Securities (Substantial Shareholder Vetting) Guidelines, 2024

This provision is only a title: “The Securities (Substantial Shareholder Vetting) Guidelines, 2024.”

These Guidelines may be cited as the Securities (Substantial Shareholder Vetting) Guidelines, 2024.

These guidelines are issued under the Securities Act and give the Commission guidance on vetting.

Refers to the substantial shareholder's source of funds.

This text identifies the beneficial owner of a company whose securities are registered, or that is authorised or licensed under the Act.

Clause 2.1.3 applies only to beneficial owners who are substantial shareholders.

For these Guidelines, the Act’s substantial-shareholder threshold applies to beneficial owners subject to vetting.

If there is any doubt about how the Guidelines apply, the Commission should be consulted.

This section defines terms used in the Guidelines.

These Guidelines take effect when the Board approves them.

Context line for Section 5 of a Zambia Gazette item dated 10 January 2025.

The text says criminals may try to use the financial system by taking control of existing entities, becoming beneficial owners, or creating new entities in financial services.

Regulators must vet substantial shareholders of financial-market entities to help keep criminals and their associates out of financial services.

The Commission must issue Guidelines setting criteria for vetting persons.

The text refers to participation in the capital markets by licensees or substantial shareholders.

Fragment referring to substantial shareholders in entities whose securities are registered or authorised under the Act.

The criteria are only a guide, and the Commission may need to use different or additional criteria depending on the circumstances.

The Commission must promote orderly capital market growth and vet substantial shareholders and beneficial owners under Commission-issued guidelines, including source of funds for substantial shareholders.

The Commission may publish codes and guidelines, and those issued under the Act must be complied with.

The Commission has power to issue vetting criteria through the Guidelines.

These Guidelines give the Commission guidance on criteria for vetting and source-of-funds checks to help prevent misuse for money laundering, terrorist financing, and other serious offences.

These Guidelines apply to substantial shareholders, beneficial owners, and associates who meet the Act’s threshold and criteria, including some participants in the capital markets and Sandbox framework.

If someone applies to the Commission for a licence, the Commission must vet the applicant and specified related persons, and it must approve appointments of directors and senior management.

The Commission may require an applicant to submit details about the applicant’s directors, senior management, and substantial shareholders for vetting.

This item refers to the names and nationality of the person.

Certified copies of the person's identification documents.

This provision is about proof of a person's residential address.

This phrase refers to the sources of funding used by a shareholder to invest in the applicant.

This fragment refers to the curriculum vitae of a person.

If the applicant is a foreign national or a Zambian national not ordinarily resident in the Republic, the police clearance certificate or report from the country of residence must be no more than six months old.

If a substantial shareholder is a corporate entity, the applicant must disclose the corporate entity’s beneficial owners and provide the clause 9.1.2 information for each beneficial owner.

The Commission may require an applicant to provide additional information for vetting.

The Commission must vet the applicant by doing background and security checks, and it may also involve third parties when needed.

The Commission may issue a licence conditionally.

If the Commission later gets a negative fitness-and-probity report about a beneficial owner who is a substantial shareholder, it may direct the entity to remove the unfit person and set a compliance timeline.

If an entity does not comply with the Commission's directive, the Commission may impose an administrative penalty and start a show cause process for revoking the entity’s licence.

An entity licensed by the Commission must submit the details required under clause 9.1.2 to the Commission before changing its directors, senior management, or substantial shareholders.

If a listed licensee’s substantial shareholding changes because of a market trade, the entity must notify the Commission within 10 days and submit the details required under clause 9.1.2.

The text appears to say that a vetting process applies in certain circumstances, but the source is incomplete.

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The vetting is for capital markets and extends to entities seeking to participate in acquiring securities.

The Commission must vet and ensure the fitness and propriety of persons who are beneficial owners of shares in the entity.

This section concerns brokers’ obligations in relation to a trade for acquiring securities.

When a broker receives an instruction, the client must submit information about the beneficial owners of the shares and the source of funds for the securities purchase, if the transaction is within the stated threshold.

A broker must immediately submit specified client and trade information to the Commission when a trade involves, or makes, the client a substantial shareholder.

If the client is a corporate entity, the broker must require beneficial-owner details and the information in clause 9.2.2.3 for each beneficial owner. For complex corporate chains, the applicant must trace and provide substantial-shareholder details at each layer until the ultimate beneficial owners are identified.

A broker must make sure beneficial ownership information is adequate, accurate, and current before sending it to the Commission for vetting.

The Commission may require a broker to provide extra information for vetting.

The Commission must conduct background and security checks after receiving the information in clause 9.2.2.3, and it may engage third parties if needed.

A broker may keep dealing with a client until the Commission notifies the results of the beneficial owner’s fitness and probity test, subject to clause 9.2.2.8.

If the Commission gets a negative fitness/suitability report, it must direct the broker to tell the substantial shareholder to divest; if the client will not divest, the broker must stop acting and report the client to the Financial Intelligence Centre.

If a broker does not comply with the Commission’s directive, the Commission may impose an administrative penalty.

Section heading on obligations of substantial shareholders.

A substantial shareholder must notify the issuer when the shareholder acquires more securities or disposes of securities that cause them to stop being a substantial shareholder, once the issuer’s securities are registered.

A notice under clause 9.2.3.1 must be in writing and include specified shareholder and transaction information.

An issuer may ask a substantial shareholder for extra information needed to complete a notification about a trade.

A substantial shareholder that does not comply with reporting requirements may be fined up to 100,000 penalty units, plus 10,000 penalty units for each day the non-compliance continues.

If an entity applies to the Commission to register its securities, it must submit specified shareholder and ownership documents with the application.

If the substantial shareholder is a corporate entity, the applicant must provide beneficial ownership details; in complex corporate structures, the applicant must trace and disclose substantial shareholders at each layer until the ultimate beneficial owners are identified.

An applicant must make sure the beneficial ownership information it submits is adequate, accurate, and current before submitting it to the Commission for vetting.

The Commission may require an applicant to submit extra information for vetting.

When the specified information is received, the Commission must carry out background and security checks on the beneficial owners.

The Commission may direct an applicant or beneficial owner to fix a problematic securities application, and an issuer must notify the Commission within five days about certain securities changes.

The document must be in writing and include specified information.

An issuer must follow the requirements in clauses 9.2.4.2, 9.2.4.3, and 9.2.4.4 after securities are registered.

If the Commission gets a negative fitness-and-probity report about a beneficial owner who is a substantial shareholder, it can require the issuer to tell that shareholder to divest within the Commission’s timeframe.

If an issuer does not comply with substantial shareholder notification requirements, the Commission may impose a penalty.

If an issuer does not comply with the Commission’s directive under clause 9.2.4.11, the Commission may impose an administrative penalty.

Section 9.3 concerns vetting of entities authorised by the Commission.

The Commission must vet the substantial shareholders of entities authorised to manage and operate collective investment schemes.

An applicant for authorisation as a manager, trustee, or custodian of a collective investment scheme must provide details of its substantial shareholders when required by the Commission.

An applicant must provide personal identification and background documents, and some foreign or non-resident applicants must also provide a recent police clearance certificate or report.

If a substantial shareholder is a corporate entity, the applicant must provide beneficial ownership details; for complex structures, it must provide details of all substantial shareholders in each corporate entity until the ultimate beneficial owners are identified.

Applicants must ensure beneficial ownership information is adequate, accurate, and current before submitting it for vetting; the Commission may request more information and must conduct checks, and may use third parties or issue the authorisation conditionally.

An entity may be directed to fix an application by removing beneficial owners or substantial shareholders who are not fit and proper, and to comply within a set timeline.

If an application has not been determined and the applicant does not rectify it under the Commission’s directive, the application is to be rejected.

If an applicant has been issued an authorisation, a show-cause process must be started for revocation where the entity’s substantial shareholders are not fit and proper.

If a manager gets a client instruction to execute a trade to acquire units in a collective investment scheme, the manager must ask the client to submit specified information with that instruction.

This text refers to the client's name and nationality.

Certified copies of the client’s identification documents.

This provision is titled “proof of the residential address of the client.”

References the beneficial owners of the securities being traded.

This section refers to the client's or beneficial owner's occupation and the sources of funding used to undertake the trade.

If the client is a corporate entity, the manager must require beneficial owner details and the information listed in clause 9.3.8. For complex corporate structures, the applicant must provide substantial shareholder details at each layer until the ultimate beneficial owners are identified.

A manager must make sure beneficial ownership information is adequate, accurate, and current before sending it to the Commission for vetting.

The Commission may require a manager to provide extra information needed for the vetting function.

Clause 9.3.6 applies only if the transaction value is within the substantial shareholder threshold, or if buying additional units makes the client a substantial shareholder.

A manager must immediately submit specified information to the Commission when helping a client acquire units in a collective investment scheme, if the client is a substantial shareholder or the deal would make them one.

The Commission may apply these Guidelines to other capital market participants, subject to clause 9.4.2.

The Commission may require a person to submit additional information.

This text refers to functions under these Guidelines.

The provision refers to a right to be heard before a decision is made.

The Commission must ensure that an affected person is given the fitness and probity of a substantial shareholder.

The Commission must ensure the submitted documents are complete.

The Commission may interview a person during vetting, must inform the affected person of its decision, and a dissatisfied person must appeal to the Capital Market Tribunal within 30 days.

The Board must review the Guidelines every year.

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