NASS And Capital Market Investment

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Security of investments is a panacea for growing and deepening any country’s capital market. There is perhaps no better way to achieve this except through proper regulation and adequate control of the market based on industry best practices

The Nigerian Capital Market Community led by Director General of the Securities and Exchange Commission, Mr. Mounir Gwarzo recently presented several reports on the reviews of various laws affecting investment and capital market practices in Nigeria to the President of the Senate, Dr. Bukola Saraki.

The reviews were conducted under the leadership of three of Nigeria’s most erudite legal practitioners namely:  Chief Anthony Idigbe (SAN), Mr. A. B. Mahmoud (SAN) and Dr. Babatunde Ajibade (SAN), and had the input of all segments of the financial system community. While presenting the report to the Chairman of the National Assembly, Gwarzo expressed optimism that the proposed recommendations would improve Nigeria’s investment climate when implemented. He stressed the fact that these recommendations were a reflection of the in-depth experience and intellectual capacity of the membership of the various committees that undertook the review.

The report proposed amendments to the Investment and Securities Act (2007);  the Companies and Allied Matters Act (CAMA) and Trustees Investment Act (TIA), and  the Financial Reporting Council of Nigeria Act (FRCNA) , Pension Reform Act (PRA) & Ware House Receipt Bill (WHRB).

To ensure better regulation and affective control of Nigeria’s capital market, the SEC must be empowered to function as an efficient and effective regulator. This can only come about when it has adequate powers that puts regulation and control in its hands, without the encumbrances of third parties as is currently the case.

The law currently vests prosecution of criminal cases on the office of the Attorney General of the Federation (AGF) and other law enforcement agencies; hence the commission has to pass information on possible criminal cases to the AGF and the other law enforcement agencies. The review of the ISA has recommended deletion of this provision and replacement with a section which would permit a lawyer in the employment of the Commission to prosecute or defend criminal or other proceedings for and on behalf of the Commission.

The enlarged powers being sought for the Commission include the power to:

Compel the production of recordings of telephone conversations or other electronic communications held or maintained by persons regulated by the Commission,



Compel the production of auditing information including, but not limited to, audit work papers, communications and other Information relating to the audit or review of financial statements; encourage internet service providers and other electronic communication providers, who are located within the jurisdiction of the requested authority to produce subscriber records held or maintained by the service providers in the form prescribed by the Commission as well as make it mandatory for the production of subscriber records held or maintained by telephone service providers who are located within the jurisdiction of the Commission.

Aside these recommendations, the review of the ISA also made several other proposals to improve the operations of the capital market and the investments climate in the country. Some of these include the establishment of a Council for the Investments and Securities Tribunal (IST), which shall be responsible for the appointment, discipline and formulation of policies for members and staff.

Alternatively, it recommended that the National Judicial Council be charged with the responsibility for the appointment and discipline of members of the Tribunal. It is also proposed that only lawyers, appointed by the National Judicial Council (NJC) would be members of the IST and for the jurisdiction of the IST to be enlarged to include criminal jurisdiction

Among these proposals are the ones on the Regulation of Derivatives Market and Trading where it is proposed that general clauses empowering the Commission to issue rules, formulate policies, promote, develop, as well as supervise, matters concerning derivatives (contracts), derivatives markets or business, derivatives exchanges, derivatives CSCDs, derivatives business operators, regulatory association of derivatives business operators, and prevention of unfair derivatives trading practices be inserted in the Act.

In addition, it is proposed that the Commission be empowered to govern derivatives offering and trading and related activities, provide for oversight of the activities of derivatives market professionals. This is to ensure that their conduct is honest, fair and responsible, provide for the monitoring of regulated entities and, more specifically, of their activities, their exercise of delegated powers, the adequacy of their capital and resources, the accessibility of their services, and the transactions carried out via the facilities or systems they operate, regulate market participants and regulated entities.

The purpose is to ensure compliance with the principles set out in this provision and with the obligations deriving from those principles, facilitate the control of systemic risk in derivatives trading, particularly through rules applicable to derivatives clearing and to CSCD operations etc.

Several amendments have also been proposed to the Companies and Allied Matters Act (CAMA) and Trustees Investment Act (TIA). The proposals are geared towards making it easier and less cumbersome to oversee operators in the capital market and eliminate or drastically reduce sharp practices. One of these is the recommendation for the digitalization of corporate processes in the country. It is recommended that the registration, filing and other corporate processes to be engaged in by companies in compliance with the CAMA should be digitalized to improve ease of doing business in Nigeria.

Also, to improve access to finance for Small and Medium Enterprises SMEs in the country, it is proposed that the provisions of Section 22 of the CAMA be amended to accommodate non-traditional capital raising for SMEs. This is believed would deepen the capital market and creates liquidity for small investors. At the moment, the market does not favour small investors in an economy where experts have predicated quick economic recovery and growth on SMEs.

These are no doubt far-reaching proposals that are certain to change the investment climate and make it easier to do business in the country. The onus is now on the National Assembly to save Nigeria’s capital market by enacting these proposals into law.

– Omokwe wrote in through




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