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Securities & Exchange Commission (Reviewed, 10th May 2001) Tell your friends about this page! Email it to them.
The Securities and Exchange Commission (SEC) is the apex regulatory institution of the Nigerian capita market. It is a federal government agency established by the securities and exchange commission act 71 of 1979 which was re-enacted as Decree number 29 of 1988. Since inception, the SEC has been playing within the capital market a similar role to that played by the Central Bank of Nigeria in the money market.
Before attaining its present status, the commission had undergone a number of changes from the initial days of its progenitor, the Capital Issues Committee that had ad-hoc powers to Capital Issues Commission that was statutorily established by the Capital Issues Decree of 1973. As would be expected, its role with each change continued to vary over the years with the changing objective carved for its evolving structure. The policy determination of the commission is the responsibility of its board of directors, which includes the director-general of the commission as a member. The director-general in turn oversees the day-to-day administration of the commission on behalf of the board.
Generally, members of the board are chosen in consideration of their ability, experience, specialised knowledge and professional attainments in securities business in particular and the national economy in general.
At inception, the staff of the commission was drawn from the Central bank, (an inevitable fact of its history). But since attaining separate existence, it has recruited more professionals in the accountancy, economics, finance, statistics and law, in addition to administrative, clerical and secretarial staff. Administratively, the commission is divided into departments headed by departmental directors and divisions under divisional heads, who must be at least of managerial status. In broad terms, the main functions of the commission are to regulate and develop the Nigerian capital market in order to achieve its wider objectives of investor protection and capital market development toward enhanced socio-economic development. The pursuit of these broad objectives involves:- Full disclosure requirements by operators and issuers in the market.
- Regulation of trading in securities through market surveillance activities.
- Registration of securities and institutions in the market.
- Public enlightenment, research and general education about securities industry.
- Creating the necessary atmosphere for the orderly growth and development of the capital market.
- Investigation of complaints and suspected breaches of the securities laws and,
- Making of rules to direct the market towards a desired course.
Apart from the Securities and Exchange Commission decree of 1988, which the commission administers, it also operates within the provisions of other statutory enactments that relate to securities business, corporate finance and investments in Nigeria. Significant among these are the companies and allied matters decree, 1990 which vests the administration of unit trust schemes in the SEC, the trustees investments acts of 1957 and 1962, and the technical committee and Privatisation and commercialisation decree of 1988.
As a statutory corporation under the supervision of the federal finance ministry, the commission submits reports of its activities annually to the ministry. Despite its now familiar public enlightenment strategy for broadening awareness, a certain level of ignorance still exists about the commission, its functions, roles and place in the Nigerian socio-economic set-up.
OBJECTIVES OF THE COMMISSION (SEC)
The basic objectives of the commission are:
The need for investor protection emanates from the nature of financial assets and financial services industry itself. The former, for instance, cannot have their worth determined by ordinary physical examination, like most other products do. Financial services on the other hand, are perceived to be terse and intricate. It is therefore more difficult for investors to evaluate with any degree of confidence, the quality of the services and products that are offered. It is equally not easy for a single investor to gain access to all the relevant information he may need in order to make an informed and rational investment decision.
The objective of investor protection is to ensure that issuers of financial instruments provide investors with relevant, timely and adequate information about securities and institutions that are subject of public issues. Secondly, such protection is pursued to prevent fraudulent practices such as false claims, deceit, price manipulation and unfair use of undisclosed price sensitive information that could dent public confidence in the securities business.
By and large, the rules and regulations of the commission have been formulated to guide all market operations and operators with the aim of offering far-reaching protection to all investors, whether local or foreign.
Capital market development on the other hand, involves creating general awareness about the market as an important source of investment finance and therefore, a catalyst for rapid socio-economic advancement. Capital market development has involved research activities aimed at improving market efficiency and competitiveness as well as introducing new instruments and initiating policies with positive implications for the market. The commission ensures that it balances regulation with development and progressive ideas.
As the apex regulatory body for the capital market, the SEC is the principal adviser to the Nigerian government on capital market issues and is in this regard, called upon to give upon from time to time to give opinions on related subjects.
FUNCTIONS OF THE COMMISSION
Regulatory: This amounts to the protection of the investing public from deceit, and other unscrupulous practices in the sale of securities, which can destabilise the market.
Registration: Through this, the fitness or otherwise of an applicant to do business in the capital market is ascertained and the worthiness of the instrument for offer is assessed.
Investigation: As empowered by its enabling acts and decree, the commission investigates all reports of violations and suspected violations of the securities law.
Enforcement: The commission has the responsibility of ensuring that participants in the market comply with securities law. It has the power to institute penalties and remedial action if there has been any violation.
Rule making: Makes rules, creates and reviews procedure as the occasion demands.
Timing of Issues: The SEC is also empowered to control the timing and amount of issues in order to avoid demand on the primary market beyond its capacity to absorb.
Review of Accounts: The commission carries out, on a regular basis, the review of accounts of companies covered by the SEC for the following reasons:
Mergers & Acquisitions: The commission is empowered by law to approve and review every merger or acquisition or a combination between companies before consummation.
An application for merger is usually presented to the commission by the two issuing houses representing the companies after each must have evaluated the terms of the merger, which must be spelt out in details in the submission. The proposal must also indicate synergy effects of the combination steps being taken by the companies to comply with relevant sections of the companies & allied matters decree, 1990. In granting approval, the SEC ensures that mergers, acquisitions or business combinations are not likely to cause substantial restraint on competition or tend to create monopoly either directly or indirectly.
As a general rule, the SEC gives issuers of securities a period of 3months after approval of a particular issue for the issue process to be completed. It demands that failure to keep within this time frame can be referred to it for further directives.
Approval of State and Local government bonds: In order to augment their federal allocations and be able to finance some other development projects, states and local governments, either directly or indirectly resort to long-term public debt market for funds. As the commission charged with the responsibility to appraise such requests, it expects that all applications in this regard should be submitted through issuing houses and must be accompanied with the following:
Once a project is considered viable and all other conditions listed above, especially provision (G) are complied with, the commission will give its approval for the flotation of the bond. However, the requirements of the Nigerian Stock Exchange would still have to be met before the bonds are finally listed for trading in the market.
Authorisation of Unit Trust Schemes: The companies and Allied matters decree of 1990 vests in the SEC, the regulation of Unit trust schemes in Nigeria. Thus, by powers derived from the above decree, the commission authorises and regulates unit trust schemes.
Developmental Roles: The commission views its developmental role as the broadest and perhaps the most important of all its functions at this stage of the market development. Section 6h of the SEC decree charges it with the responsibility to create the necessary atmosphere for the orderly growth and development of the capital market.
To date, the SEC has organised 17 conferences on topics, which have stimulated considerable interest and doubtlessly improved knowledge and growth of the market. The list of these conferences are listed below:
External Relations: The Securities and Exchange Commission has a long-standing relationship with some international securities market organisations, securities commissions and stock exchanges. It is a member of the International Organisation of Securities Commission (IOSCO), which has its origin dating back to 1974 and currently has over 100 member countries spanning all continents. Nigeria became a member in 1985. The IOSCO provides a forum for the discussion of securities market related issues, improving cross border trading in securities and finding solutions to problems of mutual interest.
Nigeria was chairman of the working group that drafted stimulation policies for securities market development a blueprint for boosting growth of securities in emerging markets.
The SECs external relations also extend to the International Finance Corporation (IFC), the private sector affiliate of the World Bank, and multilateral organisations on the African continent like Economic Commission for Africa (ECA).
Capital Market Committee: The commission provides the secretariat for the capital market committee, which was established as part of its developmental functions. The committee which is made up of representatives of the commission and market operators was inaugurated in 1990 as an advisory and consultative body to serve as forum to deliberate on matters affecting the capital market and also find ways and means of improving the system.
Picture: AIICO Insurance PLC
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