By Akintola Omigbodun

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 constitutional 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.