The capital markets industry is governed by the Capital Markets andSecurities Act of 1994.

The Act is supplemented by 19 regulations and Guidelines governingspecific aspects of capital markets;

Apart from the Capital Markets Act, there is Anti money laundering Act whichprovided the guidelines for the market intermediaries activities.

Financial systems Act under the central bank for all the payments systemissues and monitoring of the government bonds trading;

Electronic and postal communication Act (EPOCA), 2016, which requires alltelecommunication companies and service providers to offload 25% of theirsteak to the public.

In 1997, the CMS Act was amended to include provisions on Public Offers ofSecurities; Collective Investment Schemes; and Advertisements relating toSecurities.

In 2010 the Act was amended to among others, comply with therequirements on becoming a signatory to the International Organization ofSecurities Commissions (IOSCO), MMoU on information sharing andinternational cooperation. The 2010 amendments addressed the deficienciesin the following areas:-

Limited scope of the powers of the CMSA, due to the narrow definition of the term"securities" that did not include "commodity derivatives",

Unclear powers of the CMSA to cooperate internationally linked with secrecyprovisions that preclude information provision to foreign regulators, and

The scope and status of the confidentiality provisions applicable to the staff ofCMSA

The amendments of 2010, also were made to address the issues related tothe establishment of the Enterprise Growth Market (EGM), the marketintended to the start up, small and medium enterprises to rise fund throughthe Capital markets.

In 2014, foreign investors regulation was uplifted to 100 percent. Thisprovided foreigners access to participate in the stock exchange withoutrestrictions on equity market.

In year 2016, two regulations were amended which includes the Licensingregulations and the establishment of stock exchange regulations. Theestablishment of the exchange regulations was made in respect of thedemutualization of the stock exchange.

In the financial year 2013/2014 the drafting of the new capital markets andcommodity exchanges legislations was initiated in order to improve theregulation and supervision powers of the Authority, to bring it in line withdevelopments taking place internationally and to include provisions foreffective regulation and supervisory aspects of commodity exchanges.

The proposed amendments on the CMS Act are expected to address aspectsof; Investors compensation; Capital market and commodity exchanges tribunal; International cooperation; Sharia compliant products;

In August 2015, the Commodity Exchange Act was passed by the Parliamentwhich provided grounds for the establishment of the Commodity Exchange inTanzania.

Up to the current, the process of reviewing the proposed draft of the CMS Actis still going on waiting for the same to be submitted to the Parliament.

The CMSA regulates the industry by exercising surveillance over capitalmarkets intermediaries and issuers of securities with a view of maintainingproper standards of conduct, professionalism thus ensuring integrity ofsecurities dealings.

Traditionally, supervisors focused on rule based system that relied on reviewof transactions and historical performance, covering all operational areasregardless of any demonstrated or probable weakness.

The CMSA Tanzania has adopted Risk Based Supervision to the capital marketintermediaries since 2015.

This realization has led to the emergence of the risk based approach tosupervision where emphasis is placed on the process rather than onindividual transactions.

Risk Based Approach: Identifies, assesses and monitors licensed entity business conduct through off

and on site inspections and following up on complaints and self reportedbreaches;

For high risk and high impact firms, they are generally subject to more frequenton site inspections and closer scrutiny;

Requires licensed entities to perform own risk management activities based onrisks taken on by the firm and treatment is based on its risk profile and ability tomanage the risk.

Capital adequacy and liquidity margins required to take cover in case of anyfailures proved by intermediaries.

The four basic elements of an effective Risk Management system includes;

Board and senior management oversight;

Policies and procedures that have been developed and implemented to managebusiness activities effectively;

Risk measurement, monitoring, and management information systems that are inplace to support all business activities; and

Establishment of internal controls and the performance of comprehensive (externaland possibly internal) audits to detect any deficiencies. When rating the risk, therisk management system and mitigating activities are also considered.

The following inherent risks are associated with the licensed entities of the Tanzaniancapital markets. These risks may be related to each other in some respects and maychange as the capital markets develop.

Operational; Financial; Counterparty (or credit);Market and Liquidity; Legal / Regulatory/Compliance.

The risks are assessed and rated according to the frequency of occurrence and the impact to the firm and the market as a whole.

Despite high prospects and new opportunities in the economy, the Capitalmarkets Tanzania has a number of challenges that hampered its growth and itscontribution to the economy.

The following are some of the challenges to the market;Fewer listing contributed by fear of increases disclosure requirements,

slowness of local contents regulations by Regulatory Authority and taxloopholes;

Preference of family owned business as opposed to public companies hascontributed into few public offer of securities;

Absence of competitive market professionals including investment banks andmarket markers.

Limited liquidity in the market;

High yield on Government stocks which is discouraging issuers of fixedincome securities as benchmarking yield curve discourage issuers as thesame are too high;

Few institutional investors.

New securities legislation fully compliant with Iosco principles,Strengthening of the supervisory and enforcement capacity that will ensuremaximum investors protection

In addressing the demand and supply side problem of securities, initiativesto introduce tax incentive on securities will be proposed for considerationparticularly to reduce tax incentives for investors who buy and hold theirsecurities longer. This is intended to stimulate more listing and liquidity inthe market.

Follow up with the government on the remaining public corporations thatwere earmarked for divestiture.

Conduction of a baseline survey of public unlisted companies, findings ofwhich will assist in putting in place disclosure requirements for publicunlisted companies and periodic reporting requirements.

Strengthen the supervisory capacity through, capacity building for staff andlicensed dealers in handling emerging challenges in the market andstrengthening of offsite analysis system, enforcement of technological toolsfor market surveillance and investigation

Improving investors protection. The key goal under this objective will be toensure that Tanzanian listed and non-listed public companies adhere togood corporate governance;

Efforts to include new forms of investment vehicles such as hedge funds,mutual funds, REITS with the aim of increasing number of products to themarket

EXPECTATIONS FROM THE PROGRAM

Taking into account the size of Tanzania market which is still growing, the scope ofsurveillance, new products and foreign intermediaries participation, as the capitalmarkets regulator of Tanzania we have seen the need of getting prepared for thechanges of the market and acquire knowledge from the developed market on thefollowing areas;

New products, foreign intermediaries supervision and other tools to protectinvestors interest.

Listed companies monitoring

Crisis management framework for interconnected products and services.

Cyber crime management

It is my expectation that, the experience from the Japanese markets will add valueto the undergoing review of the Capital Market Act and its regulations in Tanzania.The same will be useful in the preparation of monitoring tools that will be usedto strengthen the supervisory power for listed companies, market intermediariesand other public companies in a view of upholding the market confidence andinvestors protection.

AHSANTENI SANA(THANK YOU)