Redefining capital market at Gwarzo’s SEC

IN the three months he has been at the helm of the Securities and Exchange Commission (SEC), first in an acting capacity and a fortnight ago as substantive Director General (DG) following his confirmation by former President Goodluck Jonathan, Mounir Gwarzo has mostly been out of the limelight. He has granted few media interviews. Apart from reports of professional groups on official visit to SEC, there have been but only a few stories or pictures of him in the media. He has also been conspicuous by his absence at social events.

Yet, as SEC staff, capital market operators and other stakeholders will testify, Gwarzo has been very busy. Since he took the reins at SEC, this scion of a distinguished Kano family has streamlined the operations of the commission to focus on its core mandate as an apex regulator. Within a short time span of about three months, he has taken very bold and important steps to build a stronger capital market on a foundation of clear rules and best practice by releasing long-delayed rules on critical market issues like demutualization, securitization, National Investor Protection Fund (NIPF), Investor Complaints Management amongst others. The impact of this is better appreciated against the backdrop that the release of some of these rules had been stalled for over 10 years! In addition, he has overseen the successful completion of work on the corporate governance scorecard, undertaken an impactful and robust public enlightenment campaign on market initiatives like e-dividends and dematerialization to press into public consciousness that it is indeed a new dawn at SEC and that strong positive things are happening.

He has done this and more while at same time deepening operational efficiency and encouraging greater participation in the market by rebuilding public confidence in the stock market.  This is critical because since the global economic recession of 2008 and the crash of once celebrated Nigerian banks, the enthusiasm of Nigerians for buying stocks had witnessed a serious decline. It is true that since the bank crashes, the policy environment has witnessed some improvements and the capital market had recovered some of its verve as activity had increased. But, as the cliché goes, once bitten twice shy.

After the controversial tenure of Arunma Oteh, a period largely defined by high profile disagreements with the National Assembly, the confirmation of Gwarzo as substantive head of the institution is indeed a good omen for the institution and the Nigerian economy. The battles with the House of Representatives and the Senate had deprived this important regulatory institution of legislative legitimacy and kept it busy with issues outside its mandate. The current refocusing of SEC is, therefore, a positive development.

This is clear from the manner in which SEC’s management under Gwarzo has approached the institution’s core mandates: the regulation and development of the Nigerian capital market. The approach is to strengthen the legal constructs that govern the capital market while ensuring strict compliance to the rules and guidelines without fear or favour and, most importantly to achieve these in an environment of firmness and fairness in which there is a level playing ground for all players and other stakeholders.

In fact, firmness and fairness could be said to be the twin pillars of SEC so far under Gwarzo. Based on this experience as well as a clear understanding of the challenges of the environment, the corner stones of SEC Gwarzo’s short stay in the saddle have been: zero tolerance for corruption, a strong adherence to established rules and, where necessary, the tweaking of the rules to make them more responsive to today’s realities.

The ongoing investigation of companies behind floated private placements not yet quoted on the Nigerian Stock Exchange (NSE) exemplifies this approach. The investigation by SEC and the NSE follows the anxiety of investors over the development which has led to huge funds being trapped in irregular and dubious investments. SEC has acted quickly to stop further damage and the firms involved have been put on notice that it would not tolerate any practices that would affect investors’ confidence such as misleading information or false promises by issuers and marketers in respect of listing. This is also the same focus behind the collaboration between the Securities and Exchange Commission (SEC) and the National Insurance Commission (NAICOM) to achieve better enforcement against insurance companies who misappropriate funds raised from the capital market.

SEC under Gwarzo has also focused on tightening the nuts and bolts and ensuring that the necessary lubrication that keeps the engine of the capital market running smoothly are of the right specifications and in good condition. This is in line with the institution’s mission – “to develop and regulate a capital market that is dynamic, fair, transparent and efficient, to contribute to the nation’s economic development” and vision – “to be Africa’s Leading Capital Market Regulator”.

When the organisers of the PEARL Awards paid him a courtesy visit, Gwarzo spoke passionately about the central place of governance in the capital market: “One issue that is very critical in the capital market is corporate governance… I appeal that in your selection process for awards, emphasis should be given to the quality of compliance to best corporate governance practices by companies. This should be an important consideration in addition to the financial performance of companies.” Here SEC is leading by example. To boost investor’s confidence and deepen corporate governance practices in Nigeria, the Commission is set to release a landmark Corporate Governance Scorecard for listed companies in the country.

Another priority of the new dispensation at SEC is fidelity to the enthronement of best practice and global standards. When another professional group, the Association of Reporting Accountants visited SEC, he did not hide his displeasure about the failure of some companies to fully migrate to the International Financial Reporting Standards.

“Last year, almost 40 or more per cent of the companies had yet to migrate to IFRS”, he stated, adding that SEC plans to run a training programme for such firms in collaboration with the Association. Gwarzo, who explained that the commission was having some challenges with some of the companies migrating to IFRS, said it was prepared to collaborate with ARACM to ensure a smooth migration to the new reporting standards.

It is evident that change has come to SEC. With Gwarzo having taken effective charge, no one within the industry has been left in doubt that it is no longer business as usual. A steady, firm and fair hand, which resonates confidence in both the local and international markets is what is required at the commission at such a time as this.

• Kyaave is a business and policy analyst