SCHOOL OF LAW

L 430- CAPITAL MARKETS AND SECURITIES LAW

FINAL EXAMINATION PAPER

TUESDAY, 3 DECEMBER 2014

14:00 - 17:00 HOURS

TIME ALLOWED: 3 HOURS PLUS 5 MINUTES READING TIME

INSTRUCTIONS TO CANDIDATES

1. Check that you have the correct examination paper in front of you.

2. The paper consists of FIVE (5) questions. Answer QUESTION ONE (1) and ANY
OTHER THREE (3) questions.

3. All answers should be in answer booklets provided only.

4. Write down the number of questions attempted on the cover page.

5. Begin answering each question on a new page.

6. Candidates are NOT permitted to bring into the examination room ANY statute.

7. There shall be no communication between students during the examination. Any

attempt to make such communication will lead to disqualification.

DO NOT TURN THIS PAGE UNTIL TOLD TO DO SO BY THE INVIGILATOR

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QUESTION 1

Ntemena worked as an office orderly at Itanga Solutions Limited (ISL), a public company listed
on the Lusaka Stock Exchange. Ntemena, a grade two drop out, is not only illiterate but also
dysgraphia and dyslexic. On 5 October 2014, while serving tea in the ISL boardroom, Ntemena
overheard a conversation between the directors of ISL to the effect that ISL had won a
substantial contract with the Government and that there was no better time to acquire the
companys shares. She also noticed that the directors were clearly in a celebratory mood.

When Ntemena got home, during supper, decided to share the news she heard at work with her
husband, Mutemwa who also told his friend John. On 7 October 2014, Mutemwa instructed his
financial adviser to buy 50, 000 ordinary shares of ISL. Similarly, John also bought 40, 000
shares from ISL on 8 October 2014. At the time of the purchase, which were effected on 9
October 2014, the shares for ISL were trading at K 0.70 each. On 10 October 2014, ISL issued
a press statement announcing the good news of ISLs receipt of the award of the contract.
Between that date and 20 October 2014, ISLs share price rose up to K 1.40 per share and has
remained at that level ever since. Although Ntemena, who resigned on 6 October 2014, never
heard about the press statement, later became aware of the sharp rise in the share price. She
had no clear idea of what could have been directly responsible for the rise, but she was quiet
pleased that her husband had made a sound investment.

The Board of Securities and Exchange Commission (SEC) is seriously concerned about the
conduct of Ntemena and have approached you to advise on the legality and/or validity of
transaction in ISL shares in terms of the Securities Act, 1993.

Write a legal opinion for SEC addressing whether there is a violation of the provision(s)
of the Securities Act. [25 Marks]

QUESTION 2

According to section 2 of the Securities Act, Securities" means-

(a) shares, debentures, stocks or bonds issued or proposed to be issued by a government

or a body corporate;

(b) any right or option in respect of any such shares, debentures, stocks, bonds or notes; or

(c) any instruments commonly known as securities or which are prescribed by rules made
by the Commission to be securities for the purposes of this Act.

Although this definition appears comprehensive, some instruments or agreements may not
qualify as securities.
In light of the assertion made above, discuss the types and the characteristics of
securities. [25 Marks]

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QUESTION 3

Richard K Abrams and Michael W Taylor Issues in the Unification of Financial Sector
Supervision (2000) 3 postulate:

Unification of financial sector supervision remains rare in the world today. However, a
number of countries have recently adopted this structure, giving rise to growing interest
in the topic, particularly regarding the merits of such arrangements. In this regard, the
appropriate regulatory structure appears to vary from country to country, and a major
concern should be whether this type of financial regulatory structure is suitable to the
individual circumstances of a particularly country.

In light of the statement above, discuss the prospects for unification of financial services
supervision in Zambias context. [25 Marks]

QUESTION 4

Merging African stock markets into a single regional exchange immediately is no doubt an
ambitious and daunting task, given the associated institutional and financial cost complexities
but it will be a powerful source and driver of capital flows to Africa. Such an exchange will also, if
well structured, solve the current problems of illiquidity, small size, and fragmentation. Unlike the
BRVM Model, there appears to be slow or no progress in other regional trade agreements
quest for stock market integration. Discuss [25 Marks]

QUESTION 5

Tumbi is a business woman who has a passion to read about financial matters. While walking
along Cairo road, she bought a newspaper and on the front page was an article, a portion of it
read:

Lusaka Stock Exchange faces low liquidity challenge. Despite, the market having
celebrated its 20th anniversary, there appears no solution addressing the liquidity
challenge.

With all her brilliance, she does know not what that means. She has approached you to explain
to her the meaning of the heading. Further, she wants you to advise her on what should be done
to improve and/or address the problem faced by Lusaka Stock Exchange. [25 Marks]

END OF EXAMINATION PAPER