October 07, 2014/SEC

In order to ease the illiquidity around unquoted securities in Nigeria, the Securities and Exchange Commission [SEC] licensed the NASD to create an Over the counter market in 2013.

As we launched operations, NASD and our regulator SEC became acutely aware of the opacity of the unlisted securities market.  SEC, recommended measures that will increase the transparency and ultimately liquidity of the market.

First was the need to bring all public companies under the supervision of the SEC.  SEC issued a circular with a deadline for all public companies to register with the apex regulator.  SEC further clarified that a company that has more than 50 shareholders automatically falls into this category.  Effect? – Many companies complied and updated their status from limited liability to public company at the Corporate Affairs Commission [CAC] and then registered their securities with the SEC.

As a second step to encourage even more transparency in the capital market, SEC proposed further amendments to trading rules in April 2014 to the effect that:

1.    securities of public companies shall be bought, sold or transferred only by means of a [public and transparent] system approved by the Commission. 

2.    no persons shall buy, sell or otherwise transfer securities of a public unlisted security except through the platform of a securities exchange or platform established for the purpose of facilitating over the counter trading of the securities.

After exposure to and thorough consideration by market operators, the proposed amendment has returned to SEC.

We anticipate that the Commission is codifying this critical amendment that will allow and encourage formal recognition of OTC market activity. We believe this amendment when passed will significantly boost investor confidence and provide critical data on the magnitude and velocity of the OTC market in Nigeria.

Addendum:

OTC Market in Numbers