Investors at the Nigerian Stock Exchange (NSE) who suffered pecuniary losses due to activities of capital market operators may have to wait longer, as there seem to be no solutions in sight regarding their compensation from the Investor Protection Fund (IPF).
The NSE Investor Protection Fund was established to give investors a statutorily-backed avenue to reduce the losses they suffer as a result of bankruptcy. It is also meant to cover investors’ losses arising from insolvency, bankruptcy or negligence of a dealing member firm of a securities exchange or capital trade point.
Barely six months ago, the NSE, responding to BusinessDay inquiry, said the board of the IPF intended to compensate the first batch of verified claims of aggrieved investors by January/February 2014 and continue the investigation and verification process for the remaining claims.
The Board of Trustees (BoT) of the IPF chaired by Gamaliel Onosode had met in December 2013 where issues regarding the payment of verified claims of aggrieved investors were said to have been finalised.
The NSE IPF is also expected to compensate investors that have genuine claims resulting from defalcation committed by a dealing member firm, or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received by, the dealing member firm in the course of its business as a capital market operator.
Oscar Onyema, chief executive officer, NSE, at the NSE’s 2013 market review and outlook for 2014 earlier this year, had said the fund would commence operations later this year after the regulatory approval might have been given. The Securities and Exchange Commission (SEC) in January this year approved the proposed rules for NSE IPF.
Onyema also noted that once the IPF becomes operational, it would aid the NSE to boost investor confidence and in its quest to ensure that capital market operators avoid market infractions.
Six months after the NSE’s disclosure and about four months after the SEC approval of the rules governing the operation of the IPF, no investor has been compensated.
In line with the provisions of part XIV of the Investment and Securities Act (ISA) 2007, which requires the NSE to establish and maintain an investor protection fund, the NSE launched its IPF with about N625 million in the coffers as at last year.
Investors had expressed concerns over the feasibility, accessibility and compensation process of the fund.
But the NSE had assured six months ago, while responding to BusinessDay inquiry on the state of the fund, that “The Board has taken steps to ensure that the Investor Protection Fund is regulated, managed, operated and administered in accordance with the highest standards and in compliance with the provisions of the Investment and Securities Act 2007.”
Also, the NSE had noted that as the fund was considered as a Public Interest Enterprise (PIE) under the provision of the Federal Reporting Council Act of Nigeria, “it is required to convert its accounts into the International Financial Reporting Standards (IFRS)”.
The audit exercise was expected to be concluded by January 2014 after which the accounts would be approved by the board and submitted to the National Council of the NSE and the SEC.
Few months after this assurance, they have refused to comment on developments around the IPF.
Iheanyi Nwachukwu
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