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Reflecting On SEC Market Development Initiatives



The Nigerian Stock Exchange (NSE) serves as the hub for formal transactions in equities and other instruments like its counterparts in other climes. Beyond the official listing and trading of stocks and other securities in the bourse, however, lies the more fundamental ‘regulatory radar’ being provided by the Securities and Exchange Commission (SEC).

A cursory assessment of the commission’s transformational strides in the past year has reflected remarkable innovations and the attendant positive developments, especially when understood against the backdrop of the pervasive effects of the economic sluggishness on capital markets on emerging economies across geo-political zones globally in the past few years.

It will be recalled that the former Minister of Finance, Kemi Adeosun on April 13, 2018 approved the reassignment of portfolios in SEC, which brought in Ms. Mary Uduk as the acting director-general of the Commission.

The Minister of Finance, in a letter dated April 13, 2018, said Uduk’s appointment had become necessary to ensure effective regulation of the Capital Market. Her appointment will, subject to satisfactory performance, subsist until further notice.

But then, like a clairvoyant Amazon endowed with requisite professional skills and cognate experience in investment management, Uduk came with a mission of fulfilling the SEC’s statutory mandate through team work, collaborative engagements of stakeholders and a deep sense of purpose.

She knew then that her primary task was to restore investors’ confidence in the nation’s capital market system and by so doing, make the Nigerian investment space attractive to global and domestic investors, despite the nation’s economic challenges.

Looking at the performance of the SEC in the past year on critical rating parameters showed that the management has done reasonably well in terms of sustaining investors’ confidence in the capital market; instilling discipline in transactional processes in the bourse; and enlightenment and engagement of investors and their associations on emerging trends in global investment space.

Similarly, the SEC over the past year intensified sundry initiatives to protect of the public from fraudulent or scam investment promoters, improve the contributions of the capital market to nation’s economy; investment in human capital training and development; promotion of innovative technology and solutions in the SEC and capital market operations; and sustained the implementation of the 10-Year Capital Market Master Plan (CMMP) with remarkable achievements recorded so far, amongst others.

For instance, on the issue of sustaining investors’ confidence in the Nigerian capital market, the Uduk-led leadership of the SEC has continued to promote the E-Dividend Mandate Management System, the Direct Cash Settlement and the Multiple Subscription service option for investors. In addition, the SEC has raised the bar of investors’ confidence through the National Investors Protection Fund (NIPF) Risk-Based supervision and the Complaints Management Framework that opens communication channels for investors to lodge complaints and get prompt responses.

The importance of the E-Dividend Mandate Management System is to eradicate or reduce to the barest minimum the incidence of unclaimed dividend. To boost the e-dividend mandate and Direct Cash Settlement initiatives, the commission has engaged the Nigeria Inter-Bank Settlement System (NIBSS) on behalf of the capital market community to facilitate identity validation and account validation in an effort to enhance market processes.

Another area the SEC has made progress in the past year is in respect of its initiatives aimed at educating investors on capital market development. Apart from advising retail investors to invest in Collective Investment Schemes and Mutual Funds given the low or no risk level of such investments, the commission has also been carrying out regularly various investor education campaigns nationwide to inform investors of the benefits of investing in long term securities and avoiding investments in illegal schemes, among others.

Also, the capital market regulatory institution has recently initiated a collaborative relationship with the Nigerian Educational Research and Development Council (NERDC) on the development of a curriculum for basic and secondary schools on Capital Market studies as part of the Uduk-led management’s futuristic approach in Nigeria’s capital market development.

Recently, in furtherance of its investor protection mandate, the commission, in line with the provisions of Section 13 (w) of ISA 2007 which empowers the commission to close any illegal investment companies, sealed off the premises of a Lagos-based firm, Growing Circle, for engaging in illegal fund management activities.

Also, the SEC early this year issued a cease-and-desist order to Kapa-Community Ministry International Inc. (KAPA), a religious corporation found to be soliciting investments from the public in a manner resembling a Ponzi scheme, following “substantial” evidence that the organization had been offering and selling securities in the form of investment contracts without the necessary license.

The SEC has issued several warning notes to the investing public, urging them to refrain from investing their money in outfits not registered with the commission. The commission has also advised the public not to subscribe to any financial investment plan without first checking the registration status of the operating company on the commission’s website.

Specifically, the SEC must register any investment scheme targeted at the investing public together with the managers of the scheme. This is the first step toward investors’ protection. Therefore, any investment scheme that is not registered is automatically categorised as illegal and potentially fraudulent. The commission maintained that even if the company was registered with SEC, the potential investors should endeavor to find out from the commission whether the commission has approved the company’s activities.

In line with global trends, the SEC has also keyed into the idea of leveraging the performance of the nation’s capital market on technological products and solutions. Already a Division now exists in the SEC dedicated to Fintech which is helping the management to invest in and adopt all the technologies that relate to the capital market surrounding ICOs, among others.

As the acting DG confirmed recently, the management believes that technology, when properly leveraged, will reduce the cost of doing business in the capital market. To demonstrate the SEC leadership’s commitment to using technology as the driving hub for the nation’s capital market transactions, the Capital Market Committee (CMC) set up a Road Map committee recently to develop a guide for the capital market with a view to tapping on the benefits of technology to do business and reduce cost.

Again, as a proof of the SEC management’s commitment to promoting professionalism and ensuring that capital market transactions are devoid of opacity in any form, the commission introduced the Fidelity bond as one of the requirements for all market operators to file.

The bond is a yearly regulatory mandate for operators to file and the commission, following its observation of some level of default, has started compiling the list of defaulters for the purposes of sanctioning them according to the provisions of the law.

Complementarily, the commission had last December also approved the amendments to its regulatory framework which prohibited stockbrokers from engaging in any form of guaranteed investments on behalf of shareholders.

The amended regulation also requires stockbrokers to categorically inform their clients, in writing, that they cannot engage in guaranteed investments on their behalf. Prior to the commission’s directive, there had been a significant increase in the abuse of guaranteed investments which, unfortunately, resulted in losses.

These regulatory measures, as some analysts have commented, are desirable to the current drives by Uduk and her team to make transactions in the capital market totally transparent for investments in line with global best practices.


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