Nigeria: Uduk - One Year As SEC DG

17 April 2019

Goddy Egene writes that the Securities and Exchange Commission has made some progress one year after Mary Uduk was appointed acting director general

When Mary Uduk was appointed acting director general of the Securities and Exchange Commission (SEC), in March 2018, she came in with a mission to fulfil the commission's statutory mandate through team work, collaborative engagements of stakeholders and a committed sense of purpose.

Given the circumstances of her appointment, she knew then that her primary task was to restore investors' confidence in the nation's capital market system and by so doing, make the Nigerian investment space attractive to global and domestic investors, despite the nation's economic challenges.

One year of overseeing the regulation of the capital market, stakeholders said Uduk and her management have done reasonably well in sustaining investor confidence, instilling discipline in transactional processes in the bourse, enlightenment and engagement of investors and their associations on emerging trends in global investment space.

Although the value of the market has declined, operators said the negative development was caused the inability of the federal government to support the efforts of SEC management.

According to them, while the regulator has been working hard to sustain investor confidence, the absence of board has discouraged potential investors.

Sustaining investor confidence

In the area of sustaining investor confidence, the Uduk-led leadership of the SEC continued to promote the E-Dividend Mandate Management System(EMMS), the Direct Cash Settlement(DCS) and the multiple subscription service option for investors. In addition, the SEC has raised the bar of investors' confidence through the National Investors Protection Fund (NIPF) Risk-Based supervision and the Complaints Management Framework that opens communication channels for investors to lodge complaints and get prompt responses.

The importance of the EMMS is to reduce to the barest minimum the incidence of unclaimed dividend. To boost the e-dividend mandate and DCS initiatives, the commission engaged the Nigeria Inter-Bank Settlement System (NIBSS) on behalf of the capital market community to facilitate identity validation and account validation in an effort to enhance market processes.

Another area the SEC made progress in the past year is in respect of its initiatives aimed at educating investors on capital market development. Apart from advising retail investors to invest in collective investment schemes (CIS) also known as mutual funds, given the low or no risk level of such investments, the commission has also been carrying out regularly various investor education campaigns nationwide to inform investors of the benefits of investing in long term securities and avoiding investments in illegal schemes, among others.

Also, the capital market regulatory institution has recently initiated a collaborative relationship with the Nigerian Educational Research and Development Council (NERDC) on the development of a curriculum for basic and secondary schools on Capital Market studies as part of the management's futuristic approach in Nigeria's capital market development.

Recently, in furtherance of its investor protection mandate, the commission, in line with the provisions of Section 13 (w) of ISA 2007 which empowers it to close any illegal investment companies, sealed off the premises of a Lagos-based firm, Growing Circle, for engaging in illegal fund management activities.

Also, SEC early this year issued a cease-and-desist order to Kapa-Community Ministry International Inc. (KAPA), a religious corporation found to be soliciting investments from the public in a manner resembling a Ponzi scheme, following evidence that the organisation had been offering and selling securities in the form of investment contracts without the necessary licence.

SEC has issued several warning notes to the investing public, urging them to refrain from investing their money in outfits not registered with the commission. The commission has also advised the public not to subscribe to any financial investment plan without first checking the registration status of the operating company on the commission's website.

Specifically, the SEC must register any investment scheme targeted at the investing public together with the managers of the scheme. This is the first step toward investors' protection. Therefore, any investment scheme that is not registered is automatically categorised as illegal and potentially fraudulent. The commission maintained that even if the company was registered with SEC, the potential investors should endeavor to find out from the commission whether the commission has approved the company's activities.

Embracing Fintech

In line with global trends, the SEC has also keyed into the idea of leveraging the performance of the nation's capital market on technological products and solutions. Already, a division now exists in the SEC dedicated to Fintech which is helping the management to invest in and adopt all the technologies that relate to the capital market surrounding initial coin offerings (ICOs), among others.

As the DG confirmed recently, the management believes that technology, when properly leveraged, will reduce the cost of doing business in the capital market.

To demonstrate the SEC leadership's commitment to using technology as the driving hub for the nation's capital market transactions, the Capital Market Committee (CMC) set up a Roadmap Committee recently to develop a guide for the capital market with a view to tapping on the benefits of technology to do business and reduce cost.

Boosting transparency

Again, as a proof of the SEC management's commitment to promoting professionalism and ensuring that capital market transactions are devoid of opacity in any form, the commission introduced the Fidelity Bond as one of the requirements for all market operators to file.

The bond is a yearly regulatory mandate for operators to file and the commission, following its observation of some level of default, has started compiling the list of defaulters for the purposes of sanctioning them according to the provisions of the law.

The commission had last December also approved the amendments to its regulatory framework which prohibited stockbrokers from engaging in any form of guaranteed investments on behalf of shareholders. The amended regulation also requires stockbrokers to categorically inform their clients, in writing, that they cannot engage in guaranteed investments on their behalf. Prior to the commission's directive, there had been a significant increase in the abuse of guaranteed investments which, unfortunately, resulted in losses.

These regulatory measures, as some analysts have commented, are necessary for the current drives by Ms. Uduk and her team to make transactions in the capital market totally transparent for investments in line with global best practices.

Even on the issue of deepening the capitalisation of the market, the SEC's leadership in collaboration with the NSE, has not fared badly despite the increasingly worrisome under-performance of the nation's economy over the past few years, including the associated investors' sentiments about the 2019 general elections.

Implementation of Capital Market Masterplan

Far more fundamental to the current and future of the nation's investment space is the sustained implementation of the 10-year Capital Market Masterplan (CMP), which in the past year, has been given more attention. Uduk disclosed that the commission had commenced implementation of 66 out of the over 90 initiatives outlined in the CMP with 13 of them completed so far. She listed the de-materialisation of shares, re-capitalisation of capital market operators, setting up of a National Investment Protection Fund, and establishment the West African Securities Regulators Association, as some of the completed initiatives.

Uduk expressed optimism that many of the yet-to-be completed 55 initiatives now at various stages of implementation would be concluded before the end of 2019.

When the progress made by the SEC in the implementation of the CMP is analysed within the context of the fact that the document is a blueprint for the development of the Nigerian capital market in core areas of investor protection and education, professionalism, product innovation and expansion of the capital market's role in Nigeria's economy, then it can be said that SEC has recorded significant progress in the last one year.

Going forward

While SEC has been commended on some of the initiatives made so far, market analysts believe there should be more collaborative efforts among the regulators and all stakeholders. They include the fiscal and monetary authorities as well as the National Assembly.

This will boost the task of attracting long term investments into Nigeria and close the funding gap that has remained the bane of the country's sustainable development over the years.

The Chairman of Ibadan Zone Shareholders Association, Mr. Eric Akinduro, said: SEC should embark on intensive awareness creation particularly to the grassroots investors. In this market we have two types of investors informed and uninformed SEC should create an enabling environment for the uninformed to be informed and key into the e-mandate system."

According to him, the commission should partner shareholders groups to reach their members at grass root level.

Mr. Anthony Omojola of Independent Shareholders Association of Nigeria (ISAN) said the regulator should embark on an enlightenment using radio, town hall meetings and other means across the country.

"This can be done through partnership and collaboration with other market stakeholders. Apart from shareholders, most banks' staff needs enlightenment too because many of them do not understand the workings of the e-dividend platform. They show high level of ignorance when an investors want to register," Omojola said.

Mrs. Bisi Bakare of Pragmatic Shareholders of Nigeria said we need to do more of enlightenment, especially in the rural areas.

"Before now, most investors were civil servants, who have retired to their villages or changed addresses. The regulator should collaborate with other stakeholders and do more enlightenment for a more efficient result," Bakare said.

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