Here are the leading news reports from the Day 1 public Hearing on HB. 325 – An Act to amend the ISA 2007 to provide for greater transparency and accountability in the finances of SEC; and to ensure greater legislative oversight; and for other matters connected therewith.

 

The reports were filed in by MBC NewsCorp.

 

 

1. SEC generates NGN40bn in 4 years, spends all – House of Reps

Nov 24, 2010 1:20 PM

 

Abuja, Nigeria (MBC News) – The Securities and Exchange Commission (SEC) generated a total of NGN40bn between 2006 and 2010 but has spend all the money only on salaries, wages and other operational expenses. This was revealed a few minutes ago by the House Committee on Capital Market holding a public hearing on the new Bill to review the provisions of the Investment and Securities Act or ISA 2007 in relations to the finances of the Commission.

 

The House told the meeting that the SEC generated 16bn naira in 2006, 13bn naira in 2007, 8bn naira in 2008 and 3bn in 2009 but has spend all the money only on recurrent expenditure. The House said the government feels no need to fund the SEC because the agency always spend all its revenue generated from commissions made from both primary and second market transactions.

 

The committee said the SEC always failed to execute the capital projects expenditure portion of its annual budget. The House committee led by Honourable Umar Jubril said the SEC does not even execute up to 20% of its capital expenditure every year but always spend its recurrent expenditure 100%.

 

 

2. SEC transfers 80% revenue annually to FG – SEC Daisy Ekineh

 

Abuja, Nigeria (MBC News) – The Securities & Exchange Commission has countered the argument of the House of Representatives that all SEC’s annual revenue are spent.

 

Below are excerpts of the ongoing discussions at the National Assembly on the new Bill on SEC financing –

 

HOUSE: Who is SEC accountable to? To the people of course. SEC must have a reporting agency. The MOU with IOSCO must have been done in accordance with other legislations. You must not compromise your national legislation with your MOU. Any foreign legislation not consistent with national legislation is null and void. We are not trying to strangulate SEC but strength en your regulations in revenue generation and expenditure. How can we help if this amendment will strain our relationship with the IOSCO.

 

SEC (Daisy Ekineh): It is erroneous that SEC was not accountable to anyone. The SEC budget is audited every year and made public. Anyone that has access to the account will have access to everything. I have been par t of the budgetary process. I did say the SEC need a ‘bed’ at the House to show how the SEC always visits the National Assembly. Sometimes we come and you drill us and we go back. I am astonished to hear that SEC is not transparent with its budget. The budget performance is submitted to the national assembly and we defend all these documents. Not only that, we submit same to Ministry of Finance and the budget performance too. It’s necessary to clarify all that.

 

When the market was going down, the National Assembly was aware of that. The SEC saved surplus during the boom years, we have operated without staff sacking or salary cut or hindrance despite market bleeding because of the savings we did. I think this must be known. We have every year, transfer about 80% in the boom years to the Federal government account. On the capital budget, we make certain provisions, but because the market was down, our recurrent expenditure on surveillance was done first, so we concentrate on that and we always inform the House. Our reverses are still intact. We have not touched the capital reserve, but used only the interest earned on that to run the SEC since the meltdown. We always inform the House on our spending and we always explain.

 

On the issue of moving the SEC into Federation Account: different model of funding SEC is available. First the US model, the second is where the market funds the SEC and the third is a combination of both. For instance, if the SEC does not have the fund to do any capital project, there is nothing wrong for the government to support us with funding. The government can come in this regard if our revenue is down on certain projects such as computerization. The agency that ensures capital formation properly is the SEC but if weakened without funding then things will go wrong. When IOSCO talks of operational independence, it means funding independence. We need to look at the importance of the market in national development. We don’t want a capital market that is like the Nigerian university system that lacks funding from the government.

 

House Chairman: I don’t know who the promoter of this Bill because it comes from the House. You have never told us you need additional funding and this could be a good opportunity for SEC to achieve that. We can come to a consensus on this matter for your benefit.

 

House Member: I personally have not seen a copy of SEC annual report for many years. If they are available, I would like to receive them in arrears.

 

SEC DG, OTEH: I think after 50 years of independence, looking at using the capital market to develop the economy, I do feel that this opportunity has allowed us to communicate many issues with the stakeholders. It is statutory for us to submit our audited accounts. I have submitted one and we have always dutifully did that. The Law also required us to submit our budget on September 30. I have done that for 2011. My colleagues reminded me on that and I commend them.

 

But the issues are on good corporate governance. The auditor general send people to audit us as well. We publish our audited accounts always. Mr Chairman, corporate governance means what we do on a daily basis. We have taken it on board. My Commissioners have signed on that to take responsibilities and the Directors too to prevent challenges in internal control. We have challenges on checks and balances in internal control of listed companies and other market entities.

 

We will do better if we have not met all the obligations of the House Committee. We have been required to send 80% of our cash surplus to the government. We never get it back, we just sent them and I just sent one. Kindly look into the Fiscal Responsibility Act, because it is a handcuff on us.

 

On the Abuja Securities & Exchange Commission, the SEC has been providing support to the Exchange. One of the things we have recommended was that the ABUJA Exchange be privatized. The Exchange wants to get moving properly. We have done more on investor’s education and sanitise the market. We are all victims of what had happened.

 

On IOSCO, we must abide on all the 30 areas of the Principles and independence of SEC is critical. In terms of financial independence, IOSCO consider the size of your market.

 

On the market crisis, it was considered that the Central Bank was the only important regulator before now. People now realize that market regulation is more important. We must have framework that supports the Central Bank but will be unfortunate if we don’t move in that direction. We must move in that direction as well.

 

 

3. SEC DG rejects new House Bill on SEC funding

 

We at the SEC thank the House Committee for the support given to its investor protection mandate. We thank you for the guidance and support in our duties as the apex regulator. We, however, submit that the proposed amendment will undermine the efforts of the House and others to build a world class market to address the huge funding requirement needed for the real sector and meet the social and economic aspirations of Nigeria. It is not in line with international best practices and will undermine investor protection.

 

Our concerns is heightened by the unprecedented stock market crash from a peak of 13tn naira to a lowest of 4.9tn naira while given your efforts, the SEC and others, the market cap is now at about 8tn naira. We do feel that investor confidence is still fragile and we feel that if investors feel unprotected, we will not be built a virile stock market.

 

Our submission is based on the requirement s of IOSCO (International Organisation of Securities Organisation) that sets standards for 183 members worldwide in terms of SEC to abide by world class standards. Compliance with this means how we are perceived by local and international investors. It is investors that provide money for the market. The IOSCO objectives and Principles in Part A should be independent in exercise of powers and structure. We are signatory to the Principle. Only 36 countries include Nigeria has robust framework to operate. In Africa, it is only Nigeria and South Africa that are so recognized.

 

Nigeria has gone over rigorous assessment issues regarding our IOSCO memorandum of understanding. We are undergoing now a review of our level of abidance with IOSCO standards. It is also important for me, Mr Chairman and the House to bring to your attention what happened in other jurisdictions. We have looked into other comparative economies: the South African Financial Standards Authority have same arrangement as us, the Malaysian SEC, the Ontario Canada SEC. Even more significant is the USA SEC that goes through appropriation process. But the USA is working fast to move away from this model due to the lessons of not moving fast to respond to the current global market crisis. A US Senator has moved for SEC there to move for self-funding in the Dodd-Frank Legislation. The US SEC strongly supports this and is making submissions. There are other examples that even smaller markets are looking into similar models to have. We believe that the proposed amendment will adversely affect the operations of the SEC in terms of its responsiveness of dual role of regulation and development of the Nigerian capital market. We humbly submit that your Committee and the Senate committee on capital market has gone beyond the call of duty for providing call of duty in market protection.

 

Our accounts are audited annually. We have never failed to make statutory submission in March every year to the Assembly. You have also continued to provide oversight to issues in the market. We are also required to submit budget, three months before year end. And the SEC has never failed in this regard. You have always provided us guidance and ask tough questions. I have personally interact with this noble committee since I took office in January this year. You have carried out your duties with great sense of responsibilities. You have been keen on issues in the market.

 

In view of this the Sec submit that the proposed to reconsider the bill and retain the status quo.

 

 

4. Ikhazoboh supports SEC rejection of ISA Review

 

The NSE associates itself with the presentation of the SEC on this issue but would like to add that the NSE is striving to be one of the top three Stock Exchanges in Africa and be the number one in Africa by 2015. Some of the issues and regulations that would make it seen at the top by the year 2015 is the way the regulators managed the NSE. If the SEC is not independent or perceived to be so, it would affect our global investors. I want to add that we are working hard to ensured that we reduce the cost of operating in our market and, the only way is to find a way to reduce listing, registration cost and get more operators and investors to come in. But if only SEC has independent funding and would not depend on listing fees or operators. We therefore associate with the SEC that the new Bill be revisited properly and that the SEC be given powers of independence, but still regulated by the House Committee.

 

 

5. CIS supports SEC, NSE to reject new Bill on SEC funding

 

We thank the House for being proactive on how to move the market forward. The operators are always miles ahead of the regulator; hence the regulator must have plenty of funds to do a good job. To depend on fees was not sufficient for them. Changes are rapid in the market in terms of products, etc. so a SEC that goes cap in hand to beg for funds from the government will not be able to do any job. On that basis, we are asking this Committee to rethink this amendment. We support need for a budget by SEC but IT IS not proper to pass all its internally generated revenue to the Federation account or the treasury.

 

Source: www.marketnewstv.com