Securities and Exchange Commission
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. 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)