Trading session in NSE
By Goddy Egene
The President, Association for the Advancement of the Rights of Nigerian Shareholders (AARNS), Dr. Faruk Umar, has made case for the establishment of special financial crime court where stockbrokers who sell clients’ securities without their consent should be tried.
In his presentation to the House Committee on Capital Market and Institutions at the on-going public hearing on the capital market, Umar noted that in order for the market to gain the confidence of investors, brokers who sell clients stocks without their consent should face a special financial crime court that would dispense of the case in the shortest possible time.
“Justice delayed is certainly justice denied. It is not enough for a broker to be suspended, what we want is our money. Even though the Securities and Exchange Commission (SEC) had assisted many investors in getting their money back, the assistance was limited to those who petitioned the Commission. There are still cases relating to hundreds of millions of Naira that have not been resolved by the NSE,” he said.
Faruk said that one of the reasons the Nigerian capital market suffered the heavy depression was massive lending by banks to operators in the market.
Going forward, he suggested that no bank should be made to invest in the capital market directly.
“If this must be done the total amount must not exceed 10 per cent of the total loan portfolio of the bank. Banks should not give loan for the purchase of their own shares to avoid double losses to the institution in case of any crash in the market. No bank should be allowed to take shares as collateral for share loan so as to protect depositor’s money,” he said.
Faruk added that another area that should be tackled so as to attract new listings is the cost of doing business in the market.
“There are investors willing to list their companies but the cost of listing discourages them. The same applies to doing Initial Public Offerings (IPOs) and Right Issues. Recently we have seen companies delisting from the market and this could be due to the high cost of business associated with being quoted,” he said.
Faruk also decried the proliferation of shareholders associations, saying regulators should improve on the regulations of these associations. According to him, companies nowadays find it difficult to conduct their Annual General Meeting(AGM)s due to the struggle by different associations to have their members nominated on the statutory Audit Committee.
“In Ghana, like United Sates, Audit Committee comprises only non-executive directors, without representation from the public shareholders. In Nigeria the Company and Allied Matters Act, in section 359 (6), provides that six members be nominated and elected at each AGM. While the directors are required to nominate up to three members, the public shareholders are to elect three members to represent them on the Audit Committee. Also, 15 years ago only 10 associations existed. Today there are over 40 associations.
Like political parties, unless there is a body similar to Independent National Electoral Commission (INEC) that would regulate the Associations, the situation may lead to more companies delisting from the market. The SEC must be empowered to regulate the associations in terms of number, conduct and enlighten of their members,” he said.