SEC: Tackling Investors’ Challenges

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o one likes to lose money and, certainly for any businessman, losing money is bad business. That is why investors the world over will be quite reluctant to commit funds into an insecure economy. Anyone familiar with the psychology of investment knows that three things are always on the mind of the investor-security, corruption and government’s red-tapism.
Anyone wanting to invest in a capital market is also looking out for the security of his investment, the level of corruption in the market and the efficiency of regulation. Responsibilities for all of these in Nigeria rests squarely on the Security and Exchange Commission (SEC), which is the apex government regulatory agency for the Nigerian Capital Market.
The Investments and Securities Act (ISA) 2007 and the Rules and Regulations made pursuant to the Act, are enforced by SEC to ensure the protection of investors and their investments in the market. SEC’s powers have also been widened to include regulating the capital market with a view to protecting investors; and developing the capital market in order to enhance its allocative efficiency, and pave the way for a private sector- led economy. Thus, basically, SEC is in the driver’s seat of Nigeria’s capital market, responsible for any positive or negative turn.
In truth, the management of SEC in the last four years has been impressive in terms of vision, regulation and enforcement of ethical standard in the capital market. But while SEC has been upbeat in recent years, it is even more so in the last few months. Munir Gwarzo, who is leading the team of professionals calling the shots at SEC, seemed to be all out against any acts that could sabotage investors’ confidence in the market.
In the last two months alone, not less than six cases of market infractions have been decided by the Administrative Proceedings Committee (APC) of SEC, with one or two handed over to the Economic and Financial Crimes Commission, EFCC. Last month, SEC blacklisted an illegal operator in the market and warned investors not to patronise the company. SEC said the Company claimed to be an Investment Company that engages in Business Development in Commercial sectors of the economy and also issues bonds to raise funds for its investment activities.
But after prompt and thorough investigations by officials of the commission, it was discovered that the operation of the Company “had no tangible business model” and declared it a Ponzi scheme where returns are paid from other people’s invested sum. SEC also alerted the investing public that the company’s operation was not registered by the commission.
It subsequently sealed off the premises of the Company and advised depositors to submit documentary details of their investments with the Company to the Commission’s Lagos Zonal Office and Port Harcourt Zonal office on or before May 15, 2017 to facilitate refund of their funds
Within the same period, SEC also secured the conviction of another illegal operator by the Federal High Court in Kaduna. Considering how cumbersome and tedious Nigeria’s court processes are, it is a credit to SEC that it prosecuted a successful case against an unscrupulous market operator.
Also on December 7 last year, SEC convened an APC meeting to look into a petition submitted since 2008 against owners of a company for alleged market misconducts. This was after the commission had investigated the petition and found out the director had carried out actions which were in breach of the provisions of the Investment and Securities Act 2007, as well as the SEC Rules and Regulations.
The Committee subsequently banned the operator from operating anywhere in the Nigerian Capital Market, and from holding any position of director in any entity operating in the Nigerian Capital Market. He was also alleged to have forged board resolutions and issued dud cheques, was handed over law enforcement agencies for prosecution.
This zero tolerance for dubious operators in the market is no doubt paying off. That is why despite the economic recession, the market has been doing well and has recorded only marginal loss. Two weeks ago the volume of shares traded in one day closed higher by 5.31 per cent due to investors buying and selling 313.28 million shares valued at N3.60 billion in 2,883 deals. A day earlier, 297.48 million shares worth N2.29 billion were traded in 3,438 deals. On the same day, the market capitalisation opened at N9.42 trillion and shed N6 billion to close at N9.42 trillion.
This was why the market was in shock when some national dailies recently reported that some investors in the Nigerian Capital Market have recently been defrauded by a licensed member of the Nigerian Stock Exchange. But almost as soon as the story broke, SEC doused the tension and said there was no cause for alarm. The commission reeled out actions it had taken to redress the situation and restore market confidence. It said the protection of investors and their investments in the market was a cardinal rule of its operations. SEC said it was on top of the situation and had initiated series of meetings with all the parties involved. It also took the matter before the EFCC which is now looking into it.
To reassure investors, the Commission said it had established a robust framework for investigating complaints received from investors, and has an “excellent enforcement mechanism” and continues to maintain zero tolerance for any form of infraction in the market. It said a risk-based monitoring and supervision of operators and institutions in the market to forestall potential systemic collapse has also been adopted.
In the last few months the Commission has imposed stiff sanctions on erring operators to serve as a deterrent within the limits permitted by law, while infractions with elements of criminality are referred to the Law enforcement agencies for prosecution as provided under Section 304 of the ISA 2007. It has also developed a thriving partnership with the Nigerian Police Force and the EFCC as evident in the cases now before the anti-graft agency.
In line with its commitment to implement the Nigerian Capital Market Master Plan (CMMP 2015-2025), the Commission has in recent times launched several notable initiatives which would galvanize the market, safeguard investors’ portfolio and contribute to the overall transformation of the economy. These include the E-dividend, Direct Cash Settlement, Full Dematerialization, Recapitalization Exercise, Corporate Governance Scorecard and the establishment of the National Investors’ Protection Fund. All these are geared towards further deepening and developing the marketing to make it an investment destination in Africa.
In order not to scare the market, SEC on February 16, 2017 lifted the suspension of two operators who had served out their sanctions. They are: Northbridge Investment & Trust Limited and Heritage Capital Markets Ltd, together with all their Directors and Sponsored Individuals.These are no doubt positive actions that are in tune with the vision of the management team led by Munir Gwarzo, an astute administrator and professional who has been a stabilising factor in the Nigeria Capital Market.


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