The Non-Banking Financial Institutions Regulatory Authority (NBFIRA) has castigated most asset managers and management companies operating in Botswana for failure to appoint independent members to their Board of Directors.
Outlining key risks faced by investment houses operating in the country in its latest annual report, NBFIRA pointed out that ‘lack of independence’ poses a threat to such organisations.
“The tendency in most asset managers and management companies is such that the board usually consists of either employees from the group and/or its shareholders,” the annual report for 2013 stated.
NBFIRA re-stated the fact that most major asset managers in Botswana are subsidiaries of international corporations and most of their processes are done outside the country.
“These arrangements limit skills transfers to locals as key operations are being conducted externally,” the authority said.
It has further emerged that the local market faces limited skilled resources and this poses a threat in that some key roles such as ‘compliance officers’ are non-existent.
The authority says in terms of investment risk, the funds or portfolios may fail to meet investor’s expectations due to limited products in the market. The trend, according to the authority offers little diversification opportunities resulting in investors’ buying and holding to securities and thus pushing prices up.
It is also evident that concentration risk asset managers in Botswana are largely dependent on one major client which is reportedly managed by six asset managers.
Meanwhile NBFIRA revealed that it did not cancel, suspend or impose further conditions on any CMI licenses or exemptions during the 2012-2013 financial years. At the same time, no new licenses were issued for management companies for CIUs and no additional funds were approved.
Data provided by the authority shows that as at March 31, 2013, there were six licensed management companies for CIUs in the country, and these were managing 25 funds. The funds consist of eight money market funds, five equity funds, four fixed income (bonds) and eight balanced funds.
The NBFIRA Act requires that all Non-Bank Financial Institutions (NBFIs) who carry out the business of financial services or purport to be carrying out the business of financial services in Botswana should be licensed.
The purpose of licensing the NBFIs, according to the authority, is to lay out pre-operation conditions and to monitor the operations of the licensed entities.