence

   7.   Application for stock exchange licence

   8.   Management of stock exchange

   9.   Transitional provisions in respect of licensing of stock exchanges

   10.   Renewal of stock exchange licences

   11.   Power of the Registrar to issue directives to stock exchange

   12.   Power of the Registrar to close stock exchange

   13.   Rules of stock exchange

   14.   Stock exchange to assist the Registrar

   15.   Enforcement of rules of stock exchange

   16.   Prohibition against use of certain titles

PART IV
LICENSING OF BROKERS, DEALERS, INVESTMENT ADVISERS, PORTFOLIO MANAGERS, SECURITIES REPRESENTATIVES OR SECURITIES MARKET INTERMEDIARIES

   17.   Prohibition against carrying on business as a broker, etc., without licence

   18.   Prohibition against acting as a securities representative without licence

   19.   Applications for licences

   20.   Refusal of licence

   21.   Validity period of licences

   22.   Revocation or suspension of licences

   23.   Records to be kept by licensees

   24.   Information to be supplied by licensees

   25.   Renewal of Licence

   26.   Deposits by brokers, etc

PART V
REGISTRATION OF SECURITIES

   27.   Securities to be registered

   28.   Prospectus

   29.   Registration statement

   30.   Reports of issuers

   31.   Reporting of information by issuer

   32.   Acquisition of beneficial ownership of publicly-traded securities

   33.   Regulation of proxy solicitation and tender offers

   34.   Compliance with the Companies Act

PART VI
CONDUCT OF SECURITIES BUSINESS

   35.   Unlawful transactions

   36.   Capital and financial requirements

   37.   Code of conduct regarding securities business

   38.   Contract notes

   39.   Compliance with directives of the Registrar

   40.   Short sales

   41.   Trading outside stock exchange prohibited

   42.   Depositories, clearance and settlement

   43.   Accounts to be kept by licensees

   44.   Investment advisory contracts

PART VII
IMPROPER TRADING PRACTICES

   45.   False trading and manipulations

   46.   Use of deceptive statements, etc., as inducements

   47.   Fraudulent transactions

   48.   False or misleading statements in connexion with sale of securities

   49.   Insider trading

PART VIII
SECURITIES STABILIZATION FUND

   50.   Establishment of the Securities Stabilization Fund

   51.   Establishment of the Stabilization Fund Committee

   52.   Purpose of the Stabilization Fund

   53.   Disbursement from the Stabilization Fund

   54.   Directives on management of Stabilization Fund

   55.   Liability of the Stabilization Fund to be limited

   56.   Recovery of fund disbursements from defaulters

PART IX
COLLECTIVE INVESTMENT SCHEMES

   57.   Prohibition against operating as a collective investment scheme operator without licence

   58.   Application for licence under this part

   59.   Revocation or suspension of licence under this part

   60.   Approval of schemes

   61.   Transitional provisions in respect of schemes

   62.   Directives on collective investment schemes

   63.   Restrictions on promotions

PART X
POWERS OF INTERVENTION

   64.   Administrative and monetary penalties

   65.   Restrictions on assets

   66.   Maintenance of assets in Malawi

PART XI
MISCELLANEOUS PROVISIONS

   67.   Registrar’s powers to issue directives

   68.   Guidance notes, etc

   69.   General offences and penalties

   70.   Repeal and savings

      Schedule

20 of 2010
G.N. 14/2010

An Act to provide for the regulation of capital and securities markets, and persons transacting business in or through capital and securities markets; to promote internal and external confidence in the integrity and proper functioning of the capital and securities markets; and to make provision for matters connected therewith or incidental thereto.

[1ST OCTOBER 2010]

PART I
PRELIMINARY

1.   Short title

   This Act may be cited as the Securities Act.

2.   Interpretation

   (1) In this Act, unless the context otherwise requires—

   “associated person” means any person who is—

   (a)   an officer or director of a broker, dealer, investment adviser, portfolio manager or operator of a collective investment scheme;

   (b)   any person controlling, controlled by, or under common control with, a broker, dealer, investment adviser or portfolio manager; or

   (c)   any securities representative or other employee of a broker, dealer, investment adviser or portfolio manager, other than employees engaged solely in clerical or ministerial functions for such broker, dealer, investment adviser or portfolio manager;

   “beneficial owner” means a person who, directly or indirectly, possesses or shares investment or voting power with respect to a security;

   “broker” means any person engaged in the business of buying or selling securities for the account of others, but does not include an employee acting within the scope of his duties;

   “collective investment scheme” means any arrangement made with respect to securities or property of any description under which—

   (a)   provision is made for participation by persons taking part in the arrangement to participate in profits or income and capital gains arising from the acquisition, holding, management or disposal of property, excluding securities held in majority owned subsidiaries which themselves are not collective investment schemes;

   (b)   property which is the subject of the arrangement is owned by a body corporate or held in trust by a body corporate; and

   (c)   the interests of persons participating in the arrangement are represented by shares of the body corporate or in the case of a unit trust by units;

   “dealer” means any person engaged in the regular business of purchasing and selling securities for his own account, and licensed as such, but does not include an employee acting within the scope of his duties;

   “exchange rule” in relation to a stock exchange, means any rule made by a stock exchange that is binding on its members;

   “investment adviser” means any person who, for a fee, engages in the business of advising others on the purchase, sale or holding of, or advisability of investing in, securities, and licensed as such, but does not include—

   (a)   any broker or dealer who is licensed under this Act and is engaged in such business solely as an incident to the business of acting as a broker or dealer;

   (b)   any securities representative of a broker, dealer or investment adviser acting within the scope of his duty as such;

   (c)   any bank providing such services exclusively in a capacity as a trustee or other fiduciary;

   (d)   an advocate or accountant whose advice is incidental to his professional activities; or

   (e)   the proprietor or publisher of a newspaper, news magazine, or business or financial publication of general and regular paid circulation distributed only to subscribers thereto or to purchasers thereof, in relation to any advice with respect to investigations given therein, where—

      (i)   the proprietor or publisher receives no commission or other consideration for giving or publishing the advice; and

      (ii)   the giving or publication of that advice is incidental to the conduct of the business of a newspaper proprietor or publisher;

   “investment company” means a company that is the owner of property which is the subject of a collective investment scheme;

   “issuer” means a person who issues or proposes to issue a security;

   “licence” means a licence issued under the Financial Services Act;

   “licensee” means any broker, dealer, investment adviser or securities representative licensed under this Act or the Financial Services Act;

   “listed security” means a security which has been admitted to listing by a stock exchange for the purposes of dealing in the security on the exchange;

   “open ended investment company” means an investment company whose collective investment scheme which offers for sale on continuous basis or has outstanding any security which is redeemable at the option of the holder.

   “portfolio manager” means any person engaged in the management of funds and investment portfolios on behalf of customers as a regular part of his business for remuneration and licensed as such, but does not include—

   (a)   any broker or dealer who is licensed under this Act and is engaged in such business solely as an incident to the business of acting as a broker or dealer;

   (b)   any securities representative of a broker, dealer, investment adviser or portfolio manager acting within the scope of his duty as such; or

   (c)   any bank providing such services exclusively in a capacity as a trustee or other fiduciary;

   “registered securities” means securities registered in accordance with Part V;

   “Registrar” means the Registrar of Financial Institutions appointed under the Financial Services Act;

   “registration statement” means the registration statement specified by the Registrar pursuant to section 29;

   “securities” means—

   (a)   shares, debentures, stocks, bonds, notes or funds issued by a government or a body corporate;

   (b)   any warrant, right, option or interest, whether described as units or otherwise, in respect of any shares, debentures, stocks, bonds, notes or funds referred to in paragraph;

   (c)   any instrument, including a derivative instrument, contract, profit-sharing agreement, fractional interest, right to subscribe or any instrument commonly known as securities or which are prescribed by the Registrar to be securities for the purposes of this Act;

   “securities market intermediaries” means underwriters, transfer secretaries, credit rating agencies and such other persons engaged in business in the securities market whom the Registrar may by directive prescribe;

   “securities representative” means any person who is employed as such by a broker, dealer or investment adviser, portfolio manager or an operator of a collective investment scheme and who, depending on his employment—

   (a)   engages in the solicitation, purchase or sale of securities;

   (b)   provides advice or recommendations with respect to transactions in securities; or ,

   (c)   otherwise deals with members of the public with respect to the purchase or sale of securities;

   “share” means a share in the capital of a body corporate, and includes a stock except where a distinction between stock and shares is expressed or implied, and a reference to a number of shares shall be construed as including an amount of stock;

   “Stabilization Fund” means the Securities Stabilization Fund established under section 50;

   “Stabilization Fund Committee” means the Stabilization Fund Committee established under section 51;

   “statutory disqualification” means the disqualification of any person if the person—

   (a)   has been convicted of an offence involving fraud, dishonesty or moral turpitude;

   (b)   is subject to an order or directive, entered by consent or otherwise, of any Malawian or foreign regulatory authority or self-regulatory organization suspending or barring the person from conducting any securities, commodity trading, financial institutions, insurance or pension scheme business; or

   (c)   has associated with any person subject to a statutory disqualification;

   “statutory restriction” means the restriction of any person if the person—

   (a)   has been adjudged bankrupt;

   (b)   has been adjudged or found in Malawi or elsewhere to have contravened, or caused the contravention of, any securities, commodities trading, banking, financial services, insurance or pension scheme law;

   (c)   has stipulated or consented to the entry of any order or finding with respect to a contravention described in paragraph (b); or

   (d)   has associated with any person subject to a statutory restriction;

   “stock exchange” means a market or other place at which, or a facility by means of which—

   (a)   offers to sell or purchase securities are regularly made or accepted;

   (b)   offers or invitations, being offers or invitations that are intended, or may reasonably be expected, to result, whether directly or indirectly, in the making or acceptance of offers to sell or purchase securities, are regularly made; or

   (c)   information is regularly provided concerning the prices at which, or the consideration for which, particular persons or particular classes of persons propose, or may reasonably be expected, to sell or purchase securities and licensed as such;

   “unit trust” means a collective investment scheme which is organized under a declaration of trust or similar instrument and issues units representing an interest in the underlying portfolio of securities.

   (2) Subject to subsection (1) and except where a contrary intention appears, expressions used in this Act shall have the same respective meanings as in the Financial Services Act.

3.   Application

   This Act shall apply, in addition to the Financial Services Act, to all persons conducting securities business except to the extent that such persons are exempted by the Registrar pursuant to his authority under the Financial Services Act.

PART II
POWERS OF THE REGISTRAR

4.   Powers of the Registrar

   Without limiting the powers of the Registrar under the Financial Services Act, the Registrar shall have the following powers, duties and functions—

   (a)   to take all available steps to ensure that this Act is complied with;

   (b)   to license and supervise the activities of stock exchanges, brokers, dealers, investment advisers, portfolio managers, collective investment schemes, securities market intermediaries and their respective securities representatives;

   (c)   to approve the constitutions, charters, and articles governing and pertaining to any stock exchange;

   (d)   to issue directives implementing the requirements of this Act;

   (e)   to promote and encourage high standards of investor protection and integrity among persons licensed to operate in the securities market;

   (f)   to promote the operation of a free, orderly, fair, secure and properly informed securities market;

   (g)   to regulate the manner and scope for securities traded on any stock exchange;

   (h)   to take all reasonable steps to safeguard the interest of persons who invest in securities and to suppress illegal, dishonourable and improper practices in relation to dealings in securities, whether on a stock exchange or otherwise;

   (i)   to take all reasonable steps to promote and maintain the integrity of persons under Parts IV and IX and encourage the provision by such persons of balanced and informed advice to their clients and to the public generally;

   (j)   to consider and suggest proposals for the reform of the law relating to the securities industry;

   (k)   to encourage the development of securities markets in Malawi consistent with the purposes and standards of this Act;

   (l)   to promote and develop self-regulation by stock exchanges;

   (m)   to co-operate, by the sharing of information and otherwise, with other regulatory bodies within and without Malawi and such cooperation being either solicited or unsolicited;

   (n)   to exercise and perform such other powers, duties, and functions as may be conferred or imposed upon him by or under this Act or any other financial services law.

5.   Directives relating to stock exchanges

   Without limiting the power of the Registrar under the Financial Services Act to issue directives, the Registrar may issue directives in respect of the following—

   (a)   conduct of business by licensed brokers, dealers, investment advisers, portfolio managers and securities market intermediaries, operators of collective investment schemes and securities representatives;

   (b)   conditions subject to, and the circumstances in which, any stock exchange may permit, supervise and suspend dealings in securities;

   (c)   qualifications for membership of stock exchanges and determination of the maximum number of persons that may be admitted to membership of any stock exchange;

   (d)   type of business that may be carried on, and the services that may be provided by or at a stock exchange;

   (e)   requirements to be met before securities may be listed on a stock exchange;

   (f)   procedure for dealing with applications for the listing of securities on a stock exchange;

   (g)   cancellation or suspension of the listing of any specified securities at any stock exchange if the Registrar considers that such action is necessary to maintain an orderly market;

   (h)   amount of deposit required to be made for the purposes of section 26 and the application of deposits under that section;

   (i)   correction of any errors in any register or record kept under this Act;

   (j)   particulars of any books, accounts, reports or records prepared or maintained for the purposes of this Act;

   (k)   lodgement by persons under this Act of annual financial statements;

   (l)   lodgement of auditors’ reports and the information to be contained in such reports;

   (m)   remuneration of any inspector appointed, and the costs of any inspection or audit carried out, for the purposes of this Act;

   (n)   forms to be used for the purposes of this Act, and the manner in which applications are to be made for licences;

   (o)   further defining or clarifying terms used in this Act;

   (p)   insurance by persons licensed under Part IV against negligence or default;

   (q)   the issue of duplicate licences in case of loss or destruction; and

   (r)   any other purpose which furthers the purposes of this Act and is in the public interest.

PART III
STOCK EXCHANGES

6.   Prohibition against operating stock exchange without licence

   (1) No person shall establish or assist in establishing or maintaining, or hold himself out as providing or maintaining, a stock exchange unless such stock exchange is a stock exchange licensed under the Financial Services Act.

   (2) Any person who contravenes this section commits an offence.

7.   Application for stock exchange licence

   (1) An applicant for a licence to establish and operate a stock exchange shall submit an application in writing in a form prescribed under the Financial Services Act and containing such information as the Registrar may specify.

   (2) An application under subsection (1) shall be accompanied by a fee in a form specified by the Registrar.

   (3) Upon receipt of an application under subsection (1), the Registrar may grant a licence to the applicant if the Registrar is satisfied that—

   (a)   establishment of the stock exchange is necessary in the public interest having regard to the nature of the securities industry; and

   (b)   the applicant satisfies the requirements set out in the Schedule.

   (4) This section does not limit the power of the Registrar to deal with an application for a licence.

8.   Management of stock exchange

   (1) The affairs of a stock exchange shall be managed by a board whose members shall comprise those elected or appointed in accordance with articles of association of the stock exchange.

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