Members of Parliament and experts in the Nigerian financial sector on Thursday expressed support for stiffer penalties for operators involved in misappropriation and diversion of funds in the capital market. Securities and Exchange Commission (SEC) specifically proposed 15 years imprisonment for anyone convicted and payment of 500 per cent of the amount involved, among others as stipulated in Section 27(a) of the Investment and Securities Act, 2017.
According to Abdul Zubair, acting SEC Director-General, and Charles Udora, SEC solicitor who spoke at the public hearing also stressed the need to Investment and Security Tribunal (IST) similar status with Federal High Court and National Industrial Court (NIC), to enable it to intervene on matters relating to the capital market and remove the existing conflict.
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As part of the ongoing reforms, the Commission unveiled plans to set up Fund Custodian as part of efforts to ensure effective utilization of funds raised from the capital market, ensure regular filing of the utilization of funds every quarter. Other stakeholders, however, decried the sharp mpractives being perpetrated by some of the stockbroking firms involved in the private placement, which they observed is not regulated, hence hampering the development of the market.
They also called for the reconstitution of SEC Board by empowering the SEC Director General to be appointed as Chairman of the SEC Board, ensure financial autonomy as well as allow the Board to take responsibility for their actions and inactions. Similarly, they stressed the need to provide for enabling environment for SEC to intervene in the market in case of a crisis, by sanction any dominant player/operator whose activities may derail the market.
According to them, out of the 600 stock brokers in the Nigerian capital market, 10 of them control about 80% of the market, adding that any of infraction by any of them could trigger crisis in the system. On his part, Demenongu Yanfa, CBN Deputy Director, Financial Market noted that the Corporate Affairs Commission (CAC) should play a major role in checkmating the activities of companies involved in the private placement.
He also called for the amendment of relevant laws with the view to ensure that companies coming to embark on private placement have a board of trustees and put necessary in place to ensure that stockbrokers who serve as a financial intermediary are accountable in case of any infractions. Speaking earlier, Edward Pwajok (APC-Plateau) who sponsored the bill, noted that State and Local Governments should get the resolutions of the State Houses of Assembly and Local Government Assembly before assessing funds from the capital market.
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He argued that such move will provide necessary checks and balances in the borrowing and fast track provision of infrastructure through the utilization of the fund, as well as checkmate the excesses of State Governors who refuse to conduct Local Government elections but embark on the appointment of administrators for Local Governments.
In his remarks, Tajudeen Yusuf, chairman, House Committee on Capital Market and Institutions applauded the concerted efforts of the 8th House of Representatives in expanding the frontiers of the Nigerian capital markets through legislation and engagement geared toward efficiency, proficiency and delivery of the core mandates of institutions and practitioners in the
the capital market as well as invigorating investors confidence in the subsector and nation’s economy.
“In a report published by the Nigerian Stock Exchange, over 300 private placements were marketed between 2005 and 2009 with many recording successes in their bids. The report further revealed that over N700 billion was realized with most of these offerings over-subscribed.
“During this period, over 300 companies in the oil and gas sector, financial and non-financial industry and other sectors of the Nigerian economy were involved in varied degrees of the private placement. However, reports indicate that whilst some of the companies took advantage of investors naivety, others were involved in outright sleeze and scam. Thus breaking the hearts of many Nigerians, contributing largely to the slump in the equities market and eroding public confidence in the capital market,” Yusuf noted.
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In the bid to achieve meaningful success in the financial sector, the lawmaker who harped on the need for the apex bank to play lead role in the financial sector tasked CBN and other regulatory agencies to strengthen Financial Reporting Council and ensure synergy between the Money Market and Capital Market.
Speaking earlier, Speaker Yakubu Dogara explained that the public hearing was aimed at “assuaging the feelings of investors, restoring confidence in the capital market, recovering and redeeming some of the loses recorded by Nigerians.” The Speaker who was represented by Chukwuka Onyema, Deputy Minority Leader, also reiterated the House readiness to strengthen the capital market as well as the regular agencies through amendment of the Investment and Securities Act, 2017, just as he expressed optimism towards ensuring high-scale efficiency in the industry.
On his part, Chairman, Senate Committee on Capital Market who noted that Nigerian economy worth more than N100 trillion underscored the need for mobilization of resources through the capital market, adding that the annual budgetary process can only catalyze economic development. He also stressed the need to address the GDP/tax ratio by unlocking the huge potentials in various sectors of the Nigerian economy especially in the capital market. He also decried a situation where an investor will walk away with whooping sum of $2 billion freely without check.
KEHINDE AKINTOLA, Abuja
