Browse Profiles > Cameroon > Objectives and Principles of Securities Regulation
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Cameroon

Objectives and Principles of Securities Regulation

Summary
In June 2003, following an International Monetary Fund (IMF) assessment, the Financial Sector Reform and Strengthening Initiative (FIRST) Initiative launched a "Capacity Building of the Financial Markets Commission" project for Cameroon, which was completed in June 2005. The aim of the project was to provide the Financial Markets Commission (CMF) with the appropriate tools to supervise and regulate the Douala Stock Exchange (DSX), and, in a second phase, assist it in the licensing of issuers, brokers and dealers. However, the project was terminated before the completion of the second phase due to uncertainties about the future of the DSX and the viability of the market. According to the IMF's 2007 Article IV Consultation with Cameroon, the breadth and depth of Cameroon's financial markets should be expanded. The IMF pointed out that the authorities are addressing this issue and there are plans to develop the securities market by transferring zero-coupon treasury bond transactions to the bond market and issuing new securities, by the end of 2007. The government requested that the IMF and World Bank assess the financial sector and planned to develop an action plan for improving financial intermediation based on the assessment, also by the end of 2007.

    General Overview

    According to the International Monetary Fund's (IMF) 2007 Article IV Consultation with Cameroon, the breadth and depth of Cameroon's financial markets should be expanded. The IMF pointed out that the authorities are addressing this issue and there are plans develop the securities market by transferring zero-coupon treasury bond transactions to the bond market and issuing new securities, by the end of 2007. Also, the government requested that the IMF and World Bank assess the financial sector and planned to develop an action plan for improving financial intermediation based on the assessment, also by the end of 2007.
    In June 2003, following an IMF assessment, the Financial Sector Reform and Strengthening Initiative (FIRST) Initiative launched a "Capacity Building of the Financial Markets Commission" project for Cameroon, which was completed in June 2005. The aim of the project was to provide the Financial Markets Commission (CMF) with the appropriate tools to supervise and regulate the Douala Stock Exchange (DSX), and, in a second phase, assist it in the licensing of issuers, brokers, and dealers. However, the project was terminated before the completion of the second phase due to uncertainties about the future of the DSX. The FIRST Initiative recommended implementing a "credible plan for the recapitalization of the DSX" (p. 3), strengthening the credibility of the financial markets, and increasing the participation of companies in the DSX. As a result of the project, there is "greater awareness of the complexities of developing a stock exchange" (p. 3).
    The IMF's 2006 Financial Systems Stability Assessment (FSSA) on the Central African Economic and Monetary Community (CEMAC) emphasized the problems with maintaining both Cameroon's stock exchange (the DSX) and the Central-African regional stock exchange, the Bourse des valeurs mobilières (BVMAC). It suggests that the exchanges merge in order to preserve the viability of the market, considering its small size and limited resources. It also recommends that integration with other financial markets, such as those in West and South Africa be considered.
    The 2006 IMF Report on the Observance of Standards and Codes (ROSC) reported that the Commission de Surveillance du Marché Financier de l'Afrique Centrale (COSUMAF) is the Central African regional financial markets supervisor. CEMAC is comprised of Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea and Gabon. The CMF, first established in 1999, is the Cameroon financial markets regulator. The FIRST Initiative website indicates that the objectives of the CMF are to provide appropriate protection for investments in securities and other financial instruments, enhance investor awareness, and the supervision and surveillance of the stock exchange and other market participants to ensure proper and ethical conduct.
    The DSX was inaugurated in April 2003 as the sole securities markets agent in Cameroon, but so far, according to a 2006 FIRST Initiative report, it has failed to begin trading activities. The African Development Bank's 2006 report conveys that while the government has a legal framework governing the issuance of treasury bills and bonds, no treasury bills have been issued. The zero-coupon bonds that exist are restructured parastatal and government debt. The Caisse Autonome d'Amortissement (CAA) is the clearing house; and the Société Générale des Banques du Cameroun is the settlement bank. According to FIRST Initiative website, Cameroon has 11 banks, which hold 5 percent each of equity in the DSX. The remaining 45 percent of equity are owned by other institutions such as insurance companies. Furthermore, the Netherlands Development Finance Company (FMO) is a 5 percent shareholder of the DSX.
    Cameroon is not a member of the International Organization of Securities Commissions (IOSCO), according to the IOSCO website.


    The Principles

    1. The responsibilities of the regulator should be clear and objectively stated.

    The CMF, first established in 1999, is the Cameroon financial markets regulator. The FIRST Initiative website indicates that the objectives of the CMF are to provide appropriate protection for investments in securities and other financial instruments, enhance investor awareness, and the supervision and surveillance of the stock exchange and other market participants to ensure proper and ethical conduct. However, there is insufficient publicly available information addressing Cameroon's compliance with this principle.

    2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.

    According to FIRST Initiative's 2006 Project Completion Report, the CMF was understaffed and did not receive sufficient funding during the duration of the project.

    4. The regulator should adopt clear and consistent regulatory processes.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    5. The staff of the regulator should observe the highest professional standards, including appropriate standards of confidentiality.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    6. The regulatory regime should make appropriate use of Self-Regulatory Organizations (SROs) that exercise some direct oversight responsibility for their respective areas of competence, to the extent appropriate to the size and complexity of the markets.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    7. SROs should be subject to the oversight of the regulator and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    8. The regulator should have comprehensive inspection, investigation and surveillance powers.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    9. The regulator should have comprehensive enforcement powers.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    10. The regulatory system should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    11. The regulator should have authority to share both public and non-public information with domestic and foreign counterparts.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    12. Regulators should establish information sharing mechanisms that set out when and how they will share both public and non-public information with their domestic and foreign counterparts.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    13. The regulatory system should allow for assistance to be provided to foreign regulators who need to make inquiries in the discharge of their functions and exercise of their powers.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    14. There should be full, timely and accurate disclosure of financial results and other information that is material to investors’ decisions.

    According to the 2005 IMF Article IV Consultation report, Cameroon adopted a new public procurement code in 2004 to strengthen transparency and the independent oversight of procurement procedures in Cameroon. Furthermore, in its 2007 report on Selected Issues, the IMF recommended promoting stronger corporate governance, and using best accounting practices for small and medium-sized enterprises (SMEs). Nevertheless, there is insufficient publicly available information addressing Cameroon's compliance with this principle.

    15. Holders of securities in a company should be treated in a fair and equitable manner.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    16. Accounting and auditing standards should be of a high and internationally acceptable quality.

    According to the December 2006 Institute of Chartered Accountants of Cameroon (ONECCA) self-assessment, all companies in Cameroon, except for banks and credit institutions, must comply with the Organization for the Harmonization of African Business Law (OHADA) accounting framework, which was established to bring about harmonization of business law, greater regional integration and economic growth in sub-Saharan African countries.. Banks and credit institutions adhere to "Plan Comptable Des Etablissements De Credit" issued by the Central African Banking Commission (Commission D'Afrique Centrale, or COBAC). ONECCA encourages "members to promote the using of IFRS" (p. 84) and "is working to sensitize environment to the necessity to adopt IAS/IFRS but [does not have] enough power to succeed alone in this evolution" (p. 84). A 2006 International Monetary Fund (IMF) report on CEMAC noted that the OHADA accounting framework "places an excessive burden on SMEs." The IMF recommended strengthening the accounting framework for large companies and making it more consistent with IFRSs. However, there is insufficient publicly available information addressing Cameroon's compliance with this principle.

    A 2006 report on CEMAC noted that lack of standards on auditing in the CEMAC region, which includes Cameroon, raised "serious concerns" regarding the quality of audits. The IMF recommended adoption of the International Standards on Auditing to improve the regulatory framework and the negative image of accounting profession in the region. The 2006 ONECCA self-assessment reports that it informs its members on the existence and availability of the International Auditing and Assurance Standards Board (IAASB) pronouncements, takes measures to train its members, and conducts seminars on IAASB standards and guidance. Furthermore, the ONECCA pointed out that it plans to officially adopt the IAASB pronouncements.

    17. The regulatory system should set standards for the eligibility and the regulation of those who wish to market or operate a collective investment scheme.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    18. The regulatory system should provide for rules governing the legal form and structure of collective investment schemes and the segregation and protection of client assets.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    19. Regulation should require disclosure, as set forth under the principles for issuers, which is necessary to evaluate the suitability of a collective investment scheme for a particular investor and the value of the investor’s interest in the scheme.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    20. Regulation should ensure that there is a proper and disclosed basis for asset valuation and the pricing and the redemption of units in a collective investment scheme.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    21. Regulation should provide for minimum entry standards for market intermediaries.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    22. There should be initial and ongoing capital and other prudential requirements for market intermediaries that reflect the risks that the intermediaries undertake.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    23. Market intermediaries should be required to comply with standards for internal organization and operational conduct that aim to protect the interests of clients, ensure proper management of risk, and under which management of the intermediary accepts primary responsibility for these matters.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    24. There should be procedures for dealing with the failure of a market intermediary in order to minimize damage and loss to investors and to contain systemic risk.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    25. The establishment of trading systems including securities exchanges should be subject to regulatory authorization and oversight.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    26. There should be ongoing regulatory supervision of exchanges and trading systems which should aim to ensure that the integrity of trading is maintained through fair and equitable rules that strike an appropriate balance between the demands of different market participants.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    27. Regulation should promote transparency of trading.

    There is no publicly available information as to Cameroon's compliance with this principle.

    28. Regulation should be designed to detect and deter manipulation and other unfair trading practices.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    29. Regulation should aim to ensure the proper management of large exposures, default risk and market disruption.

    There is insufficient publicly available information addressing Cameroon's compliance with this principle.

    30. Systems for clearing and settlement of securities transactions should be subject to regulatory oversight, and designed to ensure that they are fair, effective and efficient and that they reduce systemic risk.

    The CAA is the clearing house; and the Société Générale des Banques du Cameroun is the settlement bank. However, there is insufficient publicly available information addressing Cameroon's compliance with this principle.

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    Sources of Assessment

    Financial Sector Reform and Strengthening Initiative, "Cameroon: Capacity Building of the Financial Markets Commission," January 2006. Available from Financial Sector Reform and Strengthening Initiative website. Accessed on January 10, 2008. (FIRST 2006)

    International Monetary Fund, "Central African Economic and Monetary Community: Financial System Stability Assessment, including Reports on the Observance of Standards and Codes on the following topics: Monetary and Financial Policy Transparency, and Banking Supervision," Country Report No. 06/321, August 2006. Available from World Bank website. Accessed on January 10, 2008. (IMF 2006a)

    International Monetary Fund, "Cameroon: 2007 Article IV Consultation, Third Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility, Request for Waiver of Performance Criterion, Request for Modification of Performance Criterion, and Financing Assurances Review--Staff Report; Staff Supplement and Statement; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for Cameroon," Country Report No. 07/285, August 2007. Available from International Monetary Fund website. Accessed on January 10, 2008. (IMF 2007a)

    Relevant Organizations

    Central African Banking Commission - Commission Bancaire de l'Afrique Centrale (COBAC) (in French only)

    Central African Economic and Monetary Union - Communauté Economique et Monétaire de Afrique Centrale (CEMAC) (in French only)

    Central African Financial Markets Supervisor - Commission de Surveillance du Marché Financier de l'Afrique Centrale (COSUMAF)

    Douala Stock Exchange (DSX)

    Financial Markets Commission - Commission des marchés financiers (CMF)

    Institute of Chartered Accountants of Cameroon - Ordre National des Experts Comptables du Cameroun (ONECCA)

    Ministry of Economy and Finance - Ministère de l'Économie et des Finances (MEF)

    Organization for the Harmonization of Business Law in Africa - Organization pour l'Harmonization du Droit des Affaires en Afrique (OHADA)



    Relevant Legislation/Regulation

    Law 99/015 On Creation and Organization of Securities Market, 1999 Loi N° 99/015 Portant Creation et Organisation D'un Marche Financier, 1999 (in French only)

    Decree 2001/213 July 31, 2001

    Decision 02/002 General Regulations of the Financial Markets Commission, 2002 - Desicion N° 02/002 Portant Reglement General De La Commission Des Marches Financiers, 2002 (in French only)



    Supplementary Sources

    African Development Bank Group, "2006 At a Glance: Cameroon," 2006. Available from African Development Bank website. Accessed on January 10, 2008. (ADB 2006)

    Financial Sector Reform and Strengthening Initiative website. Accessed on January 10, 2008. (FIRST Initiative website)

    Institute of Chartered Accountants of Cameroon, "Response to the IFAC Part 2, SMO Self-Assessment Questionnaire," Self-assessment prepared as a part of the International Federation of Accountants' (IFAC) Member Body Compliance Program, December 2006. Available from International Federation of Accountants' website. Accessed on January 10, 2008. (ONECCA 2006)

    International Monetary Fund, "Cameroon: 2005 Article IV Consultation and Staff-Monitored Program--Staff Report; Staff Statement; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Cameroon," Country Report No. 05/164, Washington D.C.: May 2005. Available from International Monetary Fund website. Accessed on January 10, 2008. (IMF 2005)

    International Monetary Fund, "Cameroon: Selected Issues," Country Report No.07/287, Washington, D.C.: IMF, August 2007. Available from International Monetary Fund website. Accessed on November 16, 2007. (IMF 2007b)

    International Monetary Fund, "Central African Economic and Monetary Community: Report on the Observance of Standards and Codes--FATF Recommendations for Anti-Money Laundering and Combating the Financing of Terrorism," Country Report No. 06/322, August 2006. Available from International Monetary Fund website. Accessed on January 10, 2008. (IMF 2006b)

    International Organization of Securities Commission website, Accessed on January 10, 2008. (IOSCO website)

    U.S. Department of Commerce, "Doing Business in Cameroon: A Country Commercial Guide for U.S. Companies," U.S. & Foreign Commercial Service and U.S. Department of State, 2004. Available from U.S. Department of Commerce website. Accessed on January 10, 2008. (U.S. DoC 2004)
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