The local Capital Market Authority is responsible for implementing government policy on capital markets, as well as regulating and supervising all capital market activities with a view to maintaining a proper code of conduct and acceptable practices on the capital market. 

Though the capital market is open to all people, it is sophisticated and very sensitive for a number of different reasons. The financial markets have increasingly gained political importance, and currently, serve as repositories of choice for the retirement savings of majority of countries across the world, especially in advanced societies.

However, the capital market is also peculiar in many respects; first of all, even though it is a "market”, the nature of the products makes it impracticable for the application of the normal "caveat emptor” (buyer beware) rule that governs transactions in the market place. This is because, unlike consumer goods, such as cars and refrigerators, investors in securities have no way of measuring the soundness of what they are buying since they are intangible. This is the reason why it is necessary that investors in the capital market and the public understand the process to follow while trying to resolve disputes that may arise between them and stockbrokers, and investment banks, or any other market intermediary. Dispute resolution generally refers to one of the different processes used to resolve disputes between parties, including negotiation, mediation, arbitration, collaborative law, and litigation.

How disputes can arise in capital market?

Capital market business is guided by the standards of corporate governance, and other compliance requirements as set by the regulator. This ensures transparency, equity, fairness, and orderliness in securities transactions for the overall objective of sustaining investor confidence in the market.

Since financial markets are businesses that deal with public money, disputes relating to the instruments transacted like securities, treasury bonds/corporate bonds, commercial papers, etc, may arise. This, therefore, calls for robust and clear dispute resolution mechanisms.

Dispute resolution process

When disputes arise, parties involved are always advised to negotiate and try to get an amicable settlement. If this process fails, the aggrieved parties may seek a remedy form the sector regulator, which in the case of Rwanda, it is the Capital Market Authority.

When resolving the problem, the authority applies the relevant laws, and makes a decision as prescribed by the law. In the event that one of the parties to the dispute is not satisfied with the authority’s decision, they are free to appeal the ruling to the Independent Review Panel. The panel is an appeal body established by Article 63 of the law n°01/2011 of 10/02/2011, regulating capital market in Rwanda to review the decision of the authority.

However, the aggrieved party must lodge their appeal within 15 days following the notification of the authority’s decision.

The panel serves as an independent appeal body of all decisions related to the business of the authority, such as issuance of licences, and approvals and authorisation of all regulated activities. It also handles disputes and controversies in relation to the business regulated by the authority, and disciplinary proceedings in alleged contraventions of the capital market operating rules, arising from conduct of market players.

According to Article 6 of Ministerial Order n° 003/12/2012 of 18/05/2012 determining the organisation and functioning of the capital market Independent Review Panel and its composition, this panel must take a decision on any case brought before it within 30 days. The decision of the review panel "shall be binding in case nobody files a case in the Commercial Court within 30 days challenging the verdict.

The Commercial Court plays a critical role in capital market dispute resolution process. The court must apply the relevant laws and rules to foster effective regulation of the exchange, ensuring investor protection, and legal certainty. This would enable investors and capital market operators understand the laws and rules applicable to them predicate the consequences of their actions and properly order their affairs.

Generally, the current dispute resolution mechanisms applied by the capital market have had some positive effects on the economy. Apart from boosting investors’ confidence through the quality and unique expertise of their members, they have also solve misunderstandings and conflicts at the exchange without delays characterised by courts processes.

CMA operates under the supervision of the Ministry of Finance and Economic Planning, it is also an active member of the East African Securities Regulatory Authorities (EASRA), and an associate member of the International Organisation of Securities Commissions (IOSCO).

The writer is the legal and corporate affairs manager at Capital Market Authority

business@newtimes.co.rw