Here is the converted article in Markdown format:

Insider Trading Liability: A Growing Concern in Zimbabwe’s Financial Markets

The Securities Act of Zimbabwe has long prohibited insider trading, which involves the use of non-public inside information to trade in listed securities. However, recent cases have highlighted the challenges faced by regulatory bodies and courts in enforcing this prohibition, particularly during the COVID-19 pandemic.

Liability under Section 88(1)(c) of the Securities Act

According to section 88(1)(c) of the Securities Act, any individual who has non-public inside information is deemed to be engaging in insider trading, regardless of whether they directly benefit from it. This means that even if an individual does not personally profit from the use of inside information, they can still incur liability for insider trading.

Challenges in Enforcing Insider Trading Laws

The Securities and Exchange Commission of Zimbabwe (SECZ) has struggled to impute liability on insiders who violate section 88(1)(c) while working from home during the pandemic. The difficulty is compounded by the fact that the Securities Act does not specify whether recipients of such information, known as “tippees,” are liable for insider trading.

Flaws in Penalties Imposed on Insider Traders

The article highlights several flaws in the penalties imposed on insider traders under the Securities Act. Criminal sanctions, including fines and imprisonment, may be imposed on offenders, but these penalties are often seen as insufficient to deter insider trading activities.

• The fine of up to Zim $2 million or a jail term of five years for convicted offenders is often considered too lenient.
• The SECZ has struggled to effectively enforce these criminal sanctions, with no single criminal case of insider trading successfully prosecuted in Zimbabwe since 2004.

Using the COVID-19 Pandemic as a Defense

The article also notes that some defendants have used the COVID-19 pandemic as a de facto defense against insider trading charges. While this defense may be plausible in certain circumstances, it is ultimately up to the courts to determine whether such claims are justified.

Conclusion

In conclusion, insider trading remains a significant concern in Zimbabwe’s financial markets, and regulatory bodies must take steps to strengthen their enforcement powers and penalties to deter such activities. The Securities Act should also be reviewed to provide clearer guidelines on liability for insiders and tippees, as well as recipients of inside information.