Rules & Dispute Resolution For Investment Clubs in Zambia

 

£        Investment Club Rules

Investment clubs are a great way to get into investing and to learn more about investing. It is also a way for me to develop some great friendships and have fun with my finances. One of the most important parts of an investment club is the rules.

 

The club must have rules regulating every activity done by the club, and they must be simple. The rules indicate rights and responsibilities of members, and ensure confidentiality of club activities. In essence, the club must be a legal entity. These rules are found in the club constitution, and the legal documents used to register the investment club.

 

Everyone should,

 

‘have the rules, know the rules, and follow the rules.’

 

I will remind my team that,

 

“…the easiest way to avoid upsets, collisions and disharmony in any club is to take the time to make sure that everyone is playing by the same rules”

 

Investment club rules cover everything from the actual act of investing to how the club is run. The rules help to keep everything orderly and help to ensure that everyone has a good investment experience. The rules are found in the club’s constitution, and documents used to register the club as a legal entity; and they cover the following:

Meetings Rules: when they are called (frequency-monthly); by whom (secretary); how long they last (2 hours); how many types of meetings (four-special, investment, regular, AGM); when agenda is sent (3 days to the meeting); and dates and venues (1^st or last Sunday/Saturday of month) etc.

Investment Rules: how to select investment (risk & return model); what to invest in (according to strategic plan); how much money to invest (clubs portfolio diversification ratio, e.g., 40% equity: 30% fixed; 10% deals; 10% property; 10% cash, etc); money lending policy to members and non members for debt investments (security, post dated cheques, interest rates, etc); and stop loss policies, etc.

Learning Rules: how many guest speakers to invite; when; what topical areas to share with club members; what type of research to be carried out (this is to depend on strategic plan.)

 

Membership Rules: number of members (between 8-18 optimal); skills of members (various preferred, with lawyer, accountant and business person); sex of members (depending on nature of club); relationships of members (e.g. no lovers, married, or single); and age of members.

Dispute Resolution Rules: as below.

 

£        Dispute Resolution

Conflict is actual or perceived opposition of needs, values and interests. Conflicts are common nature of all relationships. Often a group finds itself in conflict over facts, goals, methods or values. However, a conflict can be, and should be, win-win, where both parties get what they want, and not win-lose where one party gets what they want, or lose-lose, where both parties do not get what they want. However, without proper social arrangement or resolution, conflicts in social settings can result in verbal confrontation, physical fighting or lack of cooperation. The investment club hence needs a clear dispute resolution mechanism for conflict resolution.

 

Disputes as to the interpretation of the club rules: Any disputes as to the interpretation of the club rules should be decided by the Chairperson unless notice is served requesting that the mater should be resolved by a Special General Meeting of club members.

 

Disputes relating to the valuation of a member's share: Any disputes relating to the valuation of a member's share in the assets of the club or his/her entitlement to that share should be decided by a chartered accountant (to be appointed by the Chairperson of the club) of at least seven years standing whose certificate of decision should be final.  Fees incurred in obtaining this decision should be paid by the party to the dispute against whom the decision is made, or in the case of this not being clear the fees should be shared between the club and the member or ex-member concerned.

 

Disputes relating to investment option: Any dispute relating or arising from the investment options should be settled by the provisions of the strategic plan, and where such cannot apply, then the dual concepts of “risk-return’ should be applied, and the option that would occasion the least risk and most return should be chosen, irrespective of members personal preferences.

 

Disputes relating to club activities: Any dispute relating to club activities (networking events, like outings, etc) should be solved through reference to the strategic plan, and if not applicable, then the principle of utility should be applied, by choosing the activity that will cause most pleasure, with least encumbrances in terms of organizational, costs, etc; and which subsequently will cause the club member to be more united, than fractured.

 

Disputes arising out of emotional, ego, or personal relationships: It is important that the club takes a course in communication skills to enhance relationships, by focusing on being polite, kind, and emotionally intelligence. However, be that as it may, all disputes relating to personal relationships, including fractured love affairs, ego bursts, insults, etc, should be addressed by the chairperson individually convening the two or so parties involved, without third parties, and this should be based on the principle that the club is greater than the individuals, “the whole is greater than the sum of its parts,’, and if the disputants cannot agree, then they are given opportunity to leave the club, so that the conflict does develop a malignancy with deleterious and cancerous effects on the other remembers.

 

Disputes involving the chairperson: Ideally, the chairperson is like a Russian President, who should be above party politics, and hence, only makes decisions when there is a tie, or when finality is required, but not in initial stages. All contributions of the chair which might bring disunity are to be presented through vice chairperson or by the chair in his/her capacity as a mere member of the club. However, in case there is a dispute involving the chair, then the management committee, or in its absence, a team of 3 uninterested members should discuss the matter, and issue a unilateral decision, made through unanimous consent, and not voting.

 

Disputes resolution processes: All Disputes should be addressed at first through inviting the disputants to talk between or amongst them, (this invitation can be made by the chairperson or deputy chairperson, or any club member through the offices of chairperson or deputy chairperson within one week of notice of dispute. In case negotiation does not take place, or it takes place but the dispute is not resolved (for any reason), then the matter should be refered to the chairperson as the mediator, to mediate between the parties (leaving out the rest of the club members to avoid ganging up and side taking); and if the chair fails, then the matter can be brought to the full membership of the club, at which time the options are settle or ship.

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