04 May 2022

The compensation fund launched yesterday by the Botswana Stock Exchange (BSE) is a significant milestone as it improves  and  enhances investor  confidence,  says Ms Motlalepula Kabomo.

Ms Kabomo, who is Non-Bank Financial Institutions  Regulatory Authority (NBFIRA)  chairperson, was speaking at the Investor  Compensation Fund launch in Gaborone.

She said the fund paved the way for heightened activity at the BSE in terms of increased  liquidity  and promotion  of  a  diverse  investor  base to support economic growth.

In the  context  of  financial  markets, she explained, a compensation fund,  was a  rescue facility for investors.

“A compensation fund in the context of  a  financial  market is a risk fund  for investors  established to grant compensations for financial losses suffered as  a  result  of market  participants’ failure  to meet their  contractual   obligations  to investors,”  she said. Ms Kabomo said the  compensation  was  limited  to failures due to dishonesty, insolvency, default or liquidation of a participant.

“With regard to the scope of the fund, it will cover transactions and dealings  in  securities traded on the  Botswana  Stock Exchange, with focus placed on losses suffered by claimants,”  she said.

The fund would however not cover default obligations, shortfalls, deficiencies or any other loss due to clearing and settlement of trade transactions by the Central Securities Depository  of Botswana.

Explaining that investor  protection was  an important feature of a well functioning market, she said the fund served to protect investors’ interests, ensure financial integrity and enhance investors’ confidence in the  BSE  as  the  epicentre  of  Botswana’s capital markets.

Ms Kabomo said a stock exchange was an integral part of the financial system and a major contributor to the robustness of the economy.

In the local contest, she said, BSE performed the crucial function of facilitating the formation, allocation and mobilisation of  capital. “BSE brings  convergence of true key  categories of market players been  the  issuers seeking finance at reasonable  cost  and investors  willing to provide the  funding in line with their risk in return expectation,” she  said.

Ms Kabomo said development of Botswana’s capital markets as a vehicle for attracting foreign direct investment as well as domestic listings remained a high priority.

NBFIRA’s mandate, she said, included promoting  sound  and fair  business conduct  within the capital market industry.

On the other hand, the  stock exchange had the  primary responsibility of enforcing  listing requirements and ensuring that markets  operated in a fair and transparent manner, said Ms Kabomo.

The NBFIRA chairperson said it was through effective  discharge of the two organisations’ mandates that appropriate  regulatory frameworks were established to foster efficient market operations. Ends