STATEMENT ON ALTX EAST AFRICA LTD
CMA has issued a cancellation of ALTX approval to operate an exchange in Uganda. In issuing a cancellation, CMA is purporting to exercise powers outside the scope of the CMA Act, imposing requirements that are unknown in the regulatory framework, and doing everything in its powers to kill innovation in the securities sector. ALTX shall seek legal redress.
The reason for this action is not clearly spelt out by CMA, although recent actions were carried out on their requests made under Section 28(1). Section 28(2) provides as follows: 28(2) A stock exchange which, without reasonable excuse, fails to comply with a direction given under subsection (1), commits an offence and is liable on conviction to a fine not exceeding one million shillings and to a further fine of fifty thousand shillings for each day on which the noncompliance continues after conviction.
CMA therefore created a process that is outside the law in order to arrive at the cancellation. In so doing, CMA is acting as the accuser, the prosecutor, the judge and executioner. Under Section 28, there is no provision for cancellation of exchange operating approvals. CMA’s action therefore substitutes CMA for court, which is what the law provides, and is therefore contestable.
In explaining their action, CMA is quoted in New Vision of 25th November 2019 as basing their decision on ‘reasons related to ALTX Corporate Governance’, ‘not complying with continuous approval obligations’ and ALTX’ financial position. CMA has never written to ALTX complaining about the company’s corporate governance. Secondly, we are not aware of the so-called ‘continuous approval obligations’ in the legal framework as claimed by CMA. Thirdly, the law provides that stock exchanges are regulated on their conduct rather than their financial position. CMA is not even aware of the financial information provided in this brief.
On the question of governance, ALTX submitted to CMA several regulatory instruments for approval and many have gone unapproved and are still outstanding. One of these submissions was altered within CMA and an approval issued by the board. ALTX reported this suspected fraud to the CMA chairperson in February 2018. In spite of issuing two letters admitting the alterations, and issuing an approval based upon the altered documents, CMA has been unable to commission an investigation of this suspected fraud, and to formally advise us of their findings.
In the notice issued to ALTX on 2nd October 2019, CMA raised issue with two accounting matters, and another related to company law. On the two accounting matters, CMA made directives that would have resulted in ALTX violating the International Financial Reporting Standards - under which we report our financial affairs - yet CMA had provided a legal precedent in support of the ALTX position. On the third issue, CMA has ignored four submissions of evidence of stamped returns showing the shares transacted in November 2017.
In coming to their decision, CMA called a hearing on 17th October 2019, and ALTX requested a postponement to either 28, 29 or 30 October 2019. CMA did not respond to that request until 5.55 pm on 28th October 2019, calling the board of ALTX to a hearing for 2.30 pm on 29th October 2019. CMA took advantage of the inability of ALTX to mobilize its directors on short notice and proceeded to make a cancellation decision without the ALTX directors making their representations.
CMA approved ALTX East Africa Ltd. (ALTX) to operate a securities exchange in Uganda in March 2014. The commercial operation was launched in October 2016. ALTX offers automated trading, smartphone trading, Mobile remittances, and investment in the Uganda treasury market. ALTX plans to extend its service, working with the mobile companies to every mobile subscriber in Uganda. ALTX aspires to enroll a minimum of 10 million investors in five years, starting this December.
1. Investor Base (no of investors on ALTX):
Has grown by 30 times since December 2016
2. Investor Assets (Sum of ALTX Investor Assets):
From UGX 19 million in December 2016 to UGX 1.4 billion in November 2019
3. Market Capitalization (Sum the public has invested in securities on ALTX):
Has grown 70 times since December 2016
4. Total Wealth (Market Capitalization plus securities not yet transferred for trading on ALTX market):
From UGX 25 million in December 2016 to UGX 2.3 billion in November 2019
5. Investor Funds lost:
No investor has lost funds working on ALTX.
Very few companies, in any industry, have been able to create the kind of growth that ALTX exhibits.
Investment in ALTX
The owners have invested a value of over USD 10m in creating the ALTX infrastructure. A key part of the marketplace is a trading system worth USD 6.5m, of which we booked only USD 1.28m in our Uganda operation. The system has permitted ALTX to innovate in the field of securities, to deliver treasury securities to the general public without the hassle of bank-routed orders.
Innovation on ALTX includes, same-day settlement, where ALTX was the first exchange in Africa and probably across the world to enable same day settlement of securities transactions, well ahead of behemoths like New York, which settles in 3 days, Nairobi, which settles in 4 days, JSE in five days., direct market access by smartphone and feature phone, computer-based access, tokenization using blockchain technology, mobile remittances and innovative securities products designed for a person to invest a minimum of UGX 500.
25th November, 2019