By Michael Eboh

Operators in the Nigerian Stock Exchange, NSE, have expressed concern over the planned demutualization of the NSE, stating that it is a ploy by the Securities and Exchange Commission, SEC, to usurp the exchange and sell it to its cronies.

Demutualisation is the process by which a non-profit association is re-incorporated as a profit-seeking organization with shareholders who may not necessarily be industry practitioners.

The stockbrokers who chose not to be named, attributed the removal of Professor Ndi Okereke-Onyiuke as Director General/Chief Executive of the NSE by SEC, to the proposed demutualization exercise, which they say has been hijacked by certain elements who are hell-bent on having their way.

According to the stockbrokers, the proposed reform in the capital market, through the increase in capital requirement for stockbroking firms, is meant to work in tandem with the foregoing categorisation of stockbroking firms, as it would work to trim the number of stockbroking firms that are expected to benefit from the demutualisation, leaving other interests to share in the pie.

The dealing members are gearing up against SEC over the perceived implementation process of what has been described by market watchers as new move to own one of the fastest growing stock exchanges in the world.

The stockbrokers are accusing SEC of overreaching itself in steps taken in this direction, particularly the recent appointment of individuals to the Council of the NSE to pursue the interest of SEC in this regard.

They stockbrokers are of the opinion that the expanded Council would prepare the sale of the NSE’s shares to the public, adding that the demutualisation as being proposed, using the power of the regulator to force things through, will amount to expropriation of the exchange, a development that is unacceptable to them.

The brokers stated that they would prefer SEC limiting its role to approving guidelines prepared by members of the NSE for the demutualization exercise and nothing more.

The brokers informed Vanguard that certain parties in the demutualisation exercise have adopted strategies to break the rank of stockbrokers opposed to the exercise so as to ensure minimal opposition.

According to them, in the proposed arrangement, dealing Member firms licensed after 1990 when the NSE was re-incorporated as a company limited by guarantee, would not be treated as part owners, as they would be treated merely as ‘having trading rights,’ leaving only those stockbroking firms licensed prior to 1990 as the owners of The Exchange.

They said, “One of the SEC nominees to the Council of the NSE is known to represent the category of owners of the NSE who have gone to court to challenge the demutualisation of the NSE as proposed.  Also, under the discriminatory arrangement, ordinary members of the NSE may be disqualified as having ownership stake in The Exchange.

“Under the Memorandum and Articles of Association of The Exchange, the President of the Exchange is drawn from the class of Ordinary Members. The category of houses affected by this proposal includes some of the houses currently driving activity on The Exchange in terms of volume of transactions and product innovation.”