The apex regulatory agency in the Nigerian capital market is the Securities and Exchange Commission (SEC). SEC is established by the provisions of the Investment and Securities Act 2007, which serves as Nigeria’s principal law regulating capital market transactions across the country.
The capital market is a market where companies trade securities. Several securities can be traded on the capital market, including shares, bonds, debentures and others.
In this article, we offer in detail the various duties and functions of the SEC according to the Investment and Securities Act 2007.
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What are the functions and duties of SEC?
1. Regulate investments in Nigeria
The SEC regulates all forms of investment into companies in Nigeria, especially public companies, whether quoted or not. Would be investors must file feedback to the SEC on the amount of investment and any shares allocated to the investor if any.
For private companies, recourse to the SEC is not a necessity, even if the company plans to raise funds from investors through the issuance of notes or bonds.
SEC has powers to register security exchanges of public companies, regulate the issuance of these exchanges, and foster capital trade points for options, futures, derivatives and other recognized investment exchanges by the SEC.
2. Assists securities market operations
The SEC registers all capital market operators. Operators, whether individual or corporate, willing to operate in the capital market must first register with the SEC before undertaking operations in the nation.
Aside from registration, SEC also proffers advice to capital market operators functioning in the country. SEC also sets guidelines and rules for capital market operators in Nigeria, these rules are accessible to the public and function to provide a highly regulated market for the capital market industry.
3. Registers and regulates venture Capital operators
SEC is the body charged with the registration and regulation of venture capitalist operators in Nigeria. Venture capitalist companies are businesses set up to provide funding to startup companies. All companies engaging in venture capitalist activities must register with the SEC to operate in the Nigerian market.
Again, for a foreign venture capitalist, this rule wouldn’t apply, or at the very least is unclear and silent. Most startups rush to foreign venture capitalist firms for investment. Nonetheless, the SEC still regulates venture capital funding by foreign firms into Nigerian public limited companies. Also, SEC is mandated to keep a register of all foreign companies engaging in investments in Nigeria.
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4. Regulate all collective investment schemes
SEC is in charge of regulating funding schemes across Nigeria. From public funding to crowdfunding schemes, SEC is s significant agency to interrelate with before such schemes can be undertaken by companies in Nigeria.
The various collective investment schemes must make recourse to the SEC before undertaking funding to corporations in Nigeria.
5. Regulation of other security players
SEC registers and regulates all clearing and settlement companies in the securities market, intermediary players, securities depository companies, custodians of assets and securities, all credit rating agencies, and all other intermediary companies engaging directly or indirectly in the capital market.
While undertaking the above duty, the integrity and relevance of the securities market are protected against all forms of dubious practices, allowing for integrity and reliance on the securities market devoid of all insider trading possible.
6. Review and approve takeovers
A takeover occurs when an investor takes a significant proportion, usually 30% of a public company, becoming a significant shareholder in the company.
Before takeovers can be undertaken, SEC must be informed of all or any occurrence and must consent to the takeover. If the SEC refuses the takeover, the investor cannot, therefore, undertake the transaction.
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7. Educate investors, operators and the general public on capital market transactions
SEC educates capital market operators on the knowledge of the activities of the capital market. SEC also undertakes to engage the general public on information relating to capital market business and education in Nigeria.
The capital market is highly regulated and most times involve transactional practice that can be a bit confusing to the general public. The SEC offers great details about the operations of the Nigerian capital market space to the general public.
8. Leveling of Fees and Penalties
The SEC levels registration fee, filing fees, penalties and administrative costs on players in the industry.
The SEC as a regulatory body charges administrative fees and other consultancy fees on person interfacing with the agency.
9. Making subsidiary legislation
SEC has the responsibility of enacting subsidiary legislation or rules that guide capital market operations in Nigeria.
The SEC provides legislation for the smooth operation of the market with a strong detail on operational efficiency for the best practices in the industry.
10. Inspection of operations units
SEC can inspect or investigate the activities of capital market operators, intermediaries and other players. SEC can also investigate the activities of companies as it relates to fundraising.
The agency can also enforce the provisions of the Investment and Securities Act, after receiving a report from the public on the activities of the operator, company or intermediary players.
The SEC also has the responsibility of investigating the activities of these operators to allow for trusted service delivery in the corporate securities market.
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Conclusions
SEC is a body formed by law to regulate, advise, inspect, investigate, and deal with any activity that would ensure transparency and efficiency in the industry. SEC has for long brought a highly organized and acceptable way of trading on the capital market with emphasis on transparency with strong discouragement of insider trading.
The SEC has continued to enforce the provisions of the Investment and Securities Act in Nigeria. Nonetheless, there remains scepticism on the activities of foreign trade companies and online trading companies in the market. SEC has continued to form and provide detailed supervision of the activities of these foreign players and online trading platforms to protect investments from the general public.
