The Nigerian securities industry and the 2015 national elections

The Investments and Securities Act, ISA, 2007 is the primary
law for the securities industry which law provides the
framework for the regulation of the Nigerian capital market by
the Securities and Exchange Commission, SEC. The Act sets
out to ensure the protection of investors and the maintenance
of fair, efficient and transparent market.
The Investments and Securities Tribunal, IST, is the
specialized tribunal created by the Act for specified capital
market matters. However, SEC is an agency of the Federal
Government and the Constitution has granted exclusive
jurisdiction to the Federal High Court when the Federal
Government or any of its agency is being challenged over any
executive or administrative action it took.
The IST has the distinct character that judgement should be
given within 90 days of the commencement of the hearing of a
matter before it. The Court of Appeal has recommended that
there should be a constitutional amendment to qualify the
jurisdiction of the Federal High Court such that matters vested
in a specialized tribunal or court can be determined before the
specialized tribunal or court notwithstanding the parties before
the specialized tribunal or court. We should put this
constitution amendment in place such that we can take full
advantage of the capacity of the IST.
A committee was set up by the Federal Ministry of Finance in
2010 to carry out a review of ISA 2007. The Committee invited
contributions from the public but it was not allowed to
complete its work. One of the major concerns of investors is
the procedure for the resolution of disputes between capital
market operators and their clients.
The 1999 version of the ISA allowed the IST to adjudicate on
matters relating to disputes between capital market operators
and their clients. However, the 2007 version of the ISA
requires clients of capital market operators to take their
complaints first to the Nigerian Stock Exchange, NSE, and
SEC and the matter could then be referred to the IST as an
appeal of a decision of SEC.
Regrettably, there is insufficient understanding that regulation
by SEC is a legitimate quasi-judicial procedure for prompt
dispute resolution at minimal cost. Some parties seek to
invalidate the dispute resolution process before SEC by
claiming on appeal that SEC has acted as investigator,
prosecutor and judge.
I believe that ISA 2007 should be amended to allow for capital
market operators/clients disputes to be taken directly to the
IST. A new committee should be put in place to review ISA
2007 and in particular the section on corporate responsibility
of public companies to include provisions for the protection of
investors/shareholders in companies. When a company listed
on the NSE fails, SEC and NSE have a primary responsibility
and not the Corporate Affairs Commission. The performance of
any company is entirely in the hands of the company’s
directors.
Directors have a duty of care and skill under Section 282(1) of
the Companies and Allied Matters Act (CAMA) and action can
be taken against directors for negligence and breach of duty
under Section 282(2) of CAMA. Shareholders cannot readily
obtain information on the directors’ acts of negligence and
breach of duty. A revised ISA 2007 should make it possible for
SEC to order an inquiry into a company quoted on the NSE
over and above the provisions of CAMA.