By Peter Egwuatu & Nkiru Nnorom
LAGOS—A committee set up by the Securities and Exchange Commission, SEC, to review investments laws has made recommendations for the amendments of the Companies and Allied Matters (CAMA) Act, Financial Reporting Council Act, and three other Acts.
The committee recommend that the Board of FRC as presently constituted is too large with a preponderance of government agencies and stakeholders in the private sector appear to have been left out. Also, institutions that are of relevance to financial reporting are not fairly represented on the Board.
The committee recommended that “the Board should be made up of 23 members with equal representatives from the public and private sectors. All 23 members should be professional accountants (or actuaries) registered in Nigeria, provided that in appointing the Board, due cognizance is taken to ensure representation of accounting bodies established by Acts of National Assembly.
It further recommended that the SEC should be independent in the discharge of its functions and objectives.
The committee under the report of the legislative/Bills review of the Warehouse Receipt bill recommended that “Warehouse regulation should be the primary responsibility of an Exchange as a Self Regulatory Organisation, SRO under the supervision of the department in charge of Exchanges at the SEC.
Justification- “This reduces the level of bureaucracy that is typical of government agencies and saves cost. There is also an issue of duplication of function / responsibility. Exchanges are liable for defaults of warehouses by virtue of the counterparty they provide on warehouse receipts, so should be responsible.
On the establishment of a governing board for the Agency, the committee said “ We propose that the right of the Agency to borrow and own property should be included in this section.
Justification-This section does not include the right of the Agency to own property. The size of the Board is too large taking into consideration the push to reduce the cost of governance. A number of ministries/agencies/institutes represented on the Board are not necessary.”
The Committee recommended the SEC should be independent in the discharge of its functions and objectives, saying that unlike other Acts operating and governing MDAs in the country, the ISA had no definitive statement regarding its independence.
Making definitive statements regarding the independence of an establishment is the current practice in more recent legislation, especially where specialized knowledge is required. The AMCON Act 2010 and the Nigerian Sovereign Wealth Authority Act, 2011 both have such provisions, the Committee said.
On the proposed amendments to the Companies and Allied Matters ACT CAP C20 LFN 2004, the committee said “ Section 2 should be amended as follows: “There shall be for the Commission a board which shall consist of the following: (a) A part time chairman who shall be appointed by the president. The chairman shall be a person who by reason of his ability, experience or specialized knowledge of corporate, industrial, commercial or economic matters or of business or professional attainments would in his opinion be capable of making outstanding contributions to the work of the Commission” (b) Registrar General and Chief Executive as accounting officer (c) Two full time Commissioners (With this appointment the RG and the full time commissioners shall constitute the Executive Management of the Commission.) (d) One representative of the business Community appointed by the Minister on the recommendation of the Nigerian Association of Chambers of Commerce, Industry.
On proposed amendment to Trustees Investment Act , the committee said “ contrary to the previous provision, which limits the exercise of the Trustees Investment discretion to only Federal and State Government Bonds, Corporate Bonds and stocks, the Section should be modified to include investments in real estate, money market placements with Deposit Money Banks, DMBs, and Collective Investment Schemes.
Other areas recommended for investment by the Trustees include Private Equity, Commodities, Hedge Funds and Mutual Funds, while Minimum ratings should however be stipulated for the permissible Mutual Funds.
The committee also stated among other things that given the evolving activities in today’s market, it is expedient to amend this subsection to include the securities of private companies and all forms of securities as may be published from time to time. “The amendment should provide for some minimum turnover or asset threshold that such private company should have for it to qualify as a security a trustee can invest in.”
CBN, SEC release guidelines for securities settlement
Meanwhile, the Commission in conjunction with the Central Bank of Nigeria (CBN) yesterday released guidelines on securities settlement in the financial sector.
The guidelines stated: “The main aim of this guideline is to promote competitive, efficient, safe and sound post trading arrangements in Nigeria. This should ultimately lead to greater confidence in securities markets and better investor protection and should in turn limit systemic risk. In addition, the guidelines seek to improve the efficiency of the market infrastructure, which should in turn promote and sustain the integration and competitiveness of the Nigerian securities markets.”