New Telegraph

Boosting investor confidence via securities bill

Analysts

The Investment and Securities Bill (ISB) will give capital market the vibrancy it needs to boost investor confidence, Rhoda Ogunseye writes

As widely believed, the likely passage of the Investment and Securities Bill by the National Assembly is expected to boost investor confidence. This belief was recently reemphasised by Kasimu Garba Kurfi, the Managing Director /Chief Executive Officer, APT Securities and Funds Ltd. While speaking on the Bill, he said: “We hope the National Assembly will approve the Bill and President Muhamadu Buhari signs it before be goes.” He said through the ISB the Securities and Exchange Commission (SEC) would acquire power to operate efficiently. “If you look at it the SEC have limited powers but by the time they review it, it will be given more powers where they can confisticate after withdrawing operators licenses in cases of fraud. “I believe the bill when reviewed will address so many issues. If you look at it since 2007, today we are talking of 2023, you are talking 15 years, there is so many development that need to be incorporated, which were incorporated in the Bill. “But we hope the National Assembly will pass it to the president. And we hope the President will endorse it before his tenure ends,” he said.

Impact of ISB on the capital market

He said it was going to impact seriously because there are many development. According to him, “remember in 2007, 2008 we had the economic meltdown, so there is development and experience, which the Bill will take care of. Not only that, we hope with the Bill there are more powers given to SEC. “If you look at it now they hava limited power, and by that ISB, they will have more power, especially for those issuing houses. Because, if you look at it, when they commit offence, the SEC withdraws their licence and it ends there. “But with the new Bill, they will not only withdraw the licence, they will go further just like the Nigerian Deposit Insurance CommissioNDIC) to liquidate, wind it up, and take care of the investors. “So if this bill is approved, it will give them such power. They will not only withdraw the licence, they will go further. “Because if you could remember the BGL partnership cash trap, SEC only withdrew their licence. We have to go beyond that. They should have the power to not only withdraw their licence, but to further liquidate it, in order to make sure that they resolve all outstanding matters that are related to those issuing houses.

Benefit to investors

The Bill will raise investor confidence much better. The Chairman of the House of Representatives Committee on Capital Markets and Institutions, Mr Babangida Ibrahim, had said the Investments and Securities Bill (ISB) conferred the Securities and Exchange Commission (SEC) new powers to investigate capital market infractions and apply sanctions to culprits. The lawmaker said this was one of the advantages of the new piece of legislature, which is awaiting passage in the Senate. According to him, the bill has provisions that will inspire the confidence of both local and foreign investors as they can be assured that the regulators have been sufficiently empowered to deal with malpractices that undermine confidence in the market. Mr Ibrahim stated that foreign investors and market participants would also be attracted to the Nigerian market because they will have comfort in the fact that the Bill seeks to mirror standard investor- protective provisions and practices in advanced jurisdictions, which the foreign participants are already familiar with. On the reason for the new Bill, the lawmaker stated that the current enabling law for the Nigerian capital market, the Investments and Securities Act, No. 29 of 2007 ISA), was signed into law by late President Umar Musa Yar’adua in June 2007 (15 and half years ago) before the global financial crisis of 2008/2009. Global financial regulators, he said, had made major changes in their regulatory instruments following the crisis to address some of the obvious gaps that contributed to the global economic disruption of the time, adding that such global shifts and other current trends in capital markets regulation have made it imperative to make major improvements to the Act to align our market with international standards. According to him, the bill seeks to repeal the ISA and introduce new provisions that empower the SEC to collaborate with other regulatory bodies in the financial sector to manage and mitigate systemic risks as it confers new investigative and enforcement powers on the apex regulator, SEC, to effectively regulate the Nigerian capital market. It introduces the framework for the regulation of new products, including financial and commodities derivatives and financial market infrastructures, which are expected to lead to increased activities, and, thus, deepen the Nigerian capital market. “The bill introduces stiffer sanctions in the form of increased fines and jail terms, which are commensurate with the severity of offences, and also serve as deterrence to potential future offenders. “For instance, a jail term of not less than 10 years has been provided to address the menace of Ponzi schemes and illegal investment schemes that have caused heartache for thousands of Nigerians who have been victims of such scams. Other offences, such as market manipulation, insider trading, false statements in prospectuses etc. are also subject to severe punishment. “The bill will ensure the diver-sification of the Nigerian economy away from a mono-product oil economy through the strengthening of the Nigerian commodities ecosystem with the trading of warehouse receipts and commodities contracts on the commodities exchanges. “The bill also contains a legal framework for registration and regulation of new types of critical market infrastructures such as central counterparties, which will be responsible for managing the risks emanating from transactions in derivatives and other financial instruments, thereby ensuring the safety and integrity of our markets and boosting investors’ confidence,” he stated.

Expanded access

The lawmaker disclosed that the Federal Government agencies, subnational, and supranational will be able to better access the capital market for both revenue bonds and project-tied bonds as the bill now contains adequate provisions that enable both corporates and governments to issue new instruments to develop the infrastructural requirements of the country. According to him, “the bill will generally revitalise the Nigerian capital market, as it introduces regulation of new businesses, products and services that will deepen the market while equipping the apex regulator with appropriate powers to protect the market and enforce the provisions of the bill. “In every sense of the word, this bill is truly market-inspired. Inputs were received from all segments of the Nigerian capital market – the securities exchanges, commodities exchanges, the central counterparties, capital market operators and trade associations, chartered institute of stockbrokers, capital market professionals such as the legal practitioners as well as shareholders associations.”

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