SEC sees tech innovations enhancing capital market efficiency, transparency
Technological innovations have been identified as one of the factors that could enhance the efficiency and transparency of Capital Markets around the world and enable financial intermediation, making it easier for investors and market professionals to identify opportunities and conduct their businesses in a timely and cost-efficient manner.
Director General of the Securities and Exchange Commission, Lamido Yuguda stated this in a goodwill message at the NGX Capital Market Conference held in Abuja, Tuesday.
The SEC DG noted that the capital market of every nation plays a strategic role, not only in allocating scarce resources, but in harnessing the huge investment opportunities in agriculture, infrastructure, oil and gas, natural resources as well as in other sectors of the economy.
He said, “Nigeria like most other countries in the world experienced weak growth in their economies as a result of the impact of the Covid-19 pandemic. The Nigerian economy is just recovering from the effect of the Covid-19 pandemic, with a GDP growth rate of 4.03percent in the third quarter of 2021 from a contraction of 6.10percent in the second quarter of 2020.
“To sustain this trajectory, overcome some of the negative impact of the pandemic and achieve the objectives of the developmental plans of the government, the capital market needs to continuously produce innovative products, platforms and processes. Innovation plays a critical role in the development of any capital market as it increases the markets’ chances of reacting to changes, and enables discovery of new opportunities”.
Yuguda further noted that the International Organization for Securities Commission (IOSCO) acknowledges that the use of technological innovations by market operators could potentially create significant efficiencies and benefits for firms and investors, including increasing execution speed and reducing the cost of investment services.
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“However, IOSCO also notes that this use may create or amplify certain risks, which could potentially have an impact on the efficiency of financial markets, resulting in consumer harm.
“As the apex body responsible for regulating and developing the Nigerian capital market, the SEC has strengthened market rules and regulations with the introduction of responsive rules and the amendment of existing ones to mitigate some of the risks posed by technological innovations.
“With a three-pronged objective to regulating innovations hinged on safety, market deepening, and solution to problems, our regulations, are enabling, accommodating and futuristic. They also ensure adherence to our core regulatory mandates of investor protection and market development”.
Furthermore, he stated that the SEC has put mechanisms in place to understand relevant innovations, build required capacity and subsequently deploy strategies to address them adding that this process is ongoing and the Commission is deeply committed to this new phase and face of the Capital Market.
Yuguda also said that the SEC has revamped its enforcement mechanism and enforced its zero tolerance against infractions in a bid to improve investors’ confidence in the market, and to optimally perform its investor protection mandate as evidenced in the Commission’s aggressive fight against unlawful investment schemes, which in recent times has plagued the financial markets.
“We have also committed resources to enhancing our processes through fortification of our ICT infrastructure in the areas of Registration, Returns Rendition and Analytics. Given that the advent of Financial Technology has changed how traditional capital market activities are being conducted, the SEC has embraced FinTech, and as such, has redefined its regulatory landscape to accommodate fintech related capital market activities.
“To this end, we have developed rules on crowdfunding, Robo-advisory and Digital Sub-broking. In addition, we have developed a ’Regulatory incubation framework, which will be implemented in due course.
“To align our market with the global focus on sustainable financing, the SEC released its guidelines to the market on sustainable financial principles to guide regulated entities on how to establish relevant standards and policies for their respective organizations,” he stated.
The SEC DG stated that while these measures put in place by the Commission creates the required enabling environment for increased and improved capital market activities, there is a duty on all stakeholders to utilize these channels, which have been created by the Commission to spur major economic growth.
According to him, “The ultimate duty of stirring market activities is a collective one, which must be performed by all stakeholders in the Nigerian capital market. I therefore call on all stakeholders to complement the efforts of the SEC and stimulate activities within the already established framework to ensure that the Nigerian capital market improves its contribution to the nation’s GDP.
“On behalf of the Board, Management and Staff of the SEC, I reiterate our commitment to continue to provide the required support needed to actualize this industry-wide goal. I believe that our collective efforts will immensely improve the fortunes of the market, and place us on the right track to reposition it as a world class capital market,” he added.