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Investor Protection Tips

Investing wisely

Investor protection tips from your Capital Markets Regulator
Investing on the stock exchange is open to individuals, corporate bodies and institutions, and is not without risk. Investments generally involve trading in securities including company shares, bonds etc. Before investing in securities, it is advisable to think about your financial needs now and in the future and to decide how much money you can afford to invest, so as to meet your investment objectives. In order to diversify potential risks, it is advisable to seek the advice of an investment advisor before investing on the stock exchange

Investing During the Initial Public Offer (IPO)
Initial Public Offer is when a company offers the public the opportunity to buy shares for the first time. Sometimes an IPO is also termed as going public,seeking listing, or floating of shares. During an IPO, you should only buy shares through the selling agents or receiving banks that are named in the prospectus.

A prospectus is a legal document that gives general information about the company, which is offering its shares to the public like the company's history and operations. It can be a notice, a circular, an advertisement or any other invitation offering to the public a chance to purchase shares or securities of a company.

Ask your broker or the receiving bank for the prospectus of the company that you wish to invest in.

Read it and if you have questions, talk to your broker before investing. And remember, the Prospectus is not for sale.

Investing in Shares Listed on the Stock Exchange
You can only buy or sell shares that are listed on the stock exchange through a brokerage firm. This is what is referred to as a secondary market.

Look out for the following:
Ask if the brokerage firm is regulated by the Capital Markets Authority (CMA) and is a member of Uganda Securities Exchange (USE). Request to see a copy of the CMA license.

Beware that the only stock exchange that has been licensed by the CMA is the Uganda Securities Exchange.

Always ask your broker for a Contract Note each time you buy or sell shares listed on USE. You should carefully read the information contained in this document. Do not be afraid to ask questions where you do not understand. The broker has a duty to ensure that you understand. Therefore go ahead and ask.

Be honest when the broker asks for information about your investment objectives and personal finances. They will rely on this information to make appropriate investment recommendations to you. The broker is required to keep this information confidential.

Making an Investment Decision
Before making an investment decision, it is important to read and understand the contents of the prospectus or other relevant documents.

The main contents of a prospectus are:

  • A caution statement that approval by CMA is not a guarantee about the merit of the securities issue.
  • The purpose for offering the securities to the public
  • Description of the company's business
  • Statement on the legal status of the issuer
  • Rights of shareholders, directors and employees
  • Financial statements of the issuer

In case of doubt, seek professional advice.

  • Always read the USE reports that appear in the newspapers and look out for information on the companies in which you have invested
  • The USE reports give information on share prices and market movements This enables investors to analyse movements of share prices. This information can also be obtained from the USE or your broker/dealer or investment advisor.
  • Check with licensed investment advisors or other professionals such as accountants, lawyers or banks to get a second opinion about a particular investment you are considering.
  • Keep good records of all information you receive, copies of forms you sign, and conversations you have with your broker.
  • Never invest in a product that you don't fully understand. Consult information sources such as business and financial publications.

My Rights As A Shareholder
As a shareholder you are entitled to dividends, once they are declared and announced. You are also entitled to attend the Annual General Meeting (AGM) and take part in the decisions made at the AGM for example the election of directors

If You Have A Problem

  • If the problem is with your broker, promptly talk to the manager of the brokerage firm.
  • Confirm your complaint in writing.
  • Ask for written explanations.
  • If the problem is not resolved to your satisfaction, contact the CMA.

How do I complain about the conduct of a Brokerage Licensed Firm?
As members of the USE, licensed firms agree to and are regulated by Rules and Regulations, which dictate their relationship with the Exchange, their clients and other members. These firms are licensed by CMA and any adverse conduct should be reported to the CMA or the USE.

Always remember
Nobody invests to lose money. However, investments always entail some degree of risk.

Beware that:

  • The higher the expected rate of return, the greater the risk.
  • The value of shares could go up or down.
  • Past success of a particular investment is no guarantee of future performance.