Judgment No SC 85/14 1

Civil Appeal No. SC 13/13

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REPORTABLE (67)

(1) REMO INVESTMENT BROKERS (PRIVATE) LIMITED

(2) MAHOMED IQBAL MAHMED (3) REZANA EBRAHIM (4)
JOHN MOTSI
v
SECURITIES COMMISSION OF ZIMBABWE

SUPREME COURT OF ZIMBABWE

GARWE JA, GOWORA JA & PATEL JA
HARARE, MAY 27 2013 & DECEMBER 5, 2014

F Girach with J Samkange, for the appellants

T Mpofu, for the respondent

GOWORA JA: This is an appeal against a judgment of the

Administrative Court by which the court dismissed the appeal to that court against a decision

of the Securities Commission of Zimbabwe (“the Commission”) cancelling the licences of the

first and second appellants, and imposing sanctions upon the third and fourth appellants.

The first appellant Remo Investment Brokers (Pvt) Ltd (“REMO”) is one of

the longest established registered securities exchanges within Zimbabwe. The second

appellant Mahomed Iqbal Mahmed (“Mahmed”) is a securities dealer and is also the

Managing Director of REMO. The third appellant Rezana Ebrahim (“Ebrahim”) is married
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to Mahmed and is a Compliance Officer for REMO. She and Mahmed are the beneficial

owners of REMO. The fourth appellant John Motsi (“Motsi”) is a Registered Securities

Dealer.

Following upon turbulence within the securities sector, the Commission

suspended REMO from trading for a period of six months. After the suspension of REMO,

the Commission instituted investigations through Proctor and Associates who compiled a

report. Armed with that report, the Commission charged REMO and Mahmed of

contravening certain specified sections of the Securities Exchange Act [Chapter 24:25], (“the

Act”).

The appellants were invited to make representations to the charges.

Ultimately, the Commission confirmed the convictions and cancelled the licences of REMO

and Mahmed for a period of five years after which they could re-apply for registration.

Ebrahim was advised by the Commission that she was permanently disapproved as a

compliance officer. Motsi was able to retain his dealer’s licence but was advised that he had

to practise under a supervising senior broker for a period of one year. Aggrieved by the

decisions of the Commission, the appellants collectively launched an appeal with the

Administrative Court which dismissed the appeal and confirmed both the conviction and

sanctions imposed by the Commission.

The appellants now appeal to this Court on several grounds.

Mr Mpofu on behalf of the Commission took the point in his heads of

argument that the grounds of appeal complain against every finding made by the court a quo.

The grounds, which number thirteen, have been framed too widely. They are not clear and

concise as required by the Rules of this Court. Although the manner in which the grounds

have been set out is not in itself fatal to the appeal, it would be neater to deal with the appeal
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on the basis of the substantive issues for resolution rather than the piece meal approach

detailed within the grounds.

A preliminary point raised on appellants’ behalf was that the court a quo had

erred in finding that the cancellation of the licences of REMO and Mahmed was effected in

terms of s 105 of the Act. In the alternative, it was argued that the court erred in failing to

find that the cancellation of the said licences was premature regard being had to the

provisions of s 48 as read with s 108 of the Act. It was contended further that the court a quo

had erred in any event in failing to find that, contrary to the provisions of s 105(2), the

appellants had not been afforded an adequate opportunity to be heard. It was argued that they

did not receive a fair hearing. It was therefore contended that on this basis the appeal should

succeed.

Before the Administrative Court, the appellants had similarly argued that the

cancellation of the licences had been done in breach of the quoted sections. Per contra, the

respondent contends that the licences for Remo and Mahmed were cancelled under s 105 of

the Act.

The court a quo found that, in terms of s 48 (3), the Commission was not

empowered to cancel a licence under s 48 (1) until a period of thirty (30) days allowing for an

appeal to the Administrative Court in terms of s 108 would have elapsed. The court,

however, found that contrary to the contention of the appellants, the licences were cancelled

in terms of s 105 of the Act as opposed to s 48(1). In the circumstances, the court a quo came

to the conclusion that there had been no breach of s 48(3) and s 108 on the part of the

Commission.
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In my view the dispute centres on the interpretation of ss 48, 49 and 105 of

the Act. The powers of the Commission to cancel a licence are provided for in s 48 and s 105

of the Act. It was s 105 which the court found to be the applicable section.

Section 105(1) reads in relevant part:

“If, after considering an inspector’s report sent to it in terms of subsection (1) of one
hundred and four, together with any representations made by the person, committee or
operator concerned in terms of subsection (3) of that section, the Commission is
satisfied that the person, committee or operator as the case may be, has contravened
any term or condition of his or her licence, registration or approved scheme, as the
case may be, or any provision of this Act, or any direction, requirement or order made
under this Act, the Commission may, subject to subsection (2), do any of one or more
of the following-
…
(f) direct the person, committee or operator to suspend all or any of his or her
business;
…
(i) in the case of a licensed or registered person or entity, cancel the licence or
registration or amend any of its terms and conditions.”

It is common cause that prior to launching an investigation into the activities

of REMO, the Commission advised the former in writing that it intended to investigate the

relationship between itself and Interfin Securities (Private) Limited (“Interfin”), and further,

that to facilitate such investigation, it was necessary to cause the suspension of REMO.

The appellants have not challenged the propriety of the suspension. The

Commission advised REMO that the suspension was being effected in accordance with the

provisions of s 49. The suspension was effected by a letter dated 29 March 2012, addressed

to Mahmed in the following terms:

“An announcement was made at yesterday’s trading session that your firm is
suspended from trading on the Zimbabwe Stock Exchange with immediate effect.

A complaint was received from Remo Investment Brokers (Pvt) Ltd that Interfin
Securities had misappropriated shares lodged as collateral in a loan transaction. The
Zimbabwe Stock Exchange and Securities Commission of Zimbabwe have since had
sight of Interfin Securities (Pvt) Ltd’s response to the allegations.
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Regrettably, there are serious inconsistences in the submissions made by both parties
so that it has been found necessary to suspend you from trading in terms of Section 49
of the Securities Act in order to facilitate a full investigation. Amongst other issues,
the enquiry will seek to establish the exact nature and terms of the transaction
between two members of the Zimbabwe Stock Exchange involving such a material
sum of money as well as the true beneficial owner of the shares lodged as collateral
with yourselves.

The period of suspension is a maximum of 6 months but regular reviews will be

carried out and you will be permitted to return to trading as soon as possible after
satisfactory conclusion of the matter.

In the circumstances we look forward to your full co-operation with the matter.”

Section 49 under which the licence was suspended reads in relevant part:

“49 Suspension of a licence

(1) Subject to subsection (6), if the Commission considers it necessary to suspend

a licence-
(a) in order to facilitate an investigation into the holder’s conduct; or
(b) pending the determination of an appeal in terms of section one hundred
and eight; or
(c) …

the Commission may, by notice in writing to the holder, suspend the licence
wholly or partially in relation to all or any of the activities authorised by the
licence.

(2) A suspension in terms of subsection (1) shall last for such period as the
Commission may specify, but in no case shall it last for longer than six
months.

The position of the appellants is that once the Commission suspended the

licence in terms of s 49, it was only logical that any cancellation subsequent to such

suspension be done in terms of s 48 (1) and, that consequently, the provisions of s 48 (3)

would apply. The argument advanced on behalf of the appellants is that once a licence is

suspended under Part V of the Act, specifically in terms of s 49, then it stands to reason that

any cancellation of the licence can only be effected in terms of s 48 as it is also found in Part

V of the Act. As I understand the argument, s 49 must be read together with s 48.
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The letter of 29 March 2012 is specific as to the intention behind the

suspension, that there was need to investigate the relationship between REMO and Interfin

Securities. The Commission did not in the letter specify any alleged violation on the part of

REMO and the logical conclusion is that it was intended that the investigation would reveal if

there was any wrongdoing on the part of REMO and Interfin in their mutual dealings.

The facts considered by the court a quo were the following. After the

suspension, the Commission appointed Proctor and Associates to investigate the conduct of

REMO and Interfin. This power is derived from s 103 (1) of the Act which empowers the

Commission to direct an inspector to conduct an investigation where:

“(e) the Commission has reasonable grounds for believing that a licensed person or
board of a registered securities exchange or operator of a central securities
depository, or any person connected with such a person, board or operator, has
committed an offence under this Act, other than an offence arising out of
conduct referred to in paragraph (a) or (b); or …”

Upon completion of an investigation an inspector is required in terms of s

104(1) to forward the report to the Commission. On receipt of a report from the inspector,

the Commission is required under s 104(2) to forward the report to the licensee and invite the

licensee to make representations to it on the conclusions of the inspector and the

recommendation.

On 7 May 2012 the Commission sent a copy of the report from Proctor and

Associates to REMO and requested a written response within a period of thirty days. REMO

responded by a letter dated 8 May 2012. Section 104(2) provides in relevant part:

“On receipt of a report in terms of subs (1), the Commission shall-

(a) send a summary of the conclusions reached in the report, and any
recommendations made therein, to the licensed person, committee of the
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registered securities exchange or operator of the central securities depository,

as the case may be, that was the subject of the investigation; and
(b) invite the committee, licensed person or operator concerned to make
representations on the conclusions and recommendations set out in the
summary.

3. A licensed person, committee of a registered securities exchange or operator of a

central securities depository that has been sent a summary of conclusions and
recommendations in terms of subsection (2) may, within thirty days, submit to
the Commission representations on any of the conclusions or
recommendations.”

On 23 May 2012 the Commission advised all the appellants in writing that it

intended to cancel the licences of the first two and impose sanctions on the last two and, as a

consequence, all the appellants were invited to appear before the Commission in person to

make representations. Subsequent to the letter of 23 May 2012, all the appellants appeared

before the full board of the Commission and made representations on the proposed action

intended by the Commission against each of them. On 7 June 2012 the Commission

proceeded to cancel the two licences and imposed the sanctions which are the subject of this

appeal.

Having confirmed that the cancellations were effected under s 105 of the Act,

the court a quo also found that the cancellations were not done in a summary manner but

after due consideration of a report presented to it by Proctor and Associates following upon

an investigation into the activities of the appellants and Interfin.

Section 48, on which the appellants hinge their appeal, reads:

“48 Cancellation of licence

(1) Subject to subsections (2) and (3), the Commission may, by notice in writing
to the holder, cancel a licence if the Commission has reasonable grounds
for believing that-(my emphasis)
(a) the holder has ceased to carry on business; or
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(b) the licence was issued in error or through fraud or the

misrepresentation of a material fact by the holder; or
(c) the holder has contravened any provision of this Act or any term
of or condition of the licence; or(my emphasis)
(d) the holder misrepresents the facilities he or she offers to the public; or
(e) the holder has become disqualified to hold a licence in terms of section
thirty-nine; or
(f) the holder no longer meets any prescribed financial requirements for
carrying on any activity authorised by the licence; or
(g) the holder, or any employee or agent of the holder, has been guilty
of any act or omission in the conduct of the holder’s business that
has resulted or is likely to result in prejudice to members of the
public; or (my emphasis)
(h) ..n/a; or
(i) ..n/a;

(2) Before cancelling a licence in terms of subsection (1), the Commission

shall notify the holder in writing that it proposes to cancel the licence and
of the Commission’s reasons for proposing to do so and shall give the
holder of the licence an adequate opportunity to make representations in
the matter.(my emphasis)

Provided that, if the Commission believes on reasonable grounds that it is not

possible to notify the holder personally, the Commission shall publish a notice
in the Gazette and a newspaper circulating in the area in which the holder
carries or carried on business, stating that the licence will be cancelled unless
the holder lodges an appeal with the Administrative Court in terms of section
one hundred and eight within thirty days from the date of publication of the
notice in the Gazette.

(3) The Commission shall not cancel a licence in terms of subsection (1)-
(a) until-
(i) the period within which an appeal may be lodged in
terms of section one hundred and eight has elapsed; or
(ii) the thirty day period referred to in the proviso to
subsection (2) has elapsed, where a notice was
published in terms of that proviso;
unless the holder has consented to its cancellation;
(b) if an appeal is lodged in terms of section one hundred and
eight, until the appeal has been abandoned or withdrawn or,
where it has proceeded to finality, until the Commission is
notified that its decision has been upheld.
(4) ……………

One must look at the purpose and provisions of an Act in order to interpret the

different sections forming that Act. In construing the meaning of a section it is necessary to

look at the Act generally to see what the scope of it is and whether the section accords with
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the scope and intention of the Act. It then becomes possible to draw a conclusion as to its

meaning, considering the terms of the enactment. The piecemeal approach advocated by the

appellants does not accord with principles of construction of statutes. In my view it is

impossible to know the intention of the legislature without enquiring further and ascertaining

the context in which the Legislature intended to regulate. In S v Fikizolo 1978 (2) SA 676,

VAN RHYN J stated:

“It is a fundamental principle that the intention of the Legislature must be inferred
from the words which the Legislature used and in Du Plessis v Joubert 1968 (1) SA
585 (A) at 595 BOTHA JA stated the following in this regard:

‘Only a clear and indubitable, particular intention of the Legislature, and not
merely an assumed intention can justify a departure from the usual meaning of
words and then only if the words are amenable to another meaning.’”

Moreover the whole piece of legislation must be examined to determine the

intention of the Legislature. It is equally clear that one section can throw light on the

intention of another section:-

“The correctness of the statement that the whole act must be taken into account has
been adopted so generally in our practice as to be a matter of course, that our courts
have seldom found it necessary to stress this.” Steyn Die Uitleg van Wette 4 th ed at
143.

Stripped bare of the verbiage, the process of cancellation under s 105 is

preceded by an investigation of the licence holder. Any report from the investigation is

availed to the licence holder for comment and in addition, the Commission is obliged to call

upon the holder to make representations to it before any sanction is imposed.

There is no provision for the suspension of a licence under s 48 prior to its

cancellation. In fact, the provisions of s 48 do not contemplate a situation where the holder

has been the subject of an investigation under s 49. Where a licence is cancelled under s 48
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(1), such cancellation is made subject to the provisions of subs (2) and (3) of s 48.

Subsection (2) enjoins the Commission to notify the holder in writing that it proposes to

cancel the licence, the reasons for proposing to do so, and further to this, to afford the holder

of the licence an adequate opportunity to make representations. In the event that the

Commission believes on reasonable grounds that it is not possible to notify the holder

personally, the Commission is permitted to publish a notice in the Gazette and a newspaper

circulating in the area in which the licence resides or is situate, stating that the licence shall

be cancelled unless the holder lodges an appeal with the Administrative Court in terms of

s 108 of the Act.

It cannot be gainsaid that all the actions by the Commission after receipt of the

inspector’s report were consistent with the provisions of s 104. All the appellants were

availed the opportunities afforded to a registered person or a licence holder to be heard in

terms of that section prior to the Commission taking any action subsequent to an

investigation. None of the appellants have denied that the report was sent to them, that they

were requested to make representations, or further, that they appeared before the Commission

before sanctions were imposed upon them on an individual basis.

The procedure adopted by the Commission in its dealings with the applicants

is more consistent with the provisions of s 105 as opposed to s 48. The latter section

envisages a situation where the licence holder is informed of the sanction that the

Commission intends to impose and to then avail the licensee an opportunity to make

representations. Under s 105 the licensee is investigated and a report of the investigation is

availed to the licence holder for comment. Over and above this the licence holder is provided

with an opportunity to be heard by the Commission. As a consequence the requirement in s

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48(3) obliging the Commission not to cancel a licence until the opportunity given to appeal to

the Administrative Court becomes obvious. Unlike the procedure provided for under s 105, a

cancellation effected under s 48 is summary and the licensee is not assured of an opportunity

to make representation before the cancellation. Thus, there is need for the cancellation not to

be effected before the appeal process provided for under s 108 has been exhausted. There is

no such requirement under s 105.

It is also pertinent to note that under s 105, the Commission is given the

discretion to impose a sanction before affording the holder an opportunity to make

representations if it considers that immediate action is necessary to prevent harm to the

licensed person, its employees agents, other securities or members of the public. In this case,

all the appellants were afforded an opportunity to make representations before the

cancellations were put into effect and the sanctions on the last two were imposed.

In proceeding under this section, the Commission is not required to have

regard to the provisions of s 48(3). The distinction is obvious. However any powers

exercised by the Commission under s 105 (1) are made subject to subs (2) of the same section

which provides:

“Before taking any action referred to in subsection (1), the Commission shall-

(a) inform the person, committee or operator concerned, in writing, of the

action it proposes to take; and
(b) afford the person, committee or operator concerned an adequate
opportunity to make representations in the matter;

Provided that where, the Commission considers that immediate action is necessary to
prevent irreparable harm to the licensed person, registered securities exchange or
central depository or its members, creditors or participants, the Commission may take
such action before affording the person, committee or operator an opportunity to
make representations in terms of this subsection.”
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In this Court, the appellants submitted that the Commission had, contrary to

the provisions of s 105 (2), not provided them an adequate opportunity to make

representations as to why the licences of REMO and Mahmed should not be cancelled. Their

contention that the learned President in the court a quo did not address that issue has

substance.

It is trite that an appeal to the Administrative Court is an appeal in the wide

sense. The appellants could have, if they had chosen to do so, led evidence before that court

in order to ensure that whatever irregularities the Commission may have been guilty of were

corrected. They did not avail themselves of that opportunity. In Watchtower Bible & Tract

Society of Pennsylvania & Anor v Drum Investments (Private) Limited & Anor 1993 (2) ZLR

67 (S), GUBBAY CJ, remarked as follows at p 76A-E:

“I am satisfied that the appeal from the decision of the Rural Council to the
Administrative Court is an appeal in the first sense above, an appeal in the wide sense.
I accept the comment of the court in the Jones case supra that we are dealing with
“not so much a re-hearing as the first full inquiry”. But that comment does not take
the case out of the category; it puts it more firmly in it.

The main reasons why the appeal falls into the wide category are that the Act, in
providing for the appeal, authorises the Administrative Court to “make such order as
it deems fit” (s 39(1) of Act 22 of 1976), and that evidence is for the first time led and
examined in accordance with the rules of a court of law.

I do not think it is possible to argue that even though this is a category one appeal, an
appeal in the wide sense, the onus may nevertheless be on the objector. The whole
point of the formulation which I have set out is that the appellate tribunal (in this case
the Administrative Court) is starting again. It is deciding afresh the merits of the
application, not the merits of the Rural Council’s decision. The formulation makes
sense only if one accepts that the onus is where it was in the original application.”

A failure to deal with an issue that has been placed before a court constitutes a

misdirection. However, this Court is in as good a position as the court a quo to determine the

point raised by the appellants. However, as submitted by Mr Mpofu, notwithstanding the

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failure by the court a quo to address this particular aspect, the record shows that the

Commission complied with the requirements of s 104 and 105. The court has already dealt

with the instances of the appearances by the appellants before the full board of the

Commission in this judgment.

Over and above those representations, the appellants communicated with the

Commission in writing after receipt of a letter dated 17 May to which was attached the report

from the inspector and calling upon the appellants to respond to the report in writing within

thirty days. On 29 May, 2012 Motsi addressed a letter to the Commission in which he stated

the following:-

“We refer to your letter dated 17 May 2012 to ourselves on the above matter and
advise that we have responded as per paragraph 3 of your letter. Please find attached
response for your attention.”

In casu, in addition to the written responses during the appearance of Mahmed

before the full board on 29 May 2012, the record reveals that he was availed an opportunity

to produce additional documentary evidence in response to the report by the inspector. The

record reflects that fresh evidence was produced to the Commission on 29 May and 1 June

2012. The proceedings of 7 June, 2012 were at the appellants’ request. There never was a

complaint during the intervening period before the cancellation of the licences that the

appellants had been denied an opportunity to be heard. In this connection attention is drawn

to the remarks of STEENKAMP AJA in IMATU v MEC, Environmental Affairs ETC,

Northern Cape 1999 (4) SA 267 to the following effect:

“Mr Van Wyk also referred to the various meetings and submitted that there was no
proper consultation or negotiation with second applicant prior to first respondent’s
decision not to negotiate a new service framework before or on 8 September 1998.
This conclusion is not factually correct, because the second applicant was invited to
put forward an alternative scheme to provide primary health services and did in fact
do so but his proposals were referred back to second applicant to put alternative
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models on the table because there was no duty on the first respondent to come
forward with new models. If a process for a fair hearing is set in motion then the
person who is prejudiced should come forward and put his case to enable the other
parties to consider these alternative proposals. (See Baxter (op cit at 546)).”

I am of the view that all the appellants were given an adequate opportunity to

be heard before the cancellation of the two licences and that the Commission complied fully

with its obligations under the Act. This view is fortified by the dicta in Duly Holdings v

Chanaiwa 2007 (2) ZLR 1 (S). In that matter GWAUNZA JA stated:

“To the extent the respondent was given an opportunity to answer to the charges and
present his side of the story, he should not be heard to say that there was no
observance of the audi alteram partem rule. The court a quo correctly noted in its
judgment that the rules of natural justice required no more than that the domestic
tribunal acts according to the common sense precepts of fairness procedures followed.
Given the circumstances outlined above, I respectfully disagree with the court a quo’s
conclusion that it could, in casu, not be said that the rules of natural justice were
observed. I am satisfied that the respondent was, therefore, not prejudiced in any way
by the disciplinary procedures followed.
The appellant argues, correctly, that the adoption of the disciplinary procedures not
specifically outlined in the Code finds support in ZFC v Geza 1998 (1) ZLR 137 (S),
where this court emphasized the importance of flexibility in the conduct of
disciplinary tribunals, and the principle that they were there to conduct an enquiry. It
cannot in my view, be said in this case that the disciplinary tribunal did not conduct
an enquiry.”1

Those remarks apply with equal force to the circumstances of this appeal and I

respectfully associate myself with them. The Commission is a disciplinary and regulatory

body set up in terms of the Act. Perforce, its procedures are less rigid and formal than would

be required of a court of law. The flexibility referred to in the case of Geza ( supra) would be

a necessary feature in the conduct of its proceedings. It is not required to abide by a set of

formal rules in its proceedings as is required of a court of law. The only rules provided for

under the Act relate to the regulation of securities and licensed persons and the conduct of

1
At 6A-C
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their functions in terms of the Act, which rules however do not prescribe the manner in which

proceedings by the Commission should be conducted.

A reading of the Act however establishes that irrespective of whether the

Commission cancels a licence under s 48 or s 105, the Act has provided that the Commission

complies with the audi alteram partem principle before cancellation of a licence or the

imposition of any other sanction under the Act.

Notwithstanding the failure by the court a quo to address the question as

whether the Commission had given the appellants an opportunity to be heard, the finding that

the cancellation of the licences was effected in terms of s 105 is correct and cannot be faulted.

I find no basis for overturning the conclusion by the court in that regard.

On the substantive issues relating to the Commission’s decision to cancel the

licences, the court a quo concluded that the Commission had arrived at a correct decision.

The learned President of the Administrative Court, sitting with two assessors, stated as

follows:

“Part of the appellants’ argument is that the cancellation of the First and Second
Appellants licences is too harsh. They argue that less drastic penalties provided for in
the Act would have sufficed.

Given the extent of the deviations from the expected standard of operating the
registered securities exchange that have been outlined above the court finds that the
Respondent was justified in opting for cancellation of the First and Second
Appellants’ licences with provision for re-application after five years if the two would
have been adequately rehabilitated.

Regarding the Third and Fourth Appellants it is noted that the pronouncements made
with regard to them were not sentences but inevitable pronouncements made by an
administrator concerned with practical consequences of its decision.

The appeal is accordingly dismissed with costs.”

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The Commission preferred five (5) charges against REMO and Mahmed. The

appellants concede that they accept liability in respect of one of the charges laid by the

Commission. The first charge related to the appellants participating in non-permissible

activities in breach of s 42(1) of the Act, in terms of which section a licence holder is

authorized to carry out one or more of the activities specified in the definition of licensable

activities. The allegation against REMO was that it borrowed money from Interfin Securities

which allegation REMO admitted. It was further alleged that REMO had lent the money it

borrowed from Interfin to its own clients. This was denied when the appellants made

representations to the Commission. However, in a letter to the Commission dated 12 March

2012, soon after the dispute with Interfin had erupted, it was stated:-

“During the course of the last eighteen months we arranged several loans from
Interfin on behalf of our clients.

As security for these loans, we lodged several share certificates with InterfIn. The
share certificates in question are as follows ……

On 23 February 2012, we settled all amounts due to Interfin and asked for the return
of the securities that had been lodged with them.”

It is not disputed by any of the appellants that the lending of money is not a

licensable activity as defined in the Act. The Commission found that REMO had lent money

to Cold Power after it had borrowed from Interfin Securities. It was never disputed by

REMO that it gave money to Cold Power. This non permissible activity is contained in a

letter dated 8 May 2012 to the Commission wherein it was stated:

“We provided documentary evidence that the funds borrowed were not lent to any of
our associated companies. They were used to fund REMO, and to an extent one or
two of our other companies.”

REMO and its associated companies are distinct and separate entities. The

monies were borrowed by it and any sums advanced to the associated companies could only
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have been availed as loans. There is no suggestion that REMO was giving grants to the

associated companies. Given the admissions of the financial transactions, the conclusion by

the Commission that the sums in question were advanced as loans cannot be seriously

impugned. In any case, the extending of loans to other persons was not one of the functions

that Interfin was permitted under its licence. As a consequence, REMO could not legally

borrow from Interfin and to that extent it participated in a non-permissible activity.

REMO was convicted of contravening s 50(1) of the Act by the Commission.

The conviction was upheld by the court a quo. Section 50 (1) requires that a licensed person

shall open and keep a current account at a bank as a separate trust account in which he or she

shall deposit any money received for or on behalf of a client. The Commission found that

although REMO advised the Commission of the opening of the account, there was no

indication that the account in question was used solely for funds belonging to clients. It was

also found by the Commission that the same account was used by REMO to keep its own

money, and further, that the same account was used for channelling loans secured on behalf

of REMO’s clients.

It was argued on behalf of the appellants that REMO was convicted on an

allegation in respect of which it had not been charged. I agree. This particular charge is not

reflected amongst the charges laid against REMO in the letter of 7 May 2012. The

allegations spelt out in the letter were that the borrowings and on-lending were not in the

accounts of the company as required in terms of Part VI. The conviction of REMO on an

alleged contravention of s 50 (1) constitutes an irregularity and the court a quo should have

set aside the said conviction.

 Judgment No SC 85/14 18
Civil Appeal No. SC 13/13

Further to the above, the court a quo found that transactions relating to the

loans sourced by REMO from Interfin and its own loans to its clients and to Cold Power were

not reflected in the books of account that REMO kept. The failure on the part of REMO to

keep a record of the transactions relating to the loans it received and lent to its clients was

found by the Commission to constitute a contravention of s 51 (1) which requires a licensed

person to keep proper books of account containing particulars and information of money the

licensee has received, held or paid for on account of any other person and money that the

licensee has deposited in his or her trust account.

The report from the inspector indicated that REMO did not keep a register of

all the securities in which the licence holder, or any director, officer, employee, associate, or

partner who is directly involved in its business had an interest as required under s 61 (1). The

provision is couched in mandatory terms.

It is common cause that the shares that had been pledged to secure loans were

not recorded in the nominees register. In answer to queries raised by the inspector, the

appellants confirmed that the shares had not been recorded because they had been paid for

and delivered to the client and thus could not be part of a scrip ledger. This response would

contradict the assertion now being made on behalf of the appellants that the shares pledged as

security actually belonged to Mahmed and his wife Rezana Ebrahim.

In addition, the appellants went on to state that only those shares held by

brokers in safe custody were recorded in the Scrip ledger. They stated that the nominee

shares were not in the Scrip ledger because they were not custodial shares. The court a quo

held that the excuse by the appellants that the shares were only held for a short time did not
 Judgment No SC 85/14 19
Civil Appeal No. SC 13/13

assist because the strict requirement for their inclusion in a register is for the benefit of the

public. Section 61(3) enjoins a licenced person to record any change in the interest of

security to be recorded within a period of forty-eight (48) hours from the time of acquisition

or change as the case may be.

On 20 May 2011 the Commission requested all securities dealing firms to

declare such loans as they might have obtained and a list of any clients’ shares that might

have been pledged as security for any loan. REMO rendered a nil return, which, as matters

turned out, was false. The appellants admitted that the return was false but gave the alleged

absence of Mahmed from the country as an excuse. The appellants could not explain why the

record was not corrected subsequent to his return. Section 65 reads in relevant part:

(1) “The rules of a registered securities exchange shall make adequate provision for
such of the following matters as are appropriate to its functions-

(a) …….n/a

(b) in regard to membership of the exchange-

(i) …
(ii) ensuring that-

(b) members are of good character and integrity or, in the case of members
that are corporate bodies, that they are managed and controlled by
persons who are of good character and integrity.”

The court a quo concluded that by making a false declaration as aforesaid, the

first and second appellants demonstrated the absence of professionalism and integrity in their

business dealings. The Commission, as the regulator under the Act, is obliged to ensure that

high standards are maintained by securities dealers. It did not place either first or second

appellants in good stead to claim that the return was done during the absence of Mahmed

from the country.

 Judgment No SC 85/14 20
Civil Appeal No. SC 13/13

As members of a registered securities exchange are required and meant to be

of good character and integrity, it was the finding by the Commission, which finding the

court a quo confirmed, that Mahmed was not a fit and proper person to hold a licence as

provided for in s 41(1)(c). Mahmed was the principal dealer in REMO. The Act requires

that a person in that position should have the attributes of good character, honesty and

integrity in order to ensure efficiency, honesty, fair practice and fair competition in relation to

dealings with other exchanges.

It was pointed out by Mr Mpofu that the appellants admitted guilt in respect of

the failure to disclose the financial transactions as well as the false declaration. Having

pleaded guilty to the charges before the Commission, the attempt to run away from those

admissions on appeal cannot be regarded in a serious light. In DD Transport (Pvt) Ltd v

Abbot 1988 (2) ZLR 92 (S) GUBBAY JA (as he then was), when discussing formal

admissions stated:

“But this admission in the plea is of the greatest importance, for it is what Wigmore
(paras 2588-2590) calls a ‘judicial admission’ (of the confession judicialis of Voet
(42.2.6)) which is conclusive, rendering it unnecessary for the other party to adduce
evidence to prove the admitted fact, and incompetent for the party making it to adduce
evidence to contradict it.

(See also Phipson 7 ed p 18)). Wigmore loc cit, speaking of judicial admissions in
general, refers to the Court’s discretion to relieve a party from the consequences of an
admission made in error. It does not seem to me that such a discretion could be
exercised, in a case where the admission has been made in a pleading, in any other
way than by granting an amendment of that pleading.”

These dicta were approved by MACDONALD ACJ (as he then was) in Moresby-
White v Moresby-White 1972 (1) RLR 199 (AD) at 203E-H; 1972(3) SA 222 (RAD)
at 224.”

In my view, the court a quo was correct in upholding the convictions in

respect of the following charges; s 42 (1), s 41 (1) (c), s 51 (1), 61 (1) and s 65(1) (b). The
 Judgment No SC 85/14 21
Civil Appeal No. SC 13/13

decision of the court a quo in upholding the conviction of REMO on an alleged contravention

of s 50(1) constitutes a misdirection on the part of the court on the basis that REMO was

never charged of contravening that particular offence. The conviction on that charge cannot

therefore stand and is accordingly set aside.

It was contended on behalf of Mahmed that he received a harsher sentence

than what was meted to Zengeni of Interfin. The Act empowers the Commission to impose

any sanction from issuing a warning to the cancellation of a licence. In imposing such

sanctions under s 105 the Commission exercises a discretionary power. Implicit in the

exercise of that discretion is the fact that the Act does not impose any limitations on the

Commission on the extent of the duration of the period for which a licence may be suspended

or cancelled as the case may be. It is trite that the exercise of such discretion can only be

interfered with in limited circumstances.2

Mahmed has not argued a legal basis to justify the interference with the

cancellation of his licence by this court, and it is not enough to argue that he should have

received a similar sentence to that imposed on Zengeni. In any case, it has not been suggested

that the Commission exercised its discretion improperly. Whilst it is accepted that the period

of five years for which the licence was cancelled appears a bit harsh, it cannot by any means

be said that such penalty is irrational. For that reason, any interference with the period cannot

be warranted or justified by an appellate court.

That said, slightly different considerations apply in respect of REMO. This

Court has set aside one of the five charges that REMO was found guilty of. The Commission

2
See ZB Financial Holdings v Manyarara SC 3/12; Malimanji v Central Africa Building
Society 2007 (2) ZLR 77 (S). Barros v Chimponda 1999 (1) ZLR 58(S).
 Judgment No SC 85/14 22
Civil Appeal No. SC 13/13

had imposed a globular penalty against REMO on all the five charges in respect of which

REMO had been convicted. Considering however, that the conviction on one charge is

unsustainable it seems proper in these circumstances that the globular penalty be interfered

with to some extent in order to reflect this finding.

In determining the extent to which this court should interfere with the globular

sentence imposed by the Commission, there is need to bear in mind the circumstances that

gave rise to the four charges in respect of which REMO was convicted. As security for

being availed loans by Interfin, REMO surrendered shares in negotiable form and, as matters

turned out, Interfin used the same shares as security for its own borrowings. In its letter to

the Commission of 8 May 2012, REMO provides a narrative of the manner in which Interfin

then dealt with those shares and the efforts REMO took to recover them. In cancelling the

licence of Mahmed, the Commission made reference to the market disruptions that occurred

when the Deputy Sheriff seized the shares which are the subject of the dispute between

REMO and Interfin. It was noted that the market’s integrity and investor confidence was

compromised

Some of the objectives that the Commission is charged with under s 4 include,

the promotion of high levels of investor confidence, the reduction of systemic risk, the

promotion of market integrity and investor confidence. The Commission is also obliged to

prevent market manipulation and ensure transparency in the market. As a consequence, in

the circumstances of this case, the sanction attaching to the infractions should reflect the

gravity of the proved offences and should not appear to be a slap on the wrist as it were.
 Judgment No SC 85/14 23
Civil Appeal No. SC 13/13

The activities of REMO and Interfin sought to, and did undermine the

objectives of the Act. The potential prejudice to investors was found by the Commission to

be USD 5.3 million. The Commission found that the conduct of REMO and Mahmed went

against the tenets that the Commission was supposed to uphold and regulate. In my view,

bearing in mind the mandate of the Commission to protect the market and ensure the integrity

of the market and regain investor confidence, the Commission was correct in finding that it

was necessary that the licence of REMO and Mahmed be cancelled. Given the overall gravity

of the transgressions by REMO, and, taking into account the finding above that one of the

charges in respect of which REMO was convicted is not sustainable, it seems to me proper

that a portion of the period of five years in respect of which the licence for REMO was

cancelled should be reduced by six (6) months, leaving the period of cancellation for REMO

at four years and six months.

The position is different when one considers the cases of Ebrahim and Motsi.

On 24 May 2012 each of them received a letter from the Commission inviting them to make

representations in respect of their conduct in the affairs of REMO. Ms Ebrahim was not a

licensed person under the Act, but she was an approved compliance officer. She was not

specifically charged with an offence, but as a compliance officer she confirmed that she was

the ears and eyes of the Commission with REMO. The Commission decided to permanently

disapprove her as compliance officer. She was further advised that she would not be

employed in that capacity in this country.

Motsi was not charged with a specific offence nor was his licence cancelled.

He was however sanctioned to work under the supervision of a senior dealer for a period of
 Judgment No SC 85/14 24
Civil Appeal No. SC 13/13

one year. There is uncontroverted evidence that he is in fact the most senior dealer in this

country.

In respect of the two, the principles relating to the audi alteram partem rule,

which requires that a party be afforded a fair hearing, were not adhered to. They were

sanctioned in the absence of having specific charges preferred against them. In relation to

Motsi he was advised that he had not committed any offence and, that merely due to his

employment with REMO, it was decided to sanction him. I find no justification for the

actions of the Commission against Ebrahim and Motsi. The court a quo ought not to have

confirmed the sentences against them.

The appeal succeeds in part to the extent that the sanction imposed on REMO

is reduced and, in respect of Ebrahim and Motsi, is set aside in its entirety.

In the result the Court makes the following order:-

1. The appeal by the first appellant is allowed to the extent that the conviction on

a charge of contravening s 50(1) of the Act is set aside and consequent thereto,

the period of cancellation is reduced to four years and six months.

2. The appeal by the second appellant is dismissed.

3. The appeal by the third and fourth appellants is allowed with costs.

4. The order of the court a quo in respect of the third and fourth appellants is set
aside and substituted with the following:
“(a) The appeal is allowed with costs.

(b) The restrictions placed on the third and fourth appellants are
hereby set aside.”
 Judgment No SC 85/14 25
Civil Appeal No. SC 13/13

5. The first and second appellants are to pay the costs of this appeal save for the
costs of the third and fourth appellants, jointly and severally, the one paying,
the other to be absolved.

GARWE JA: I agree

PATEL JA: I agree

Venturas & Samkange, appellant’s legal practitioners

Scanlen & Holderness, respondent’s legal practitioners