Investors criticise SEC’s NSE’s IPF initiative

Securities and Exchange Commission

Allege duplications, seek merger to widen scope
Stock market investors have described the establishment of Investors’ Protection Fund (IPF) by both the Securities and Exchange Commission (SEC), and the Nigerian Stock Exchange (NSE), as a ‘duplication of functions’, urging NSE to dissociate self from the fund and pursue other initiatives that would boost investors’ confidence.

Indeed, the investors, who spoke in an interview with The Guardian, suggested that the two bodies should merge the fund, after which SEC as the regulator would take over the management, as stipulated in the Investment and Securities Act (ISA).

This, according to them, would help expand the scope of the fund, strengthen the confidence of domestic investors and enable NSE to pursue other market growth initiatives.

IPF is a statutory fund established to compensate investors who suffer pecuniary losses arising from liquidation, insolvency, bankruptcy or negligence of non-broker/dealer and capital market operators.

The SEC had in 2015 inaugurated a National Investors Protection Fund (NIPF) worth, N5 billion.The SEC’s Director-General, Mounir Gwarzo, at the ceremony, explained that NIPF would complement the existing Nigerian Stock Exchange (NSE) Investors’ Protection Fund (IPF).

NSE had earlier in 2014 repackaged IPF to meet the demands of the nation’s capital market in line with the Investment and Securities Act (ISACT) 2007. NSE’s IPF is composite of contributory fund by dealing members, worth more than N695 million focus on compensating investors’ with genuine claims of pecuniary loss against stockbrokers whose operating licenses were revoked or cancelled, insolvency or bankruptcy.

The others included defalcation committed by a stockbroking firm or any of its staff in relation to securities, money or any property entrusted to or received or deemed received by the firm in the course of its business.

Gwarzo, said after the recent third quarter Capital Market Committee (CMC) meetings in Lagos, that the global financial challenges makes the new NIPF imperative in the nation’s capital market.

NIPF, Gwarzo explained, is a trust scheme established to compensate investors, like those involved in private placements, not covered under the existing IPF administered by NSE.

But the investors insisted that floating an IPF by the two bodies for the same purpose was not necessary, adding that the procedures involved in making claims on the fund is still not clear and well spelt out to the public.

For instance, the President, Rennaissance Shareholders Association of Nigeria, Timothy Olufemi said: “Yes, it is duplication. It is against ISACT. Only SEC is allowed to run an IPF.

“SEC must exercise its over sight function over NSE and operators but SEC acts as if it is at same level parallel and at par with NSE. It is wrong,” he said.

The President, Proactive Shareholders Association, Taiwo Oderinde, said: “It is a duplicate and that was our stand. There are one thousand and one initiatives that NSE can pursue to boost our market instead of duplicating others.

“Lack of creativity from our regulators is one of the major problems we are facing in our market.”The spokesman for the Independent Shareholders of Nigeria (ISAN), Moses Igbrude, explained that IPF is a crucial fund that is urgently needed in the market to enhance investors confident and promote growth of the capital market.

However, he advised that SEC and NSE should collaborate to improve on the existing one to avoid duplication and wastage. “Investment Protection Fund is very important and a crucial fund that is urgently needed in the market to enhance investors confident and promote growth of the capital market.

“SEC and NSE should collaborate to establish or run the existing one to avoid duplication and wastage. It is imperative for them to carry the investing public along through continuous education about the fund and how it will benefit the market.”

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