(This article has been reposted and corrected. Earlier it was cited that the Securities and Exchange Commission censured Madison Financial Services. This has been corrected to Lusaka Securities Exchange.)
The Lusaka Securities Exchange (LuSE) in Africa’s red metal hotspot Zambia, on February 17, privately censured Madison Financial Services Plc for disclosure inadequacies concerning credit risk exposures and failure to provide financial statements. The decision taken by the securities regulator follows an investigation into a matter concerning the group triggered by breaches after the asset management arm of the business defaulted on repayment obligations to retail investor classes. The liquidity crunch signaled potential mis – investment and conduct inconsistent with prescriptions of the securities regulations.
According to the bourse announcement, Madison Financial Services Plc was cited for breaches in listing rules gravitating around failure to prepare financial statements for the period 2019 – 2021, in compliance with international financial accounting standards and lack of disclosure of the credit exposures concerning Madison General Finance’s guarantee to Chakaka Village in the prospectus prior to its listing on the bourse. Other censure areas included failure to issue a public a cautionary statement to the public for the credit exposures. MFS was cited for inadequate disclosure of the management services agreement between MFS and Lawrence Sikutwa and Associates.
The MFS Group has been a subject of liquidity, credit and solvency risks which earlier in 2019 triggered a regulatory takeover of one of its subsidiaries Madison Asset Management Company for license breaches. Over the years the asset management company has sought to rectify its financial position through potential takeovers with the most recent being South Africa’s XYLEM Pty in 2020 for $35 million in a put option agreement, which is yet to materialize. Delays have been due to the complex nature and technical challenges faced by the asset management business.
As at Friday February 17 MFS (ISIN:ZM0000000391) stock was traded for K2.41 a share.
The Kwacha Arbitrageur
