“First known as the Nigerian Institute of Stockbrokers, the Chartered Institute of Stockbrokers has been in existence since 1990. It was initially incorporated as a private company limited by guarantee and was later chartered in 1992 by the Act 105 of the Federal Republic of Nigeria.

It is the only professional body in Nigeria empowered to conduct qualifying examinations into Stockbroking Profession and regulate the activities of the members and for matters connected therewith”.

Source: CIS official website

In this interview with PETER OBIORA Online Editor at InvestAdvocate, Ariyo Olushekun, New President/Chairman, Chartered Institute of Stockbrokers (CIS) in Lagos Nigeria takes on issues regarding the Nigerian Capital Market, the CIS and other matters arising. Excerpts:

 About the Chartered Institute of Stockbrokers (CIS)

The CIS is the body set up by law to train and certify Stockbrokers in Nigeria, we have the exclusive right to determine and certify someone as being fit and proper to trade on any Stock Exchange in Nigeria.

It is pertinent that the Stock Exchange also does another interview to ascertain if the Stockbrokers understand the way to trade on that Floor. Nobody can trade on any Stock Exchange in Nigeria without being a member of the CIS.

Unethical attitudes of Stockbrokers

Let me say in every professional group, you have one or two people who may not play be the rules. We have Lawyers who have had problems, same with Doctors, Accountants. In the past, we have had Accounting Firms that have been found erring in one way or the other. What you find is a general problem not only in Nigeria, but worldwide.

However, that is not to justify any unethical practice by any Stockbroker. The issue is what the professional body does when there is a complaint. As far as the CIS is concerned, every complaint that we receive we investigate fully.

Recently to even make it faster investigating complaints, what we have done is that we have enlarged the Investigating Panel; such they can operate in three different groups as soon as any complaint comes up. One group can take it up and quickly finish the investigation. If there is an indictment, then they declare their report and the matter referred to the Disciplinary Tribunal; and the Tribunal is a very strong one and no Stockbroker wants to appear before it. They know if truly they have done wrong, they won’t get away.

The Tribunal is made up of very senior people in the Market, some past Presidents and current Principal Officers of the CIS. The Assessor is a retired Supreme Court Justice, Adesola Oguntade. And all the cases that we have done in the past, nobody has been able to contest it in Court and get the decision upturned.

Like I said earlier, we have three teams on ground, when a case comes up a team handles it; and the other team will handle a new one as the case may be. With this, things will move smoothly. So, we are responsive to investors’ complaints and work on them very fast.

On Market infractions

I think it’s reducing, because people now know the possible outcome of doing something wrong. They know that once their matter gets to the CIS, it’s a big problem for them, its affects their whole essence; if a Stockbroker has his license suspended for instance, he can’t earn any income; but look for other ways to survive apart from doing Stockbroking. So, it has serious negative implications for Stockbrokers if their cases come to us and they are found guilty.

EDITOR’s NOTE:

“In a review of Market performance in 2010 by the Nigerian Stock Exchange it was affirmed that a total of 366 complaints were received in year 2010 compared to 249 received in year 2009 indicating an increase 46.98% in the review period.

Of the complaints in 2010, a total of 291 were against active Dealing Member Firms; while 66 were against non-Dealing Members and nine against inactive Houses; making it a total of 366 complaints.

The NSE affirms that amongst the 366 complaints received, a total of 135 were resolved; while 231 are still being investigated pending resolution”.

Related stories:

1. 1.Investors’ complaints: NSE reports 47% increase in year 2010
2. 2.Market infraction: Nigeria’s Exchange issues conflicting Reports

On the last Capital Market Public Hearing

I think the Probe Panel was set up to look at the factors responsible for the near collapse of the Market and also to assess if enough is being done to enable us recover. I think it was a good thing, but the report is not out yet, however, we hope that the Report will deal with all the necessary issues and factors that were responsible for the near collapse of the Nigerian Capital Market.

Also, it would also bring out clearly what the different Authorities had been doing and whether they have been doing enough or not, and areas they are not doing well. We also hope that the Report will be fair to all concerned. It was a good thing it was a Public Hearing and sessions were held Live on TV; which gave the generality of Nigerians an opportunity to know what is going on and form their opinions.

However, the Panel may have received some documents or additional information which the generality of the public may not be privy to, so they are in the position to use all the documents or information they have received, both openly and through correspondences, they are in a position to form an opinion and tell us the outcome, we await the Report.

SEC getting less involved in the Management of the NSE

This is a position of the Capital Market Community and the CIS, let me say, it does not make sense if you are regulating a particular operator, the Stock Exchange is an operator; a participant in the Market.

It does not make sense if you are regulating the NSE an operator and also micromanaging it and responsible for appointing the near majority of the Board of the NSE. You control them, if they want to do a particular thing, SEC writes to them not to do so.

For instance at the last Annual General Meting, it was part of the Agenda on the Annual Report that the SEC appointees were going to present themselves for reappointment/ratification and just one or two days to the meeting, that Agenda was changed, it is wrong to even change the Agenda of an AGM, I am not a Lawyer; but I don’t think it’s legal. And not presenting those people for ratification was also unlawful; because the Companies Act says if a Director was co-opted to the Board of any Company during an AGM, that person must present himself for appointment and ratification; but this was not done and it means that from that day on, the people were on the Board illegally. However, we have noted the recent directive by the last Board of SEC accepting the request of the Appointees to leave the Council of the Exchange and we are awaiting their withdrawal from the Council of the Exchange.

EDITOR’s NOTE:

The Board of Nigeria’s Securities & Exchange Commission (SEC) Monday at its 66^th meeting approved the disengagement of Ballama Manu Interim President of Council of the Nigerian Stock exchange (NSE) and Emmanuel Ikazoboh his Deputy from the Council of the NSE.

Oteh on Compulsory leave attending the National Economic Management Meeting

Oteh is on Compulsory Leave, because an internal Committee of the Board of SEC did an investigation on the matter and recommended an in-depth investigation should be done. The job was given to PricewaterhouseCoopers.

Also, one of the reasons for Oteh been asked to go on Compulsory Leave was to allow the Auditing Firm carryout an unhindered investigation. I think it’s normal that if somebody is involved in a case and occupying a sensitive position, it’s proper for the person to step aside; even if she was not asked to go on compulsory leave, it will be normal and honourable for her to go on leave to give room for the investigation to be done fully. Also, when the result is out, that would determine what happens next. This is the reason the Government appointed an Acting Director General.

On attending the National Economic Management Meeting, I think the Government is sending confusing signals to the Market generally and to investors in particular. The first issue to determine is her Membership of the National Economic Management Team; we need to know whether the Membership is on her personal capacity or for the office of the DG of SEC, if that position is personal, then it was right for her to attend, but if the membership is for the office of the DG of SEC, then the issue is that she is right now on leave; be it compulsory or normal leave. When you are on leave, you stay off all official roles; especially where somebody else has been appointed to act in that position.

I think it was wrong for her to have attended; if that position is for the office of the DG of SEC. Also, Government ought to be careful; it cannot afford to send wrong signals to the public. The impression given to the International Community is that the Acting DG is not fully in-charge; but only acting on certain levels. That’s the meaning people will deduce from this development.

I also believe that it’s much more honourable and responsible for Oteh to on her own accord excuse herself from official functions for now. Attending the National Economic Management Meeting sends a wrong signal; but for the interest of the public, we should apply appropriate discretion.

EDITOR’s NOTE:

“Arunma Oteh who is on Compulsory Leave is a member of the Economic Management Team by virtue of her former position as the DG of Nigeria’s SEC on Tuesday attended the Nigeria’s Economic Management Team Meeting amidst outcry.

It was expected that Ibrahim Bello Acting DG of the Commission would have taken over her position at the meeting.

However, Ngozi Okonjo-Iweala said Wednesday that Oteh’s suspension from office does not stop her from attending or participating in one or two meetings on the economy to contribute her ideas to meetings”.

On SEC writing Capital Market Community to support Project 50

There is no secret in all these; even SEC has admitted that they wrote letters to operators in the Market. Let’s face it; there is nothing wrong with that action; to say we are celebrating our 50 years of existence. Since it’s the entire Market that is celebrating, let everybody support if they can do so. Like I said earlier, there is nothing wrong in that.

There are two issues that we may want to determine whether it is right or wrong to rally support the Capital Market Community on SEC’s project 50. The first is even if we are 50 years, should we actually be celebrating; given the state of the Market? Should you be having a party when the major customers of the Market; that’s the investors when they are not happy and have lost a lot of money and are in distress.

Some have psychological issues; just because they have participated in the Market. I don’t think it was right to have that celebration. The second issue which is the real issue at stake is that when some operators responded, and indicated that they were willing to support that initiative, they were asked to issue cheques in names not that of SEC. If this is the issue, I do not think that’s right to ask donors to issue cheques in names not that of solicitors of the support. There are other legal issues, what does the law say about that, the ISA and the CAMA say about such things. Well the matter is being investigated.

On the return of Aliko Dangote

Well it was a legal issue, he was elected and some people went to Court and they got an injunction saying that he shouldn’t parade himself as the President of the Council of the Exchange and he appealed and the Court reinstated him. It’s not an issue of whether somebody likes it or not, it‘s what the Law says. In any case, I believe that a person in his position has a lot to contribute to this Market. There are several issues we may look at; but the point is that he has enough of what it takes to move the Market forward and I believe that he is in a position to do so.

Status update on AMCON and Margin Loans

The Coordinating Minister of the Economy has made statements to that effect and said Nigeria will look at the issue and grant forbearance to Stockbrokers. I guess right now they are looking at the modalities and I advise we wait for this to come out; before we start commenting if they are right or wrong. I don’t think AMCON has really done anything significant, positively or negatively about that issue. It’s like AMCON seems to be waiting for what Government is going to do, AMCON has made their recommendation to this effect; when the recommendation is accepted or not, then they need to act.

Assessment of the New NSE Team

I will say that their performance has been encouraging, we have seen a few initiatives from them, they have been trying to improve on the processes and introduce instruments and products, and I think that’s commendable. We have to constantly review the way we do things; considering the processes. We also, have to learn from the past and take steps to make sure that we do things the right way, so far so good I think they have a pass-mark.

The role of the CIS and restoring investors’ confidence

The intention is to leave positive marks at the end of our tenure. We are looking at doing a couple of things, most importantly is restoring investors confidence, working with other stakeholders to get the Market to recover. One of the things that will restore investors’ confidence is for them to know first and foremost what went wrong, that those things that went wrong are being corrected.

Again, if something happens that they are not happy about, there is a Body they can report to and that Body will look at their complaints and respond to them fully and in a fast manner, and they will get justice.

The other thing that will lead to investors’ confidence recovery is that they need to know that there are provisions for different classes of investors to invest in this Market; without taking unnecessary risk. For instance people who are less knowledgeable about the Market, they rarely should not be investing directly, it’s not in their own interest. They need to invest through professional Fund Managers, if you are a less knowledgeable investor and you have some sizeable amount of money, you can engage a Portfolio Manager that would understand your own peculiarities, design and manage that Portfolio and report to you from time to time. If your fund is not so much, you can actually invest in the Market through a Fund. There are different Funds that can be designed, you can pick the Fund that matches your peculiarities and then invest through them. These Funds are being managed by knowledgeable people who are professionals in that area of investing and they are currently being regulated and monitored by SEC, Stock Exchange, CIS and so on.

So, you find that at the end of it, the mistake that you made in the past, maybe investing much on fundamentals, sentiments or hearsay, which would be corrected.

Everybody have been worried about the Stockbrokers, the Stockbroker is not the only professional they should worry about, but also worry about how the Issuers, Registrars and other Operators are performing.

If Issuers or the Regulators are not playing their role, and nothing is being done, then that’s the source of worry, because things will never go right. So, I think a lot of things need to be done. Companies and Government has a role, because the Capital Market is actually the heart of the economy; if there is a problem, the whole economy has problem. If we have this type of situation, we can’t achieve real recovery.

Another thing is that our recovery should not rely solely on Foreign Portfolio Investors; there is nothing bad about Foreign Investments. We have two types of Foreign Investments; they are Foreign Portfolio Investment (FPI) and Foreign Direct Investment (FDI). The one that is enduring and most useful to us is the Foreign Direct Investment. If you have Foreign Portfolio Investment, it’s good; but it can be counterproductive; because the Foreign Portfolio Investors are investing here because that’s what pays them for now; if they get something better in another place or sense problems here, they would move their funds out immediately and then we will have another crash. So, our objective should be to get the Local Investors to come back to the Market. If they do so, Foreign Investors will join them; even when these Foreign Investors leave, we are not going to have a crash.

Your plans for the CIS as the new President

One is that we are going to intensify retraining of Stockbrokers, our Members needs to learn new things as they evolve. Two we are looking at computerizing our exams and Membership records. We have designed certification programmes, we now offer Diplomas in different areas. We have also created some new entry points into the Institute Exams, before now, what you have is a situation whereby only Graduates write our Exams. But we have now created another route; whereby those who are not graduates will go and write two exams that will lead them into our main exams. What I am saying is that instead of writing level one, before going to level two. Level one has been broken into two parts, you can go and write the two parts; when you finish, and you can then proceed to level two. Or you can decide that you just want to write level one straight and then come to level two. We have created that and it provides an opportunity for some people that work in Stockbroking Firms who are not Brokers to start writing the exams and qualify as a Stockbrokers.

We are hoping that within the two year period, we will start our building project; we are looking at making the Institute a major contributor in National discusses on the Economy. We have instituted an Annual National Workshop that would discuss issues that are very important and make great input into next years budget. The first National Workshop will come up by God’s Grace in September 2012. We also have an amendment Bill in the House which has passed second reading and we are hoping that it will be passed.

The Bill is to look at some of the things in the CIS current Act inhibiting effectiveness of the Institute, the Bill will further protect the Market; because the way things are, some Operators; people who get involved in the Market; are actually not been watched by an professional body now; that is one of the factors that caused the near collapse of the Nigerian Capital Market; when you have people who are operating and there is no immediate body to call them to order; that’s an issue, that Bill will serve that purpose. These are some of the things that we intend to look at.

Click here to download CIS Act 105

FACTS CHECK:

“The CIS Professional Diploma in Securities and Investment is a foundation course for anyone wishing to start or progress their career within the financial services industry. It has been designed to meet the needs of new entrants to the Securities and Investment industry, providing an overview of all key areas of securities and investment.

It provides candidates with an understanding of the foundational knowledge required to progress to professional levels in securities and investment studies. It, in addition, creates an alternative entry point for those who are desirous of becoming securities and investment professionals, but do not currently have a university degree required to proceed directly to the CIS professional qualification scheme”.

Source: CIS Official website

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