SEC AND EFFECTIVE FINANCIAL REGULATIONS
Bashir I. Hassan argues that a regulatory agency should perform its task without sentiments
Laws – and regulations deriving from them -- achieve their purposes if they are applied and enforced in equal measures to all in the society. The real test of any law and every regulation, therefore, is enforceability, which is reflected in extent of compliance. Every country has laws and rules that govern every facet of its life. These are usually embodied in a constitution that guides its policies that govern the behaviour of the populace. One of the most important facets of modern society, which the government pays attention to, is the economy. All the moral misdemeanor of President Bill Clinton, for example, was overlooked because he was implementing the right economic policies in place and was swiftly re-elected. We all can remember the famous campaign slogan of the 1990s “It’s the economy, stupid,” which was directed at his Republican opponent in his bid for re-election.
Countries, Nigeria inclusive, establish statutory bodies, from time to time, to regulate behaviours of individuals and corporate bodies within the boundaries of their economic activities or transactions. In Nigeria, we have very formidable regulatory institutions that regulate our economy. They include the Central Bank of Nigeria (CBN), Nigeria Deposit Insurance Corporation (NDIC), Securities and Exchange Commission (SEC), Asset Management Corporation of Nigeria (AMCON) and Nigerian Ports Authority (NPA), to mention a few. All these bodies are doing their utmost best to regulate, develop and stabilise our economy. In their efforts to regulate our economy, these institutions often court the ire of some people or corporations deluded by the feelings of being “too big to be touched” and all hell is often let loose when their interests are affected.
Thus, it is commonplace that, in the course of carrying out their functions, regulatory agencies come in contact with all manner of people — some understanding others naughty. However, whatever the case may be, regulators have the stipulated rules to guide them and compliance with the rules is all that matters. People, whether in their individual capacities or as representing corporate entities, have the tendency to whip up sentiments to elicit sympathy when they find themselves in conflict with the rules. No one should be beguiled by these selfish natural tendencies of the humankind.
More often than not, these sentiments are nothing but exaggerated and self-indulgent defences for clear failings on the part of the defaulting party. Such sentimental people often had the chutzpah to drag regulatory bodies to courts of competent jurisdictions or even the “public court” playing on the gullible nature of the ordinary persons. Their chief weapon of choice is assassination of the characters of the heads of such regulatory institutions in the media. If the regulatory bodies are not lucky, an opposition politician may pick the news and cash in on the media hype to hit back at the entire government in power.
Therefore, to avoid falling victims of deliberate distortion of facts, the public need to find out what are the possible reasons behind the sudden media hype about the activities of such regulatory bodies or the sudden interest in the character of their heads. More often than not, a careful investigation will lead to people having questions to answer in their interaction with such regulatory bodies are behind the negative campaigns.
The discerning public should always be guided by the meritorious work of our regulatory institutions and judge them on that basis. Let us use the example of the Securities and Exchange Commission. How far has it gone in delivering on its key mandates of protecting the investor and development of the capital market? At what cost has its accomplishments been to its image?
In 2015, the current Director General (DG) of the SEC, assumed the position at helm of affairs. He made a solemn promise to implement the Capital Market Master Plan. Capital market stakeholders put the plan together in 2013. On assumption of office, the DG had his eyes onrejuvenating the retail end of the capital market, which suffered heavy losses following the capital market crash of 2008.
As of December 2014, Nigeria’s market capitalisation stood at N16 trillion. The new DG believed that, if fully mobilised, the market capitalisation of the largest economy in sub-Saharan Africa ought to be far greater than that. Today Nigeria has recorded some progress because by the second quarter of 2016 the total capitalisation stood at N17.28trillion.
One of the innovative ways of encouraging growth in the retail end of the capital market is fast tracking the dematerialisation of shares (moving away from physical share certificate regime), which can be achieved through electronic transfer under the e-dividend platform. I once argued that dematerialisation is an incentive to encourage retail investors come back to the capital market en masse.
It is a known fact that the market is one predominantly dominated by equities and government bonds. This means that market capitalisation and activities are concentrated in a few economic sectors (indeed, two sectors — consumer and industrial goods — make up about 75% of the equities market) and stocks (the five largest companies by market capitalisation make up 56% of the equities market).
To address this skewed situation, the DG set up a market-wide committee to engage potential companies for listing. The committee has done extensive work liaising with regulatory agencies, interest groups and companies on the imperative for listing. In addition, about three companies have been identified that will be listed this year.
On the question of what regulations, oversight and enforcement mechanisms need strengthening, as part of the master plan, the SEC held a conference in conjunction with the National Assembly on the legal challenges facing the capital market. Immediately afterwards, it set up three law review committees to look at all the major laws, including the Investments and Securities Act (ISA), the Companies and Allied Matters Act (CAMA), Investment and Trustees Act, Warehouse Receipt Bill, etc.
The committees have largely completed their work. Their recommendations will form the capital market’s consensus positions on the review of those laws. These recommendations promise to be a major landmark in the nation’s financial services architecture, and it will enhance the capacity of SEC to navigate through the requirements of the NASS. Significantly, the report of the committees has the buy-in of all stakeholders in the market.
All these are pointers to the commendable efforts of SEC to develop our capital market and to take it to enviable heights. To achieve these, the SEC must continue to put regulations first, shunning all sentiments in ensuring total compliance with the regulations by all operators in the Nigeria’s capital market.
Globally, the norm amongst regulatory agencies is, when compliance is the matter, all sentiments are shoved aside. This should not be any different with our own apex capital market regulator, SEC.