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Sustaining SEC’s Improved Regulation of the Capital Markets

23 May 2012

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 DG SEC, Arunma Oteh


Goddy Egene writes that as prospects of further recovery in the nation’s market becomes brighter, the regulatory framework being put in place by the Securities and Exchange Commission (SEC) in the past years should be sustained

It is a consensus among stakeholders that the prospects for the nation’s capital market have since the crisis in 2008, have never been brighter than this year.


The   market has recorded a year-to-date (YTD) of over eight per cent compared with a decline of over 16 per cent last year.
According to them, the market   has begun to enjoy favourable  sentiments from investors  given the  improved regulatory framework , which  is a culmination of  various efforts put in place by the Securities and Exchange Commission (SEC) in the past two years.

One of the factors attributed to the renewed patronage of the market by investors is the corporate actions coming from listed companies. Unlike before when investors used to wait for companies to release their results, months after the end of their financial years, investors have been   savouring their dividends for the year ended December 31, 2011.


Even companies that could not declare dividends, prepared their minds of the investors ahead through profit warnings to the market, a development that did not exist before now.


In an interview with THISDAY recently, Manager, Primary Markets (India, Middle East and Africa), London Stock Exchange (LSE), Mr. Richard Webster-Smith, admitted the improvement the regulatory environment in the Nigerian capital had witnessed.

According to him, the disclosures and corporate governance framework now in place in the market were highly commendable and sustaining those policies going forward would attract more patronage in the market.

Commenting on  the improved disclosure,  Mr. Tola Odukoya of  Dunn Lorren Merrified, an investment bank, had said  the  intervention at  the  NSE by SEC,  which is one  of  the  steps taken to reposition the market for the positive  current positive results, would  make  the exchange  a better institution on  the long run.


He said,  NSE  had ensured  strict enforcement of compliance with post-listing obligations.

“In my opinion, one of the most important developments  in the market  the step taken to reposition the NSE into a more focused institution. In this case, I think SEC played its  key role as a regulator in facilitating the change of leadership at the Exchange. While this process is still work-in-progress, I believe the Exchange will emerge a more improved institution,” Odukoya said.

Also assessing the improvements, SEC under Arunma Oteh, has brought to the market,   a stockbroker and  Managing Director/Chief Executive Officer of Investment Centre Limited, Mr. Ifeanyi Odunwa,  said coming from a multilateral financial institution, (African Development Bank),  Oteh brought professionalism, transparency, charisma and finesse to  market.


“Oteh has  drastically reduced  unethical behaviours  by market operators through her strategy of  name and shame  of  anyone that infringes the market and this has  gradually brought back  investors’ confidence. Her various actions   since assumption of office has confirmed SEC as the ‘Headmaster’ of the capital market,” Odunwa  said.

Strengthening the SEC
In the past two years, the Information and Communications Technology (ICT) of SEC had been  revamped modern productivity tools that have significantly enhanced the commission’s capacity to discharge its market development and regulation mandates introduced.

This has enriched the commission’s online presence beyond the ambient of conventional web platforms into the social media space.  With the website, stakeholders across geographical and regional divides can now interact with the commission through various social media platforms including Facebook and Twitter with the benefit of real-time response.

Apart from ICT improvement,  Oteh  augmented capacity deficiencies in the commission’s core functions  in 2011 with the employment of 52 academically distinguished young professionals comprising lawyers, economists, accountants and information technology specialists.

Concrete measures to reduce cost, prevent leakages and strengthen internal control within the commission have also been deplored, just as the assistance of the United States Securities and Exchange Commission was received  to conduct a peer review and implemented some of the recommendations in 2010.

The active bond market witnessed today is partly as a result of enhanced internal and market operator capacity,  which was developed by SEC through the engagement of a resident bond adviser under the International Finance Corporation/ Efficient Securities Market Institutional Development (IFC/ESMID) initiative.


Strengthening Market Institutions
One the areas SEC has done well is the overhauling of the structure, form and operations of the Capital Market Committee (CMC) to enhance its relevance to the growth and development of the Nigerian capital market. Consequently,  the CMC was reorganised  late last year with seven sub-committees emerging at the end of the rigorous exercise. The committees have been streamlined  to correlate directly with the workings of the market.

Also, SEC has commenced discussions with the Bureau of Public Entreprises (BPE) on the appropriate privatisation model to adopt for the Abuja Securities and Commodities Exchange (ASCE) following consultation with the Ministry of Finance and the World Bank
The commission’s intervention in  the  NSE has led to five-year market transformation plan of the new leadership of the NSE commencing in 2011. Besides, the new leadership has  restructured the exchange from a loss making organisation in 2009 to  profitability in 2010.  

New Code of Corporate Governance
As part of efforts to strengthen public companies,  SEC issued  a new code of corporate governance in April 2011 to align governance standards in public institutions with global best practices. The new code is quite extensive and covers all aspects of corporate governance. It was introduced to promote transparency and accountability in public companies and enhance overall market integrity through the enhancement of disclosure and reporting standards.

As at the last count, over 135 of the 198 listed companies had signed up for full compliance with the new code.

The commission has equally hosted a number of enlightenment sessions with publicly listed companies to enable them understand and effectively comply with the code.


In addition to code of corporate governance, SEC has invested resources in capacity building for listed companies to ensure seamless transition to International Financial Reporting Standard (IFRS) given  the 2012 cut-off date for compliance.


Enforcement and Market Integrity
To ensure infractions in the market are no long condoned in the market, SEC has instituted legal action against market operators found culpable of market infractions and employed naming and shaming as a deterrence strategy since.

Already, there are suits against 260 individuals and entities at the Investments and Securities Tribunal (IST). Besides, between 2010 and 2011, the commission suspended 52 companies for various capital market violations, while 30 companies were referred to law enforcement agencies for further action.

Going forward, the commission has overhauled the subsisting complaints management framework. SEC has resolved 97 per cent of all complained received in 2011 (709 out of the 729 complaints received). About 156 cases were referred to the enforcement and compliance department of the SEC for necessary action. Over the past two years (2010 to 2011), an average of 882 new complaints were received each year; while an average 848 complaints were resolved each year (96 per cent resolution).

Enhancing the Fixed Income Market
Apart from enhancing the framework for bond issuance and introduction of  rules on book building and shelf registration and simplified disclosure rules for fixed income which are sold to institutional investors and high net worth individuals, the  every issuance line in the market for bond has  been shortened. The price discovery process for securities has also been improved.

SEC is equally is promoting and supporting the creation of an over-the-counter (OTC) market designed to attract more companies to the capital market and also provide additional platform for bonds trading.  To this end, the Nigerian Association of Securities Dealers (NASD) and FMDQ OTC Plc have forwarded applications to the SEC to set up Over- the- Counter (OTC) trading platforms in Nigeria.

Issuer Education/Investor Outreach
In the area of investor and issuer education, SEC has recorded some significant achievements.  It has executed various issuer education and investor outreaches to strengthen capital market awareness. Such initiatives include provision of educational materials for various cadres of bond issuers (corporate and sub-national) and investors (retail and institutional)

SEC has sponsored seminars, hosted town hall meetings, quiz competitions, and capital market studies in secondary schools and universities.

Specifically, the commission hosted  an investor outreach programme in northern region of the country covering Sokoto and Kano State in 2010,  at which the Capital Market Club for secondary schools was launched in 2010. The clubs have been extended to 33 schools in Kano and 31 schools in Sokoto. The strategies for migrating the club to other states are being finalised. Currently, the clubs have over 1000 student members.

Also, SEC collaborated with the Rivers State Government and successfully hosted an investor/issuer education outreach for the government and people of Rivers State in July 2011. Over 1000 participants were offered critical insights into the market as an ensemble of capital market experts facilitated during the interactive sessions presided over by the SEC.

The apex regulator has set aside  one year  to  commemorate 50 years of capital market regulation. The anniversary began last October when  SEC, in partnership with the Ministry of Finance, Ministry of Trade and Investment and the Central Bank of Nigerian organised an international investor forum in Abuja under the theme:

“Nigeria, the preferred investment destination”. The event was attended by leading international and local investors, state governors, ministers of the Federal Republic of Nigeria, as well chief executive officers of and financial sector leaders. It showcased the wealth of investment opportunities in Nigeria.

Rule Making
SEC has introduced and amended a combined total of 70 new rules in 2010 as part of efforts to ensure adequate rules guiding operations in the market. 


It collaborated with the CBN to formulate guidelines on margin transaction to forestall excessive margin lending, which one of the factors that led to the near collapse in 2008 and 2009.

SEC has adopted a risk-based approach to supervision of regulated entities, putting in place an implementation framework for the revised supervisory model that will become operational this year.

Promoting Mutual Funds
In order to ensure that investors increase their patronage of the market through collective investments schemes, SEC has improved the regulation of the activities of fund managers.

It has increased quantum of on-site and off-site inspections of the schemes as well as transfer of fund assets to custodians to better safeguard the assets.


SEC equally intensified examination and monitoring of fund managers and trustees of such schemes and encouraged the establishment of an industry trade group for mutual fund managers. The apex regulator last year approved the introduction of the first Exchange Traded Funds (ETFs) in West Africa.

Improving Liquidity
As part of its functions regarding development of the market, SEC has been spearheading the advocacy for improved liquidity through new listings.
It has also advocated market making, securities lending and short selling as measures to improve liquidity in the market by approved the NSE’s rules on market making, short selling and securities lending.

In addition,   the commission approved the appointment of 10 stock-brokerage firms as market makers to mitigate price volatility and induce liquidity in the equities market early this year.

SEC has been encouraged institutional investors such as Pension fund Administrators (PFAs) and insurance companies to participate in the capital market. The apex body has also facilitated the  lowering of transaction costs, and promoted the take-off of an OTC markets, all targeted at enhancing liquidity in the market.

Recognition and Awards
In recognition of the achievements of SEC, Oteh and the commission have received some awards.  They included: The Pearl's "Special Recognition Award for Capital Market Development" in 2010;  The African Business magazine award for "Distinction in Public Service" and Africa Investor's "Most Innovative Capital Markets Regulator" award (2011).

Even the Federal Government recognised Oteh’s contributions with a  national honour of "Officer of the Order of the Niger last year.
And last week, Oteh was unanimously returned un-opposed as chairperson of the African/Middle East Regional Committee (AMERC) of   International Organisation of Securities Commissions (IOSCO).

She was unanimous returned  by the 22 member countries of   AMERC as a  direct consequence of the visionary leadership, which she has provided the committee since becoming chairperson in 2010. 

“Specifically, the AMERC chairperson has remained committed to the actualisation of an enduring vision for the region in concert with the goals and objectives of IOSCO.  Her efforts have also resulted in improved capacity, communication, cooperation and visibility for the region within the IOSCO community,” a delegate said.

Tags: Nigeria, Featured, Business, SEC, Arunma Oteh, ETFs

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