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COMMODITY EXCHANGES ACT

[PRINCIPAL LEGISLATION]

ARRANGEMENT OF SECTIONS

   Section

Title

PART I
PRELIMINARY PROVISION

   1.   Short Title and Application.

   2.   Interpretation.

   3.   Determination of "fit and Proper".

PART II
ADMINISTRATION AND RESPONSIBILITIES OF THE AUTHORITY

   4.   Administration and enforcement.

   5.   Regulatory objectives of the Authority.

   6.   Functions of the Authority.

PART III
LICENSING OF COMMODITY EXCHANGES

   7.   Prohibition of operating a commodity exchange without a licence.

   8.   Application and gram of licence.

   9.   Rules of a commodity exchange.

   10.   Appointment of a representative of the public.

   11.   Amendment, alterations etc of the rules.

   12.   Compliance with the rules by members of the commodity exchange.

PART IV
RESPONSIBILITIES OF A LICENSED COMMODITY EXCHANGE

   13.   Fairness, transparency, prudency and public interest.

   14.   Preserving public interest and compliance of the laws and rules.

   15.   Standard of practice, disclosures, confidentiality etc.

   16.   Duty to notify the authority on irregularity.

   17.   Duty to notify the authority on action taken.

   18.   Duty to maintain premises, personnel, systems etc.

   19.   Duty to notify the Authority on changes of premises, equipment etc,.

PART V
ASSISTANCE TO THE AUTHORITY AND DIRECTIVES OF THE AUTHORITY

   20.   Assistance to the Authority.

   21.   Directive of the Authority to a commodity exchange.

   22.   Types of the directives to be issued by the Authority.

   23.   Censure or removal of officer of a commodity exchange for contravention.

   24.   Penalty for failure to comply with the directive of the Authority.

   25.   Appeals against Authority’s directives.

PART VI
COMMODITY EXCHANGE DISCIPLINARY MEASURES AND ADMINISTRATIVE AND EMERGENCY POWERS OF THE AUTHORITY

   26.   Notification of disciplinary action to the Authority.

   27.   Review, affirmation of a disciplinary action by the Authority.

   28.   Authority’s intervention where disciplinary action is not taken.

   29.   Action by commodity exchange not to prejudice power of the Authority.

   30.   Appeals for disciplinary actions of the commodity exchange.

   31.   Emergency powers of the Authority.

   32.   Penalty for non- compliance with Authority’s emergency directives.

PART VII
REVOCATION OF COMMODITY EXCHANGE’S LICENCES

   33.   Written notice of revocation.

   34.   Deemed cession of operations of a commodity exchange.

   35.   Effect of revocation on transactions, agreements etc.

PART VIII
APPROVAL OF COMMODITY CONTRACT, WITHDRAW AND FIXING OF POSITIONS AND TRADING LIMITS

   36.   Approval of the contracts by the Authority.

   37.   Fixing of position and trading limits in commodity contracts.

PART IX
LICENSING OF COMMODITY MARKET INTERMEDIARIES

   38.   Licensing requirements.

   39.   Accreditation of representatives.

   40.   Application for license.

   41.   Grant or refusal of license.

   42.   Criteria for licensing of foreign companies.

   43.   Licensing of representatives.

   44.   Authority may impose conditions.

   45.   Authority may issue directives.

   46.   Authority to suspend or revoke licence.

   47.   Effect of revocation or suspension.

   48.   Statutory management.

   49.   Register of licencees.

   50.   Notice of cessation or change of business.

PART X
CONDUCT OF BUSINESS

   51.   Standards of conduct.

   52.   Business conduct regulations.

   53.   Risk disclosure.

   54.   Client agreement.

   55.   Issue of contract confirmation note.

PART XI
ACCOUNTS AND AUDIT

(a) Accounts and Audit of Commodity Exchanges

   56.   Maintenance of books of accounts and record.

   57.   Authority may appoint auditor.

   58.   Annual report.

(b) Accounts and Audit of Market Intermediaries

   59.   Accounts and records to be kept.

   60.   Client assets.

   61.   Appointment of auditors.

   62.   Audited accounts to be lodged with Authority.

   63.   Auditor to report to Authority in certain cases.

   64.   Authority may appoint auditor.

PART XII
APPLICATION OF CERTAIN PROVISIONS OF THE CAPITAL MARKETS AND SECURITIES ACT

   65.   Provisions of the Capital Markets and Securities Act.

PART XIII
MARKET ABUSE

   66.   Insider dealing, manipulation, rigging etc.

   67.   Bucketing.

   68.   Cornering.

   69.   Liability to pay damages.

PART XIV
INFORMATION, INSPECTION AND INVESTIGATION

   70.   Authority may call for information.

   71.   Inspection.

   72.   Investigation.

PART XV
DISCIPLINE OF MARKET INTERMEDIARIES

   73.   Disciplinary action in respect of licensees.

   74.   Additional disciplinary orders.

   75.   Other circumstances for disciplinary action.

   76.   Effect of revocation or suspension.

   77.   Procedural requirements for exercise of disciplinary powers,

   78.   Disciplinary Committee.

PART XVI
OFFENCES AND PENALTIES

   79.   Offences and penalties.

   80.   General penalty.

PART XVII
MISCELLANEOUS PROVISIONS

   81.   Cooperation between regulators.

   82.   Immunity.

   83.   Rights of applicants and holders of licenses.

   84.   Appeals.

   85.   Liability of licensee for acts of representative, etc.

   86.   Authority may make regulations.

   87.   General directions by Authority.

   88.   Complaints committee.

   89.   Assistance to regulators outside Tanzania.

   90.   Forms.

   91.   Codes, guidelines etc.

PART XVIII
CONSEQUENTIAL AMENDMENTS

(a) Amendments of the Capital Markets and Securities Act

   92.   Construction Cap. 79.

   93.   Amendment.

(b) Amendments of the Warehouse Receipts Act

   94.   Construction of Cap.339.

   95.   Amendment of section 70A.

CHAPTER
THE COMMODITY EXCHANGES ACT

An Act to make provisions to facilitate sound management of commodity exchanges, ensuring the proper management of the business of persons who accept consignment of commodities on commodity exchanges whether in physical or electronic format setting out conditions for the organization of commodity exchanges, management of transactions on commodity markets and other matters, thereby contributing to the appropriate price discovery for all listed commodity contracts and management of the markets for commodities and to the protection of buyers, sellers and investors in the transactions on commodity exchanges markets.

[????????????]
[G.N. No. ???????]

ENACTED by Parliament of the United Republic of Tanzania.

Act No. 19 of 2015

PART I
PRELIMINARY PROVISIONS (ss 1-3)

1.   Short Title and Application

   (1) This Act may be cited as the Commodity Exchanges Act, 2015 and shall come into operation on such date as the Minister may, by notice published in the Gazette, appoint.

   (2) This Act shall apply to Mainland Tanzania as well as to Tanzania Zanzibar.

2.   Interpretation

   (1) In this Act, unless the context otherwise requires–

   "Authority" means the Capital Markets and Securities and securities Authority established by section 6 of the Capital Markets Act * ;

   "clearing facility" or "clearing house" has the meaning ascribed to it under the Capital Markets and Securities Act *;

   "clearing member" means a member of the clearing house engaged in providing clearing services and includes all categories of clearing members as may be prescribed by the Authority and shall include trading member while performing functions of clearing and settling trades;

   "commodity" means–

   (a)   agricultural, livestock, fishery, forestry, mining or energy goods, or any product that is manufactured or processed from any such goods;

   (b)   financial instruments;

   (c)   an index, right or interest in any such commodity;

   (d)   any other matter as may be determined by the Authority through official Gazette notification to be the subject of a commodity contract;

   "commodity broker" means a company which is licensed by the Authority as an agent of buyer, seller or investors to carry on the business of soliciting or accepting orders, for the purchase or sale of any commodity contracts by way of commodity trading, whether or not the business is part of, or is carried on in conjunction with, any other business;

   "commodity broker’s representative" means a person who acts for, or by arrangement with, a commodity broker other than a person who is a director of a company holding a commodity broker's licence or is a person who is in the direct employment of a commodity broker and who performs any of the functions of that commodity broker in connection with trading in commodities whether his remuneration is by way of commission or otherwise;

   "commodity contract" includes a–

   (a)   spot commodity contract;

   (b)   commodity futures contract; and

   (c)   such other contract or class of contracts as the Authority may prescribe by regulations under this Act;

   "commodity dealer" means a person who, is licensed by the Authority to deal in commodity contracts as principal or as an agent;

   "commodity dealer’s representative" means a natural person licensed by the Authority to act for, or by arrangement, with a commodity dealer, to perform any of the functions of that commodity dealer in connection with dealing in commodity contracts, other than work ordinarily performed by accountants, clerks or cashiers whether or not he is remunerated, and whether his remuneration, if any, is by way of salary, wages, commission or otherwise;

   "commodity exchange" means a market licensed by the Authority at which, or a facility, whether electronic or otherwise by means of which, offers or invitations to sell, purchase or exchange commodity contracts are regularly made on a centralised basis, being offers or invitations that are intended or may reasonably be expected, to result, directly or indirectly, in the acceptance or making, respectively, of offers to sell, purchase or exchange of commodity contracts but does not include–

   (a)   the office or facilities of a commodity dealer or broker;

   (b)   the office or facilities of a clearing house;

   "commodity exchange business" means trading in, or advising on trading in commodity contracts on a commodity exchange;

   "commodity forward contract" means a contract the effect of which is that one party agrees to deliver a specified commodity, or a specified quantity of a specified commodity, to another party at a specified future time and at a specified price payable at the time of entering the contract, but does not include a commodity futures contract;

   "commodity futures contract" means a contract the effect of which is that–

   (a)   one party agrees to deliver to the other party a specified commodity, or a specified quantity of a specified commodity, at a specified future time and at a specified price payable at that future time, pursuant to the terms and conditions of the rules of the commodity exchange at which the contract is made; or

   (b)   the parties will discharge their obligations under the contract by settling the difference between the value of a specified quantity of a specified commodity agreed at the time of the making of the contract and at a specified future time, such difference being determined in accordance with the rules of the commodity exchange at which the contract is made,

and includes options on contracts of the nature described in paragraphs (a) or (b);

   "commodity market" means–

   (a)   a market, whether in Tanzania or elsewhere, at which commodity contracts are regularly traded; or

   (b)   an electronic system, whether operating in Tanzania or elsewhere, through which trading in commodity contracts is carried out, but excludes an electronic facility which merely provides price or other information relating to commodity contracts whether that facility is part of or carried on in conjunction with the provision of any other information not related to commodity contracts and which does not permit users of the facility to channel orders for, execute transactions in, or make markets in, commodity contracts;

   "commodity pool operator" means any person who carries on a business in the nature of a collective investment scheme and who, in connection therewith, accepts or receives from other persons funds, security or property, either directly or through capital contributions, the sale of shares or other forms of security or otherwise for the purpose of buying or selling commodities on spot or for the purpose of trading future or option contracts;

   "commodity pool operator’s representative" means a person in the direct employment of, or acting for, or by arrangement with, a spot commodity pool operator, who performs for that commodity pool operator any of the functions of a commodity pool operator;

   "commodity trading adviser" is a company which for payment has been licensed by the Authority to engage in the business of advising others either directly or through publications or writings as to the value of commodities or derivatives or as to the advisability of investing in, purchasing or selling commodities contracts but does not include–

   (a)   a licensed commodity dealer or broker whose provision of advice or issuance of analyses or reports is solely incidental to the conduct of his business as a commodity dealer or broker and who receives no special compensation therefore;

   (b)   a person who gives such advice or issues such analyses or reports on:

      (i)   a newspaper, magazine, book or other publication which is made generally available to the public; or

      (ii)   television broadcast or radio broadcast for reception by the public, whether on subscription or otherwise;

   "commodity trading adviser’s representative" means a natural person in the employment of, or acting for, or by arrangement with a commodity trading adviser, who performs for that commodity trading adviser any of the functions of a commodity trading adviser other than work ordinarily performed by accountants, clerks or cashiers whether or not he is remunerated, and whether his remuneration, if any, is by way of salary, wages, commission or otherwise;

   "dealing in commodity contracts" means, whether as principal or as agent–

   (a)   making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into any agreement for or with a view to the purchase or sale of a commodity contracts; or

   (b)   soliciting or accepting any order for, or otherwise dealing in, commodity contracts.

   "financial instrument" includes any currency, currency index, interest rate instrument, interest rate index, share, share index, stock, stock index, debenture, bond index, bearer bonds, commercial paper, Exchange Traded Fund, contracts for difference, a group or groups of such financial instruments and such other financial instruments or otherwise as may be determined by the Authority through notification in the official Gazette;

   "leveraged commodity trading" means–

   (a)   the act of entering into or offering to enter into, or inducing or attempting to induce a person to enter into or offer to enter into, a contract or an arrangement on a margin basis (other than a commodity futures contract) whereby a person undertakes as determined by the terms and conditions of the contract or arrangement–

      (i)   to make an adjustment between himself and another person according to whether a commodity is worth more or less, at a specified point in time;

      (ii)   to pay an amount of money determined or to be determined by reference to the change in value of a commodity over a specified period of time; or

      (iii)   to deliver to another person at an agreed future time an agreed amount of commodities at an agreed price;

   (b)   the provision by any person referred to in paragraph (a) of any advance, credit facility or loan, directly or indirectly, to facilitate an act of the description referred to in that paragraph; or

   (c)   the act of entering into or offering to enter into, or inducing or attempting to induce a person to enter into an arrangement with another person whether on a discretionary basis or otherwise to enter into any contract to facilitate an act of the description referred to in paragraph (a) or (b);

   "market contract" in relation to a clearing house, means–

   (a)   a contract subject to the rules of a clearing house entered into by the clearing house with a clearing member under a novation which is both in accordance with those rules and for the purpose of clearing and settlement of transactions using a clearing facility and subject to the clearing house whether before or after default proceedings have commenced; and

   (b)   a transaction which is being cleared or settled using a clearing facility and subject to the rules of a clearing house, whether or not a novation referred to in paragraph (a) takes place;

   "market intermediary" means a corporate body duly licensed under this Act to provide services in the commodities exchanges and shall include any other person who is prescribed by the Authority to be a market intermediary;

   "member" means a shareholder or any person who holds shares of any class or description in the share capital of a commodity exchange;

   "Minister" means the Minister responsible for Finance;

   "novation" in relation to clearing houses, means assigning or trading over to a clearing house the legal counterparty risk for the trade executed by two counterparties;

   "principal", in relation to a representative, means a person whom the representative is in the direct employment of, acting for or by arrangement with, and for whom the representative carries out any commodity exchange business;

   "representative" means a commodity dealer’s representative or a commodity trading adviser’s representative;

   "rules" in relation to a commodity exchange or clearing house, means the rules, By-Laws or such similar body of statements, by whatever name called, that govern the activities and conduct of–

   (a)   the commodity exchange or clearing house and its members or clearing members, as the case may be;

   (b)   other persons in relation to it,

   whether or not those rules, by-Acts or similar body of statements are made by the commodity exchange or clearing house or are contained in its constituent documents;

   "spot commodity contract" means a contract for the supply of a commodity which is traded on a commodity exchange the terms of which delivery is made within two trading days or a period approved by the Authority as the standard delivery period for a particular commodity;

   "spot commodity trading" means the purchase or sale of a commodity at its current market or spot price, where it is intended that such transaction results in the physical delivery of the commodity;

   "trading member" means a company licensed by the Authority to deal in commodities trading activities and admitted by a commodity exchange to trade on commodities and contracts for that particular commodity exchange;

   "Tribunal" means the tribunal established under the Capital Markets and Securities Act * to adjudicate disputes in the capital market and commodity exchanges industry;

   "warehouse" means any building, structure or other protected enclosure duly licensed by the Tanzania Warehouse Licensing Board or any other relevant authority to be used for the storage or conditioning of commodities for the purposes of commodity exchange trading;

   "warehouse inspector" means a person empowered to inspect warehouses and commodities kept therein to ensure that the warehouse operator complies with the law and the conditions of the operator’s licence;

   "warehouse operator" means a person duly licensed to engage in the business of operating a warehouse for receiving, storing, shipping or handling commodities for the purposes of commodity exchange trading;

   "warehouse receipt" means a receipt issued by a licensed warehouse operator in respect of the storage, handling or shipment of a commodity for the purposes of commodity exchange trading.

3.   Determination of "fit and proper"

   (1) For purposes of this Act in considering whether a person is a fit and proper person the Authority shall, in addition to any other matter that it may consider relevant, have regard to–

   (a)   the financial status or solvency;

   (b)   the educational or other qualifications or experience having regard to the nature of the functions which the person will perform, if the application is granted;

   (c)   the ability to carry on the commodity exchange business competently, honestly and fairly; and the reputation, character, financial integrity and reliability, of–

      (i)   the individual himself where the applicant is an individual, or

      (ii)   the company, its directors, chief executive, management and all other key personnel, and any substantial shareholder of the company where the applicant is a company.

   (2) Without limiting the generality of subsection (1), the Authority may, in considering whether an applicant is a fit and proper person, have regard to–

   (a)   whether the person has contravened the provision of any Act designed for the protection of investors against financial loss due to dishonesty or incompetence of, or malpractice by, persons engaged in commodity trading;

   (b)   whether the person was a director of a market intermediary that has been liquidated or is under liquidation or statutory management;

   (c)   whether the person has taken part in any business practice that, in the opinion of the Authority, was fraudulent, prejudicial or otherwise improper, whether unlawful or not or which otherwise discredited the person’s methods of conducting business;

   (d)   whether the person has taken part or been associated with any other business practice as would, or has otherwise conducted himself in such manner as to, cast doubt on his competence and soundness of judgment;

   (e)   any information in the possession of the Authority provided by the applicant relating to any person who is to be employed by, associated with, or who shall be acting for or on behalf of the applicant for the purposes of a commodity exchange business;

   (f)   where the applicant is a company in a group of companies, any other company in the same group of companies or any substantial shareholder or officer of the company;

   (g)   whether the person has established effective internal control procedures and risk management systems to ensure its compliance with all applicable regulatory requirements; and

   (h)   the state of affairs of any other business which the person carries on or proposes to carry on.

   (3) For the purpose of this section, "group of companies" means any two or more companies one of which is the holding company of the other or others, as the case may be.

PART II
ADMINISTRATION AND RESPONSIBILITIES OF THE AUTHORITY (ss 4-6)

4.   Administration and enforcement

   The Authority shall be responsible for the regulation and supervision of commodity exchanges and administration and enforcement of this Act.

5.   Regulatory objectives of Authority

   The regulatory objectives of the Authority in relation to commodity exchanges are to–

   (a)   maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of commodity exchange;

   (b)   provide an appropriate degree of protection for buyers, sellers or investors in commodity exchange trading, having regard to the general principle that buyer, seller or investors shall take responsibility for their decisions; and

   (c)   promote, stability, integrity and discipline in the commodity exchange markets.

6.   Functions of the Authority

   The functions of the Authority under this Act are to–

   (a)   advise the Minister on all matters relating to commodity exchanges and their development;

   (b)   approve commodity contracts;

   (c)   investigate and act upon violation of the laws concerning the regulation of commodity exchanges and related businesses;

   (d)   take such steps as it considers appropriate to ensure that this Act and any other legislation administered by the Authority are complied with;

   (e)   take such steps as it considers appropriate to maintain and promote the fairness, efficiency, competitiveness, transparency and orderliness of commodity exchanges business;

   (f)   license commodity exchanges, commodity exchanges market intermediaries, commodity market institutions to supervise, monitor and regulate the activities of all such persons;

   (g)   set standards of competence for commodity exchanges market intermediaries;

   (h)   approve the rules of commodity exchanges’s depositories, and clearing houses;

   (i)   promote, encourage and enforce the proper conduct, competence and integrity of commodity market intermediaries;

   (j)   promote the awareness of the public with regard to commodity exchange business and markets;

   (k)   formulate principles for the guidance of the market;

   (l)   levy fees and charges as may be prescribed by the Authority in relation to the regulation of commodity exchanges, commodity exchange intermediaries and institutions;

   (m)   counter and suppress market abuses in commodity exchange markets;

   (n)   perform functions conferred or imposed on the Authority by this Act or under any other law relating to commodity exchanges;

   (o)   co-operate with and provide assistance to regulatory authorities, within and outside Tanzania in relation to exchange of information and assistance in investigation on matters relating to commodity exchanges trading.

PART III
LICENSING OF COMMODITY EXCHANGES (ss 7-12)

7.   Prohibition of operating a commodity exchange without a licence

   (1) No person shall establish, maintain or assist in establishing or maintaining or hold himself out as providing or maintaining a commodity exchange unless such commodity exchange, is licensed by the Authority in accordance with the requirements of subsection (4) of this section.

   (2) No licence shall be granted to any person to operate as a commodity exchange other than to a company incorporated under the Companies Act.

   (3) A person who contravenes subsection (1), commits an offence and shall, on conviction, be liable–

   (a)   in the case of a natural person, to a fine of not less than fifty million shillings or imprisonment for a term of not less than five years or to both the fine and imprisonment; and

   (b)   in the case of a company, to a fine of not less than one hundred million shillings.

   (4) The Authority may, in writing and subject to any conditions or restrictions as it may consider fit to impose, grant a commodity exchange licence, if the Authority is satisfied that the interest of the public will be served by the granting of the licence, it shall be consistent with the Authority’s objectives under the Act to license <<<< unclear text>> commodity exchange and that the applicant–

   (a)   is a fit and proper person for the licence sought;

   (b)   has a board of directors which is constituted in accordance with the regulations prescribed by the Authority in relation to corporate governance;

   (c)   complies with the minimum prescribed capital requirements;

   (d)   shall operate fairly, transparently, efficiently and ethically in accordance with the requirements of the licence sought;

   (e)   shall manage any risks associated with its business and operations prudently;

   (f)   has rules that make satisfactory provision for matters set out in section 9; and

   (g)   complies with such other conditions as may be required by the Authority.

8.   Application and grant of licence

   (1) An application to operate a commodity exchange, shall be–

   (a)   made by a company;

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