NASD Plc has said it expects the amendments to Securities and Exchange Commission rules relating to trading in the securities of unlisted companies to be ready soon.
The company, which was licensed by SEC to create an over-the-counter market in 2013 in order to ease the illiquidity around unquoted securities in Nigeria, expressed the confidence that the development would further create transparency and boost confidence in the OTC market.
It said in a statement, “We anticipate that the commission is codifying this critical amendment that will allow and encourage formal recognition of OTC market activity.
“We believe that this amendment when passed will significantly boost investor confidence and provide critical data on the magnitude and velocity of the OTC market in Nigeria.”
The company, which recently announced that transactions on its OTC platform had exceeded N1bn, explained that after it commenced operations in 2013, the opacity of the unlisted security market became very clear to it and SEC.
Consequently, it said SEC recommended measures that would increase the transparency and ultimately liquidity of the market.
In an exclusive interview with our correspondent, the Managing Director, NASD, Mr. Bola Ajomale, had stressed the need for the amendments, saying the biggest challenge facing the OTC market was the fact that deals could be done by non-registered brokers and in the black market.
He said, “There is no rule that says securities that are registered by the Securities and Exchange Commission should be traded on a SEC-registered platform. That rule is not there yet and I think the market needs that kind of rule. If not, there is the likelihood that operators of the industry might tell their client, “Let’s not trade it on the open platform; let me go and do a deal for you.”
“There is always that tendency and when that happens, the operators can make the biggest spread, but we believe that the spread should be made by the investors. I’m not saying this for just the NASD; I’m saying it for all the other platforms. Otherwise the development of these platforms will be stunted.”
In order to bring all public companies under the supervision of SEC, the commission had issued a circular with a deadline for all public companies to register with it.
The commission further clarified that a company that has more than 50 shareholders automatically fell into the category.
The effect, according to the statement, is that many companies updated their status from limited liability to public company at the Corporate Affairs Commission and then registered their securities with the SEC.
It explained that it was in order to encourage even more transparency in the capital market that SEC proposed further amendments to trading rules in April.
The new rules will ensure that “securities of public companies shall be bought, sold or transferred only by means of a [public and transparent] system approved by the Commission”.
It also provides that “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”.
According to the statement, after exposure to and thorough consideration by market operators, the proposed amendment has returned to SEC.
Punch
