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Enhancing market confidence through investor protection


Mary Uduk. PHOTO: nextmoneyng

Sustaining the confidence of stakeholders is a very critical issue in every business organisation. This is more so, in the fledgling Nigerian capital market that has struggled to emerge on the global fron.

The fortunes of a business soar as long as its customers, investors, employees, board members and other stakeholders, who hold various interests are assured of full protection of their interests, as well as a fair deal in their relationship with the organisation.

The reverse is the case when these stakeholders get the feeling that their interest is no longer protected or that the safety of their investments can no longer be guaranteed in that organisation. Protecting the interest of investors is a major challenge confronting the Securities and Exchange Commission (SEC), the apex capital market regulator and the Nigerian Stock Exchange (NSE).


The two bodies well know the implications of investor/market confidence or the absence of it, and they have accepted this challenge and must work hard to sustain the confidence of all stakeholders.Of course, the objective is to achieve a radical and wholesome growth in the Nigerian capital market.
Both SEC and NSE have sub units and committees that receive and treat cases of infringements on the interest of investors and other stakeholders in the market. With these units, a number of cases are duly investigated and resolved.

The Administrative Proceedings Committee (APC) of the SEC is one of such units. The APC is the highest point a matter can go within the institutional framework SEC and the NSE is the settlement of disputes arising from transactions in the capital market

However, an individual or corporate body that is not satisfied with the decisions of APC can seek further respite at the Investment Securities Tribunal (IST) .The IST is an independent judicial body with jurisdiction over all cases arising in the capital market. The idea behind the establishment of IST was the creation of a separate and independent judicial body presided over by persons knowledgeable in the securities market to specifically receive and try cases of disputes in the capital market

The Acting Director-General of SEC, Mary Uduk, recently reiterated the determination to ensure that investors in the capital market are adequately protected in all transactions.Uduk during a meeting with the Association of Corporate Trustees in Abuja, said it is the responsibility of the SEC to ensure that investors are not short-changed in any transactions in the market and therefore urged them to participate in the market to grow it.

According to her, it is to this end that the commission is taking steps to reduce transaction costs in a bid to ensure that investors do not bear unnecessary costs.“We are doing a lot to boost investors’ confidence in our market. But I want to say that both local and foreign investors are very good for the market. For instance, the foreign investors, because they trade their shares all of the time it leads to price discovery as against the local investors that just takes a long term view on their investments”, she said.

Uduk, said the protection of investors and the market from the antics of dubious people remains a major priority.She noted that the private placement bubble that happened in recent past was done with the connivance of market operators, who encouraged issuers to take advantage of loopholes in the relevant investment laws at the time.


She recalled numerous efforts and appeals to such issuers to list their shares fell on deaf ears, stressing that “market operators encouraged private placements, knowing that the law did not allow the SEC to regulate private companies.”

The SEC boss decried a situation whereby many private companies took advantage of gaps in Nigerian laws, especially between 2007 and 2008, to defraud many investors by embarking on private placements with promises of listing the shares for trading on the Nigerian Stock Exchange (NSE), when in reality they had no such intention.

Furthermore, she urged operators to cooperate with the Commission for the good of the market and the economy, knowing that “It is our market. Please let us join hands and revive this market. Let us come together and sanitise this market.”

Uduk said the SEC has been doing its best to ensure that offenders are not left off the hook; hence the Commission is collaborating with EFCC and office of attorney general to be able to do much.

The acting DG said the commission also has the complaints management framework that enables investors to know where to make complaints and how long it takes for such complaints to be resolved.Moreso, those of the investors that are averse to risks, were advised to get their financial advisers for proper directive.

Stock market investors who spoke in a separate interview with The Guardian on the regulators efforts to protect investors and police the market over the year, said the regulators need to do more in strengthening their watch on the market so as to continuously harness the confidence of investors.

For instance, the President of Constance Shareholders Association, Mallam Shehu Makail, said the SEC has improved tremendously in the areas of investors’ protection, but , however added that the commission needs to do more on issues related to corporate governance and disclosure.

“The apex regulator must be more proactive and take prompt action in any complain or petition filed by minority shareholders not only the majority holders. More so, minority shareholders are mostly Nigerians and as such needs more protection to encourage more participation and patronage of the market,” he said.

The President of IbadanZone Shareholders Association, Eric Akinduro, said SEC investors protection fund is a good initiative but however added that the rigorous process of accessing the funds is discouraging.“The bureaucratic nature of doing things in Nigeria has kept many investors away from the fund. Also there is no much awareness as regard the fund. The threshold of N200,000 as compensation is not too bad but depends on the losses of such investor.

“My advise is that SEC should be more pronounced to the retail shareholders. It is through this that they would know where they are having problems and be able to apply appropriate policies towards it. “Awareness and engagement with registered and viable shareholders group must be prioritised. We have some retail shareholders that are dying in silence because they are not aware of SEC’s initiatives aimed at protecting investors,” he said.

The former Secretary-General of Independence Shareholders Association, Adebayo Adeleke, said SEC can improve on investors’ protection by taking proactive steps based on observations and complaints of shareholders on the floor of AGMs/EGMs without waiting for formal complaints.

“SEC is trying. A case in point is the directive to NEM and Continental -Reinsurance to hold their AGM/EGM again. It was aimed at protecting minority interest and market integrity,” he said.However, the Publicity Secretary of Independence Shareholders Association, Moses Igbrude, said SEC’s investor protection scheme is being implemented in vague, noting that the apex regulator deals with only superior issues that make sensation in the pages of newspapers.


“They abandon the poor investors in limbo without help. For instance, a situation where a stockbroker employs a criminal elements in their work force and he /she used it’s trading platform to defraud innocent investors, the stockbrokers should be made to pay for it because they did not do proper due diligence on their staff.

“Here, the system punishes the investor because he/she signed some documents that indemnify the broker. SEC should intensify their efforts to protect the ordinary Nigerians investors in order to build the confidence of the retail investors,” he said.

The Deputy Director/Head, Registration, Exchanges, Market Infrastructure and Innovation Department, SEC, Emomotimi Agama, added: “The APC is still functional being a board committee with the inauguration of the board it is now alive. “There are other verious instances where the SEC has intervened .The recent action by the SEC was the case of Dantata Success in Kano.”


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