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SEC considers new guidelines to digitalise market transactions

By Helen Oji
11 May 2022   |   4:04 am
The Securities and Exchange Commission (SEC) is proposing a new guideline that will fully digitalise capital market operations and enable investors to carry out transactions on Internet-enabled appliances.

The Securities and Exchange Commission (SEC) is proposing a new guideline that will fully digitalise capital market operations and enable investors to carry out transactions on Internet-enabled appliances.

This is contained in a guideline on Minimum Operating Standards for Information Technology for Capital Market Operators (CMOSs) recently made public.

According to the SEC, the new regulatory framework undergoing review seeks to mandate compulsory adoption of information and communication technology (ICT), particularly web-based applications and devices, for virtual capital market transactions.

By the proposal, all registrars, central securities depositories and clearing houses will be required to digitise their operations as a regulatory requirement rather than an optional service provision – a move that could address issues fuelling unclaimed dividends.

The Commission stated that the provisions of the document apply to all categories of CMOs unless in sections where reference is otherwise made to specific categories.

According to SEC, the new framework’s purpose “is to establish a threshold of operational efficiency in the Nigerian capital market through the effective adoption of information technology in driving business operations and ensuring the security, confidentiality, integrity and reliability of Information Systems.”

“This will help operators harness the huge operational benefits derivable from the adoption of technology and also manage the attendant cybersecurity threats and other risks that accompany the use of technology. It would also positively impact the effectiveness and efficiency of the Commission to monitor and regulate all capital market operators in the market.”

“A draft copy of the framework indicates that the new framework, upon final approval, will apply to all capital market operations, with particular emphasis on investor-facing functions such as securities trading, fund management, share registration and clearing and custodial services, among others.

“The new rules mandate all capital market operators to have a well-secured and functional website and electronic mailing system, either hosted privately or using a cloud service provider, with domain name owned and registered by the capital market operator,” SEC said.

Under the proposed framework, stockbrokers will be required to have websites and web applications that allow investors to securely create and manage their equity accounts online, make inquiries and receive customer support using chat bots or other interactive programmes from web browsers.

SEC also stated that fund and asset managers, who run the country’s burgeoning collective investment schemes, will also be mandated to have websites and web applications that allow investors to securely create and manage investment accounts online, make enquiries using chat-bots or other interactive programs from web browsers.

“Fund and asset managers are also required to have mobile applications that provide free access to the full stack of their service offering and allow retail investors to securely create and manage investment accounts online, make inquiries and receive in-app customer support”.

“The guideline also stipulates that all central securities depositories and clearing houses shall have databases integrated with APIs that registrars and brokers can feed on as approved by the SEC while all registrars, central securities depositories and clearinghouses are required to have websites and web applications that allow investors to securely create and manage their profiles online, make inquiries and receive customer support using chatbots or other interactive programmes from web browsers.”

While securities exchanges had made self-driven efforts to automate their systems, the new rules make it mandatory for all exchanges-including equities, debt, derivatives and commodities exchanges among others, to “have secure trading platforms with robust features that include real-time quotes, charting tools, news feeds, trade monitoring and premium research.”