A cat with nine lives

Against all odds, the Arunma Oteh-led management of the Securities and Exchange Commission (SEC), appears to have devised alternative survival strategies to beat the funding embargo placed on it by the National Assembly. What is Oteh’s magic wand?

Nine months into the current fi nancial year, indications have shown that the Securities and Exchange Commission (SEC), has been trudging on despite the National Assembly’s resolution which denied the Commission any share in the 2013 budget.

Despite the antagonistic posture of the National Assembly and zero budgetary allocation for the Commission this year, investigations into its operations over the past months indicated clearly that a combination of factors have helped the Arunma Oteh-led management to support its operations even as the investment agencies see the nation’s capital market as one of the best regulated bourses globally today.

For instance, apart from the revenues that accrue to the Commission through commissions or regulatory fees on the activities of the market which have continued to help in meeting its administrative expenses, Business Courage gathered that SEC had been able to weather the politically harsh climate due to service supplier community’s (stock broking fi rms and other players in the market) very high regard for the new board and the management.

Available statistics on SEC’s revenue accruals in the fi rst two quarters of the current year indicated that the Commission had grossed over N1.92 billion from commissions on traded securities including, processing fee for schemes of merger/ acquisition and takeover; fees on government bonds and debentures of public limited companies; and fi nes on infractions as they relate to violations of market rules and guidelines. It charges 0.3 per cent as commission on traded securities.

Other sources of funds for the Commission include, fi ling fee(s) for registration of securities at a fl at rate of N10,000; registration fees of securities of public companies (including rights issue); application fee for registration of a collective investment scheme at fl at rate of N35,000; special funds; and processing fees on offer for sale, amongst others .

Indeed, an investment analyst confi rmed to Business Courage at the weekend that the biggest strength of the Commission was in its autonomous powers in respect of its regulatory roles in the capital market as provided for in the ISA Act 2007, stressing that but for the autonomous power which the Commission enjoys as far the as regulations of the capital market is concerned, the Otehled management would have been forced to eat the humble pie.

The stockbroker, who spoke under anonymity, told our correspondent that “SEC has been able to survive the war because of key stakeholders respect for the leadership of the board and professional competences of the management led by Oteh.

“If you look at what the SEC has done in the past two years to reposition the capital market, particularly by ensuring that professionals who are not tainted by political interests take over the NSE and what has been done by the leadership of the Exchange in the past year to instil discipline and global best practices in the market, then you will see why Oteh and SEC have been surviving.

“Apart from increasing operators’ confi dence in the market after the disastrous near collapse of the market about fi ve years ago, you will today see that more local and foreign investors are coming in to invest in the market. For instance, in the last eight months alone, the All-Share Index (ASI) and capitalisation indices showed clearly that the Nigerian capital market is bouncing back.

“The capitalisation of the market at the end of June this year was well above 40 per cent growth while the ASI rose by over 30 per cent. What again do you need to justify the competence of a CEO like Oteh? You will also note that although activities in the primary market remain relatively low, the ratio of foreign and local investors’ participation as at June was almost getting at par, standing at 49 per cent to 51 per cent, as against 61 per cent to 39 per cent in 2012 in favour of foreign investors,” he said.

The stock broking expert pointed out that the lawmakers’ stance on Oteh “was ill-motivated because if you look at the circumstances surrounding the whole imbroglio, you will discover that appointment of the SEC boss as provided in the Constitution requires only the consent of the Senate and not the House of Representatives after the President must have forwarded a nominee.

“So, what are they talking about? The Reps resolution purportedly calling for the removal of the Director General, as far as the law is concerned, is ultra vires since it is contrary to the provisions of the Constitution”, he added

Speaking on why SEC has continued to survive despite the zero budgetary allocation, the National Chairman of Renaissance Shareholders Association, Ambassador Olufemi Timothy, said the goodwill and integrity of the board have helped to restore investors’ confi dence in the Commission and with that, SEC has been able to provide the regulatory instruments to reposition the capital market on the path of sustainable growth.

He described the position of the National Assembly on the effort to deny SEC operational fi nancial resources as ill-conceived since the interests of the investing public and that of the country, given the crucial roles a capital market plays in the development of the economy should have been considered instead of the political exigencies that played out during the war unleashed against the Director General.

“To be honest, I cannot say how SEC has been surviving despite its zero allocation in this year’s budget. I know the Commission gets some commissions and fees from activities in the capital market but I don’t think these could be adequate to meet its operational needs. As we have earlier maintained, our position as an Association is that the resolution of the House of Representatives, which eventually denied SEC from getting funded from the budget, was not called for. It was taken without due consideration for the roles the capital market is playing in the economy. We have said it, the resolution was not in the interest of the country.

“Be that as it may, I think the integrity of the board and various measures being adopted by the management to reposition the market and make its operational guidelines to be more transparent have helped in restoring investors’ confi dence in the capital market. This is quite discernible in the performance of the market since the new board came in. I think this is why the National Assembly has sheathed its sword about the war against Oteh. From what we have seen so far, SEC is doing very well and should be allowed to continue its ongoing reforms of the market”, Timothy said.

Another situation that has also helped the Oteh-led management in proving its worth, according to investigations, has to do with the strategic role the SEC and NSE are expected to play in the current efforts by the Federal Government to fi x the infrastructure fi nancing defi cit through private sector investments in the capital market.

A source close to the Presidency told our correspondent at the weekend that government was looking up to the current board and management of the SEC to use their professional clout, integrity and contacts with the global investors to help attract the required funds for the implementation of the National Integrated Infrastructure Master plan (NIIMP).

Already, it was reliably gathered that the Federal Government had been pleased with the various measures, including investment guidelines being fashioned by the SEC to enlist foreign investors’ support for the implementation of the plan, using investments in various securities in the capital market to pool such funds.

“Let me tell you that SEC has never has it so good to have this calibre of people on its board and management. Government is very pleased with the transformation going on in the market and it would be undesirable to scuttle the reforms based on political sentiments. The role SEC is playing now and will continue to play in the NIIMP is critical.

“Dr Ndanusa and Oteh are doing a great job that will help government get it right on the NIIMP. Once Nigeria gets it right here, you can be sure that all other things would fall in place. So, the NIIMP is very key to the transformation agenda and government wants to see that the Commission helps to attract the needed funds through the market to fi ll the infrastructure fi nancing gap”, he added.

Similarly, SEC is believed also to be enjoying the fi nancial support of the fi nancial institutions, particularly the Deposit Money Banks (DMBs) whose CEOs are confi dent that ongoing reforms being championed by the SEC in the capital market deserve to be supported in view of the medium and longterm benefi ts to their institutions’ survival and growth.

Business Courage gathered that although the DMBs and others are not committing their investors’ funds to SEC by any means, many of the CEOs and their management are said to be providing funding support through their marketing campaigns to collaborate with SEC in funding its enlightenment and other awareness campaigns for improved understanding of the roles of the capital market in national development at the grassroots.

An offi cial of one of the bank’s who confi ded in our correspondent during one of the SEC-organised grassroots awareness and mobilisation on capital market investment opportunities, said that “what some of the banks are doing is to use such fora to also showcase their services and products in such a way that could also help them attract deposits.

“The banks are not giving money to SEC but what they do, since what SEC is doing is also in the interest of the fi nancial services sector is to fi nd a way of collaborating with the Commission during its programmes. That is why you see many banks trying to also embark on marketing and other promotional campaigns at such events.

“It is a win-win thing. If the bank’s pay for displaying their products and services at such events, they are also enjoying the goodwill such avenues also promise for advertisers. If banks are spending so much on marketing through newspapers and electronic media to showcase their products and services, there is nothing wrong for them to also use banners and other promotional items for the same purpose at other fora like the SEC’s” she added.

It would be recalled that the Chairman of the Board of the Securities and Exchange Commission (SEC), Dr Suleiman Ndanusa, had last May 14, euphemistically said the Commission had been surviving on prayers following the zero budget allocation to it by National Assembly in the 2013 budget.

Ndanusa, a former Director General of the SEC who revealed this at the inauguration of the Administrative Proceedings Committee (APC), said the N10.6 trillion capitalisation of the Nigeria capital market required well-regulated regime in order to protect investors’ funds.

“The capital market is a vital organ of the economy. It is imperative to have a well funded SEC to ensure transparency and accountability. Join us in prayers so that the matter can be resolved sooner than later. Where there are no credible mechanisms to deal with violations and other grievances, participants will lose confi dence in the system which may have unintended consequences on a country and its economy”, Ndanusa added

The securities and investment expert explained that the nine-member Committee headed by the Oteh was re-launched to settle disputes between markets participants to entrench confi dence and integrity in the capital market.

The National Assembly stance on zero budget allocation to the Commission, which was largely championed by the House of Representatives, was the result of what many analysts perceived as politically orchestrated unnecessary muscle-fl exing between the legislature and the presidency over Oteh’s continued leadership of the SEC which the legislators termed unconstitutional.

After weeks of prolonged face-off characterised by underground political intrigues between the Presidency and the House of Representatives in the heat of deliberations upon the 2013 Appropriation Bill, the House had passed a resolution declaring the SEC boss unqualifi ed to head the Commission and urged the President to relieve her of the appointment.

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