The Securities and Exchange
Commission (SEC) is the apex regulatory body for Nigeria's capital market. It,
however, operates under the supervision of the Federal Ministry of Finance. The
Securities and Exchange Commission, Nigeria, like other exchange
commissions elsewhere, regulates the operation of capital market transactions,
ensuring that the relevant rules are complied with
The business of capital formation
and mobilisation is at the root of economic development, which is why every
economy wants to develop its capital market. Capital markets drive capital
mobilisation and allocation to businesses, in the push for economic growth.
Through the capital market, companies and governments mobilise capital for
investment, while offering opportunity to investors to seek profitable outlets
for their funds. Because complex financial processes are often involved, and
large numbers of investors participate, the need for guarding the mechanism for
those transactions becomes apparent. Investors need to be protected, just as
the process needs to be kept viable.
HISTORY
The origin of the Securities and
Exchange Commission dates back to 1962, when an ad hoc consultative and
advisory body, known as the Capital Issues Committee, was established under the
aegis of the Central Bank of Nigeria (CBN).
Its mandate was to examine applications from companies seeking to raise capital
from the capital market and recommend the timing of such issues to prevent
issues clustering which could overstretch the market’s capacity. The Committee
operated within the Central Bank of Nigeria unofficially as a capital
market consultative and advisory body with no regulatory framework.
An increase in the level of economic
activities, coupled with the promulgation of the Nigerian Enterprises Promotion
Decree in 1972, necessitated the establishment of a body backed by law to
regulate capital market activities hence the creation of the Capital Issues
Commission to take over the activities of the Capital Issues Committee.
The Capital Issues Commission was established with the promulgation of the
Capital Issues Commission Decree in March 1973.
The new body had a board of nine (9)
members, including a representative of the Central Bank of Nigeria who
served as Chairman, while the other eight (8) members were drawn from some
Federal Ministries, the industrial and financial sectors of the economy.
In order to cope with emergent
challenges, the powers of the Capital Issues Commission had to be further enhanced.
A Financial System Review Committee was set up by the federal government to
review capital market activities and proffer ways of developing the
market. The recommendations of the Financial System Review Committee in
1976, led to the establishment of the Securities and Exchange Commission
following the promulgation of the Securities and Exchange Commission Decree No.
71 of 1979 to supersede the Capital Issues Commission in 1979.
The Commission had more powers to
regulate and develop the Nigerian capital market, in addition to determining
the prices of issues and setting the basis for allotment of securities.
Unlike its two predecessors, the Commission at this stage was excised from the
CBN, although it continued to receive funding from the apex bank.
It also had an enlarged
12-member board with a CBN representative as Chairman. Other members were drawn
from the Ministries of Finance, Trade and Industries, the Nigerian Stock
Exchange and the Nigerian Enterprises Promotion Board; other members were nominated
on the basis of individual merit.
The Commission took off
effectively on January 1, 1980 with 51 staff out of which seven (7) were
seconded (for a period of three years) from the Central Bank of Nigeria (CBN)
while a few senior and support service staff were recruited.
Nine (9) years after the
establishment of the Securities and Exchange Commission, the enabling law,
Decree No. 7 of 1979, was re-enacted as SEC Decree No. 29 of 1988 with
additional provisions to address observed lapses in the previous arrangement
and to enable the Commission pursue its functions more effectively.
To further enhance the
Commission's pursuit of its objective of investor protection, a review of the
capital market was carried out in 1996 by a seven - man panel headed by Chief
Dennis Odife. Based on the panel's recommendations, a new Act known as
"The Investment and Securities Act No. 45 of 1999" was promulgated on
May 26, 1999. The Act repealed the SEC Act of 1998. The new Act was expected to
promote a more efficient and virile capital market, pivotal to meeting the
nation's economic and developmental aspirations.
The Investment and Securities
Act (ISA) was further reviewed, amended and subsequently passed into law
in 2007. The SEC currently derives its powers from the ISA 29 of
2007.
The Securities and Exchange
Commission (SEC) joined the International
Organisation of Securities Commissions (IOSCO) in June
1985. The IOSCO is a body of Securities Commissions with the goal of
cooperating in developing, implementing and promoting adherence to
internationally recognised and consistent standards of securities market
regulation. The Nigerian SEC qualified as an Appendix ‘A’ Signatory to
the IOSCO MMOU in 2006 and has continuously been benchmarking its market rules
and regulations against those of IOSCO, the global international standards
setter.
Responsibilities and Functions
Here are the key responsibilities
of the Commission and its expected functions:
§ The
Securities and Exchange Commission, Nigeria, broadly has a
responsibility to regulate the capital market and ensure that investors are
protected. That means ensuring that processes increasingly get transparent and
that transaction rules are complied with.
§ It
scrutinises parties that apply to operate in the capital market as market
operators and licenses those considered suitable. Such operators include:
issuing houses, securities dealers/stockbrokers, sub-brokers, registrars,
trustees, capital market consultants, reporting accountants, solicitors and
investment advisers etc.
§ Securities
for issue to the investing public are also scrutinized and registered by the
Securities and Exchange Commission. A party intending an issue must apply to
SEC for approval. These include: Equities/shares, debentures/industrial loans,
government bonds and collective investment schemes.
§ It is the
Security and Exchange Commission's responsibility to license transaction floors
and exchanges, including: Securities Exchanges (like stock exchanges),
Commodities Exchanges and Capital Trade Points, Futures, Options and
Derivatives Exchanges as well as Depository, Clearing and Settlement agencies
like the CSCS.
§ Major
financial transactions like mergers, acquisitions, takeovers and other forms of
business combinations must also have the blessing of the Securities and
Exchange Commission.
§ SEC has a
monitoring role over the capital market. That role is to ensure fair practices
that will advance the market and attract more investment inflow. It extends to
ensuring good corporate governance for the quoted companies which, among other
things, have a responsibility to deliver timely and reliable reporting to the
investing public.
§ As investors,
it's good to know, too, that the Commission adjudicates on transaction
disputes, in addition to receiving and treating investor/operator complaints.
Parties that are aggrieved over market transactions and fail to get a fair
treatment elsewhere can take their case to SEC. Often, defaulting parties
receive the big stick.
The Securities and Exchange
Commission is consequently there to see to the orderly and rapid development of
the capital market. It's basic role is to ensure transparent conduct, such that
parties that take decisions, especially on investments, do so on the strength
of good information and sound processes. By that, it is to attract more funds
into the market and also attract more viable companies that could expand their
operations by tapping funds from the capital market.
IMPORTANCE OF SECURITY AND EXCHANGE COMMISSION
Securities and Exchange
Commission (SEC) is the main regulatory
institution of the Nigerian capital market. It is supervised by the Federal Ministry of Finance.[1]
The Nigerian Stock Exchange (NSE) is privately
owned and self-regulating, but the SEC maintains surveillance over it with the
mandate of ensuring orderly and equitable dealings in securities, and
protecting the market against insider
trading abuses
REFERENCES
"Who We
Are". SEC Nigeria. Retrieved 2011-06-08.
"The
Impact Of Nigerian Stock Exchange Crises On The Nigerian Economy".
Cfpe2004. February 26, 2011. Retrieved 2011-06-08.
Adefioye Onaolapo Akerele (1998). "Efficiency
Of The Nigerian Securities Market" (Pdf). Retrieved 2011-06-08.
Arunma Oteh (November 16, 2010). "Testimony
On “The Global Financial Crisis And Financial Reform In Nigeria: A Capital
Market Perspective”" (Pdf). Securities & Exchange
Commission, Nigeria.
Retrieved 2011-06-08.
Tayo Odunlami (2010-08-09). "An
Amazon’s Disgraceful Crash". The News Nigeria. Retrieved 2011-06-08.
"Nigeria
SEC: Will Appoint New Team At Nse Early 2011". Dow Jones News.
09/03/2010. Retrieved 2011-06-08. Check Date Values In: |Date= (Help)
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