By Michael Eboh

The Securities and Exchange Commission, SEC, said that it is committed towards the protection of the national interest in the proposed demutualization of the Nigerian Stock Exchange, NSE.

Demutualization is a process by which a member-owned exchange is converted to a shareholder-owned exchange. A stock exchange with a mutual status is run as a non-profit organization for the benefits of its members. Membership in the stock exchange usually is purchased and ratified by the board.

When an exchange is demutualized, there is a change in ownership structure. Valuations are carried out and existing members may decide to change their membership to share ownership, or to sell off their interests to non-members.

Speaking during the inauguration of the 21-man technical advisory committee on the demutualization of the NSE, in Lagos, Mr. Udo Udoma, Chairman, SEC, said that the demutualization process must be free and open and devoid of any conflict of interest.

According to him, the next big challenge in improving governance of the NSE is that of ensuring that the NSE is demutualised by a process that accords with the best global standards.

He said, “This must be a process that ensures fairness and openness, as well as the protection of the national interest. It is to assist the Commission to achieve this that the Securities and Exchange Commission is today inaugurating a Technical Committee to examine the processes for achieving demutualization and make recommendations to the Commission on how the Commission can best discharge its important supervisory role.”

Udoma said that the technical committee, headed by Mr. Asue Ighodalo and which is expected to complete its work and present its report within three months is saddled with the responsibilities of reviewing the current structure and ownership of the NSE; examine regulatory, ownership, management, operational, governance and financial issues in demutualization of exchanges.

Other terms of references of the committee, he said, include: review of various demutualisation models and experience, including valuation model for demutualization; recommend best demutualization model for the Nigerian market and recommend practical timeline for the completion of demutualization of the NSE.

The committee is also expected to recommend steps which are necessary and appropriate for the demutualisation of the NSE; examine potential conflict of interest and measures to deal with them in the demutualization of the NSE; and examine any other issue necessary for the demutualization of the NSE.

Continuing, Udoma said, “In order to have the benefit of the widest possible range of expertise we have included in this committee, experts in all the relevant disciplines, including lawyers, accountants, investment bankers, stockbrokers, market operators, regulators and from academia.

“We have also included a member from the Diaspora to draw on experience in more advanced capital markets. Importantly, amongst the members of the Committee, are members of the Council of the Stock Exchange, including the Chief Executive Officer himself.”

In his response, Chairman of the committee, Ighodalo commended SEC for its effort at developing the Nigerian capital market and expressed the commitment of the committee to delivering on the mandate before it.