NASS forces SEC to rely on market revenues for operations

For the first time in decades, the Securities and Exchange Commission (SEC) has become more creative in financing its operations. This finance creativity is coming as a consequence of the estranged relationship between the leadership of the commission and the National Assembly, which has yanked off its allocation from the 2013 budget.

The National Assembly has asked for the removal of Arumah Oteh, director-general, Securities and Exchange Commission (SEC) as a condition for the release of the Commission’s budgetary allocation.

However, evidence has shown that SEC can self-finance its operations from market-related revenues.

Daily statutory charges for purchase and sale of shares on the Nigerian Stock Exchange (NSE) show that 0.3 percent of consideration goes to SEC and this is driven by volume. Just last week, about 1.561 billion shares were traded at the Exchange and SEC gets related percentage for buying and selling of this volume of equities.

SEC specifically get fees from broker-dealers, underwriters, issuing houses, registrars, fund/portfolio managers, individual/ corporate investment advisers, commodities brokers, sponsored individuals, bankers to an issue, and trustees.

It also gets fees from rating agencies, capital market consultants, venture capital companies / fund managers, market makers, custodians of securities, depository agencies, jobbers, as well as from market facilities. This is in addition to the sale of application forms to intending market operators; as well as penalties paid by operators, as the commission enforces its regulatory oversight.

Amid zero-allocation on the budget of the SEC, BusinessDay investigations show that despite the third month running into the year 2013, the Commission has been able to pay staff salaries.

The House of Representatives recently insisted that President Goodluck Jonathan should implement the resolution of the House by removing the director-general of SEC, but many market operators and analysts are already querying this rigid position of the House, saying that any attempt to relieve her of her duties would negatively affect the recent rebound in Nigeria’s capital market ,which is driven by investors perception on improved regulation.

“The National Assembly’s action would affect programmes aimed at developing the capital market, not that SEC as a regulator cannot on its own pay its staff salaries from market related revenue. Just like the Nigerian Stock Exchange and Abuja Securities and Commodities Exchange (ASCE) that are self-regulatory organizations (SROs) who don’t get budgetary allocations”, a stockbroker who pleaded not to be named said.

“The National Assembly may think that withholding SEC’s budget is a way of dealing with Oteh, not knowing that they are not. Rather, they are not helping the growth of the capital market, as programmes around market development would be affected.

“If there are people that should complain against the regulator, it should be operators. But we cannot complain because the regulator has done a lot of work to instill discipline in our market, which is now driving the rebound being witnessed across market segments,” he added.

Oteh recently chaired the Africa and Middle East Regional Conference (AMERC) of the International Organisation of Securities Commissions (IOSCO), and her role in reforming Nigeria’s capital market has continued to yield results in the international arena, the most recent being the signing of a Memorandum of Understanding (MoU) with the Capital Market Authority (CMA) of Oman.

The MoU specifies the framework for bilateral co – operation and interface between the SEC Nigeria and the CMA of Oman, in matters relating to securities market development, oversight and regulation. It formalises and raises the profile of co-operation for the effective development and operation of the capital markets of both countries.

IHEANYI NWACHUKWU