X-raying reforms in SEC and uncanny zeal for investment space


By Onu Okorie

In Nigeria today, when agents of transformations in the administration of President Muhammadu Buhari are being counted, the Director General of Securities and Exchange Commission SEC, Mr. Lamido Yuguda will definitely standout, if the numerous reforms he has introduced is anything to go by.

In less than two years after assuming office the SEC management under Mr. Yuguda has not only set strategic goals but also continued to expand the frontiers of investment space thereby attracting improved local and foreign direct investment, FDIs into the economy through innovative regulatory guidelines and collaboration with other relevant institutions.

For instance, on market-wide issues, the Commission has drafted and presented an amendment to ISA Bill to the National Assembly as part of its efforts to enhance the regulatory framework of the Nigerian capital market, lead to the introduction of new products into the market, and increase the effectiveness of the Investments and Securities Tribunal, amongst other benefits to ensure that the provisions of the Bill represent realities in the nation’s investment climate.

Also, the Commission is collaborating with National Assembly Business Environment Roundtable NASSBER to prepare a roadmap towards passage of the Bill within the shortest time frame.

Also, the Yuguda-led executive management team has been implementing capital market development goals set out in the Capital Market Master Plan (CMMP) (2015-2025) and successfully completed the review of CMMP to realign the initiatives/deliverables to prevailing market conditions and keep the document relevant in the dynamic capital market due to issues related to Fintech, sustainability and regional integration.

To resolve legacy issues of Identity Management which is a crucial driver in improving market participation and solving unclaimed dividends and related problems, the management also inaugurated a market-wide Identity Management Committee with mandate to harmonize the various databases of investors in Nigerian capital market, facilitate data accuracy in the market, mitigate fraud, improve KYC requirements and manage AML/CFT risks, among others.

The report of the committee is expected to resolve issues that have hindered growth of the Market, hampered investor confidence, and matters that serve as barriers to entry for potential investors, amongst other benefits.

On primary market activities, the Yuguda-led executive management of the SEC has also in the past two years approved 41 new equities issues valued at N656.9 billion, 37 bonds valued at N776.2 billion, 28 applications for shelf programmes valued at N2.5 trillion and 21 Exchange Traded Derivatives Contracts.

This is even as it processed six Schemes of Merger, seven Acquisitions, 21 Corporate Restructurings, and three Takeovers during the period. It also ensured that over N11 billions of untraceable shareholders’ funds from Schemes of Arrangement in the custody of Registrars were transferred to the National Investor Protection Fund NIPF.

As part of the process of improving time to market of transactions and fast tracking the review process, the Commission conducted training for issuing houses to help improve the quality of applications submitted.

Similarly, Commission also recorded a landmark achievement on the first electronic offering with combined feature of book building to Qualified Institutions and use of the price discovered from book-build for sales to Retail Investors. It also granted approval for the first 21 derivatives contracts which had seven and 14 different contracts from both the NGX and FMDQ Exchanges respectively in the past two years.

On Collective Investment Scheme CIS, the Yuguda-led management has also, following completion of series of monitoring and evaluation processes, commenced implementation of 100 per cent custody requirement in the CIS sector to protect investors. As a result, all clients’ assets currently managed under discretionary and non-discretionary mandates are to be held under independent custodial agreements in custodial banks.

The Commission has also recorded remarkable milestones in its secondary market activities in the past years with successful demutualization of the Nigerian Exchange Limited NGX which investment analysts see as milestone in the development of Nigerian capital market.

This is even as the management collaborated with University of Cambridge’s Centre for Alternative Finance, UK for the training of its select employees on a certified course on Fintech & Regulatory Innovation, to enhance the Commission’s capacity in regulating Fintech.

Also, it collaborated with the World Bank to commission a Fintech Scoping project and held collaborative engagements with 15 International and local Fintech stakeholders to guide the Commission on its Fintech policies.

The Regulatory Incubation Guidelines to operationalize provisional regulation for aspiring Fintech firms were released within the period. In furtherance of its market regulation roles, management of the Commission was able to ascertain the quantum of unclaimed dividends of publicly traded companies that fall within the categories eligible to be borrowed by the Federal Government.

This amounted to N56, 584,795,648.71 and $8,153,118.41 respectively. In addition, it also facilitated the transfer into the SEC/CNB NIPF Account of N2.3 billion in excess of return monies and N11.4 billion in Schemes consideration money, both of which had previously been held in the custody of the Registrars.

On the pesky issue of Anti-Money Laundering/Combating the Financing Of Terrorism AML/CFT, following the GIABA Mutual Evaluation of Nigeria, the Yuguda-led executive management had made concerted efforts in the capital market to meet both the GIABA Mutual Evaluation Report MER Follow-Up Process and the FATF International Cooperation Review Group ICRG requirements in order to avoid Nigeria being placed on the FATF public grey list at the Plenary when the grace period expires in October, 2022.

For instance, following the MER findings that Nigeria had several important deficiencies in its AML/CFT/CPF system in relation to Technical Compliance, and that its effectiveness controls were insufficient to mitigate its high ML/TF/PF risks, the Commission championed the amendments of Rules and Regulations of the Virtual Asset Service providers; the sector specific regulations to repeal the 2013 SEC AML/CFT Regulations and enactment of the 2022 AML/CFT Regulations; the SEC AML/CFT RBS Framework.

These new rules and amendments were done in order to address Nigeria’s MER deficiencies and broaden the scope of preventive measures available to VASPs. In furtherance of its regulatory mandate, the Commission conducted investigations into complaints by investors and out of the 250 complaints brought forward into the period, 182 were resolved.

Also, out of the 58 complaints in relation to Ponzi schemes received, 45 were resolved. The Commission was able to recover 10,659,168 units of various companies’ shares as well as the sum of N1, 384,255,526.73 recovered for investors during the period under review.

It issued New Rules on Robo-Advisory Services to guide the regulatory requirements and expectations for providing automated advisory services in the market and released the Rules on Trade Repositories during the period under review.

Similarly, the Yuguda-led executive management of the Commission also introduced new rules on Crowd Funding, Social bonds, Digital Assets Exchange DAX, Digital Assets Custodians DACs, Issuance of Digital Assets as Securities and Requirements for registration of Digital Assets Offering Platforms as part of its efforts to guarantee security of investments in the capital market.

On Corporate Governance measures, the Commission also released guidelines on the Implementation of Sections 60-63 of Investments and Securities Act (ISA), 2007 and in order to strengthen the disclosure regime in capital market, the Commission in a circular dated January 19, 2022 provided public companies a fast track option for filing Audited Financial Statements.

In addition, the Commission also developed the SEC Corporate Governance Guidelines SCGG to address corporate governance issues not considered in the NCCG, and released same in October 2020. As part of its efforts to harmonise the reporting timeline of the SEC Corporate Governance Guideline SCGG with that of the National Code of Corporate Governance NCCG, it also in year 2021 exposed to the public for comments an amendment to Rules 42(2).

The Commission has also as part of its regulatory interventions to amicably resolve disputes between the board and shareholders of listed companies resolved the disputes between Alhaji Muneer Alade Bankole (the Chief Executive Officer and Sheikh Abdulmohsen A. Al-Thunayan Chairman of the Board, of Medview Airlines, resolved those between major shareholders of Ikeja Hotels Plc and returned the company to profitability and also reached a settlement with Oando Plc in 2021 after concluding investigation of Corporate Governance allegations levelled against the company.

In regard to its market development mandate, the Commission has continued its Investor Education and Public enlightenment programmes by organizing workshops on infusion of Capital Market Studies into the curricula of Basic and Secondary Schools in Nigeria and also collaborated with the Standards Organization of Nigeria SON and other partners to organize Stakeholders’ Sensitization Workshops on Commodities Standards in Lagos and Kano during the period under review.

Furthermore, the Commission held webinars on Non-Interest Capital Market Products, Financial Inclusion, Ponzi Schemes and Solid Minerals targeted at the pension industry, investor protection, women, Youth/millennial and the commodities segment of the market.

Also in pursuit of non-interest market education and enlightenment programmes, the Commission collaborated with Islamic Financial Services Board IFSB and the Auditing and Accounting Organisation of Islamic Financial Institutions AAOIFI to organize Non-Interest Capital Market training for over 1000 participants.

Also, the Yuguda-led executive management of the Commission has led the team to improve the capacity of the Nigerian Capital Market Institute NCMI by providing it with necessary tools to train Capital Market Operators CMO in different fields.

On international engagements, Mr Yuguda is now saddled with leadership of West African Securities Regulators Association WASRA. Under his leadership, rules for the integrated West African Capital Market were developed and reviewed.

On human capital development, the Commission had in 2019 conducted an internal capacity assessment that outlined staffing deficits and needs.

Also, in furtherance of its drive to leverage its operations by deploying innovative technologies and solutions to its departments and units, the Commission conducted a review of its IT infrastructure and determined that it was in a poor state.

The investigations focused on the internal and external perceptions of the Commission with the conclusion that the IT infrastructure was out dated and needed to be upgraded to international standards of securities regulators.

Also, on its Risk-Based Supervision Framework Implementation and Capacity Building Project the Commission secured a $400,000 grant from the African Development Bank AfDB to support capacity building projects in the areas of RBS, Derivatives and Green Bonds.

The Commission has also secured counterpart funding of $450,000 from AfDB on its Nigeria Securities Market Surveillance System Project to support the deployment of a real-time market surveillance system for the Nigerian capital market.

In addition, it has also secured from the Central Bank of Nigeria CBN the sum of N3.5 billion for Information Technology transformation project. Given the unparalleled achievements recorded so far, it has been argued by some financial experts that there is nexus between Yuguda’s reforms and investors’ making Nigeria a preferred destination in recent times.