The Nigerian capital market has sustained a progressive trend with innovative policies initiated by the Securities and Exchange Commission’s (SEC’s) Director General, Mournir Gwarzo, in this interview with market stakeholders in Lagos captured by Bonny Amadi, SEC DG said, among other things, that avenues that encourage market fraud are being blocked with e-dividend, BVN and Direct cash settlement among other measures .Excerpts
You are emphasizing on market transformation and participation, but without education the people will not be carried along, will you take market education to universities?
We will certainly do that, but our main focus now is in primary and secondary schools, we think that is where the key areas is, to do it at the university level will not be much of a problem, because most of the universities run courses on finance and investments and of the capital market.
Capital market operators
The market has 421 operators registered operators, the 421 operators I said earlier are those that have updated their information, but those that have not completed their information, we will give them more time because they have attained a level in updating their information.
And that is why this time around, we have spent four to five days in Lagos trying to update the market operators information so that we can clear all those backlog.
I can tell you that what they have not been able to provide to us are not that resinous issues, but those that have not been able to provide some of the vital information, we have already de-listed them.
Over a period of one or two years, they have not be able to update their data, so for those ones, we have already de-listed them as capital market operators.
But for those that have provide us with information, but not as accurate as it should be, we have given them more time. By the end of this year, all these house cleaning processes must have been completed.
Market operators sourcing funds from CBN
Initially, the CBN did not understand the concept, but we are happy that CBN was able to have that conversation with us.
What we are saying is for the CBN to be able to allow the capital market operators to leverage the discount window to get liquidity from CBN.
All what we want from CBN is what kind of criteria do you want capital market operators to meet?
And also. What type of securities do you want capital market operators to place as collateral? So that they should have the opportunity to do that.
In fact, the entire value chain of the capital market has access to liquidity for a long period of time, but it is the capital market operators that don’t have that liquidity.
What they can do is to go to a bank and borrow money at a very high rate; and we say that if we needed liquidity in the capital market, the capital market also need to have that opportunity.
At the last meeting we have with the CBN, they were very comfortable with the arrangement and have raised a few concern; and we are convinced that at the next stage, we will address those concerns.
Minimum operating standard?
Yes! The NSE has come up with minimum operating standard, but as the market grows, as the market evolve sand develops m, you have to review the operating standards.
Whatever we are going to come out with, if it in tandem with what the NSE has, that is fine, but if they are going to be different, then we are going to engage the NSE.
There has been the provision for all capital market operators to meet the N30 million minimum standard, and as the committee on standard has submitted their report, we will look at some of the investments modules and the time line it’s going to take the operators.
It will also involve other forms of investments including depository receipts.
Access declaration by market operators?
The deadline by Federal Government is March next year. It requires that public companies and operators, by the time they are sending their reports to us, they will be able to indicate their level of compliance before that deadline.
So, by the end of March next year, we start penalizing those operators and companies that have failed to indicate their compliance with the assets declaration requirement of the federal government.
We have said that hence forth any report they are ending to SEC must include that aspect.
Multiple application by retail investors
The whole essence is for us to streamline the application model. From hence forth, when you are doing IPO now, the BVN will be a unique identifier and multiple application is going to be eliminated. Who is going to benefit it?
It is only the rich people that apply in different names, if you are not a rich man, why will you apply for IPO in three or four different names? A typical retail investor will only buy ones in his name and then concentrate on his investments.
The system of having the BVN will eliminate multiple applications and protect the retail investors, so at the end of the day, everybody is on the same page.
The introduction of the BVN will streaming the elimination of the multiple application for IPOs,
Transaction circle of the market
On the issue of transaction circle, it goes beyond T+3. For emphasis, T+ 3 transaction is sacrosanct in equity market in Nigeria that on the T, that is day of transaction, three working days,
The three working days, is what we call delivery versus payment, and during this period, shares will leave the account of the seller to the account of the buyer, money will also leave from the account of the broker who bought to the account of the broker who sold for onward transmission to his client.
In the wisdom of SEC, we all know that there may be one or two broker who may not want to transmit that money to his client, SEC now introduced, DCS, Direct cash settlement.
What the broker will do is that on T+3, when he receives the money, they will do some in-house transactions clearance and on T+4 they will now give the investor the money or by way of issuing out cheques.
SEC has now directed, go by direct cash settlement, which says that on T+3, instead of the broker getting the cash credit in his account, the investor get the money in his or her account directly.
That is why we want to encourage everyone to observe the trade alert, if the transaction is executed at about 2.30 pm in the afternoon, then you know that the processing will continue and it is on real time basis that clients are alerted.
But, if transaction occurred in the morning, within one hour, you will be alerted, if transaction occurs around the tail end of the day, within one hour, you will be alerted. The alert is to put you in the know that something has happened to your investment.
So, if you are not the person that mandated the transaction, then you will report to the exchange, and that means, we will ensure that that broker unwinds what he has done.
When you misdate transition, always monitor alerts on your phones to make sure you get the messages from CSCS.
There is no way transaction will occur today and you will not be alerted today, not the third day not even the second day.
This T+3, sometimes we don’t appreciate the good things we are doing, that the advanced markets have been operating since the 18th century, their settlement is T+3.
As at today, the US market as developed as they are, it is just towards the end of the year that they are looking at T+2, which is settlement of transaction within two days of transaction.
If the DCS takes effect and it becomes fully operational, i don’t see why we can’t operate T+2.
Issues relating to share sales or identification challenge
If you have any issue on share sales or accounts identification challenge, take your complaints to the Central Securities Clearing Systems (CSCS).
The CSCS, assured to key into SEC’s provisions that the primary aim of the regulator is to protect the investor. SEC also gave the CSCS the mandate to ensure that investors in the Nigerian capital market are protected.
At the CSCS, there is the customer service unit there that is dedicated to render uninterrupted services to the customers. And there are also documents to report at their office to report if one is not well treated.
Reports for mistreatment can also be taken to the management of CSCS.
Direct cash settlement and new minimum operating standard
The market is built on the premise of the T+3, if there is no T+3, there will be no market. There is no way the deal will be executed and you will not get paid.
The broker can chose not to pay you, but it doesn’t mean that the broker has not received money.
If you have registered for DCS and your broker sells your shares, you will get your money directly. The three days settlement period is what qualifies the capital market.
The exchange came up with its minimum standard under the supervision of the SEC, The commission will use that as a base line to prepare minimum operating standard for other operators.
I don’t expect that there will be any additional cost on brokers who have met the NSE’s minimum operating standard.