Statutory Regulations In The Capital Market

Statutory regulations refers to the laws and rules administered by a government agency. All over the world there are laws and rules that govern or regulate the capital market as sensitive as it is and Nigeria is no exception. A number of factors have been attributed as determinants for capital market success and one of this factor is the provision of legal regulations governing the capital market.

In Nigeria, the Investment and Securities Act of 2007 which make provision for the establishment of the apex regulatory body called the Securities and Exchange Commission(SEC) to regulate the capital and securities business in Nigeria together with the rules and regulations made by SEC called the Securities and Exchange Commission Rules and Regulation 2013 regulates the capital market in Nigeria . The next question one will ask is what are the reasons for regulating the capital market or why should the capital market be regulated? There are three core objectives of securities regulations and they include:

1. To ensure investor’s protection
2. Ensuring that market are fair, efficient and transparent; and
3. The reduction of systemic risk
These three core objectives are closely related and in some way overlap each other. A large number of the requirements that ensure fair, efficient and transparent market also provide for investor’s protection, help reduce systemic risk and vice versa. Securities regulations seeks to achieve this objectives through setting standards, supervising market, market participants and ensuring the effective enforcement of standards.
Thus, in order to achieve the aforementioned objectives of securities regulations, the Securities and Exchange Commission uses various tools to regulate the capital market and they include:

a. Registration
b. Inspection; and
c. Rule making.
We shall examine each of this briefly.

A. Registration
Registration in the capital market entails the registration of securities and market intermidiaries (capital market operators). The purpose of registration is to ensure the value of securities are maintained and ensure the credibility of the issuer.
Furthermore, Section 54 of the Investment and Securities Act 2007 provides that all securities of a public company and all securities and investment of a collective investment scheme shall be registered with the commission (i.e the Securities and Exchange Commission). Also Section 13 (g) of the ISA 2007 empowers the Securities and Exchange Commission to register and regulate corporate and individual capital market operators. While Section 38 of the Investment and Securities Act 2007 provides that no person in the capital market as an expert or professional or in any capacity unless such person is registered in accordance with the Act carry on any securities and investment business.
It’s important to note that the investment and Securities Act 2007 requires the general registration of capital market operators while the Securities and Exchange Commission Rules and Regulation 2013 provides the registration requirements of capital market operators.

B. Inspection
There are two types of inspection carried out by the Securities and Exchange Commission and they are:
1. On-sight inspection; and
2. Off- sight inspection
On-sight inspection are those inspections the Securities and Exchange Commission carries out at the capital market operator’s office. While, the off- sight inspections are those inspections that are undertaken at the commission’s office.
Thus, the various inspection are subject to routine inspections that are specified in Section 45 and 40 of the Investment and Securities Act 2007.

C. Rule making
According to Section 313 of the Investment and Securities Act 2007, the Securities and Exchange Commission have been empowered to from time to time, make rules and regulation for the purpose of giving effect to the provisions of the Investment and Securities Act and for the regulations of other operations in the capital market like prescribing the procedures and criteria for the approval of mergers, takeovers, acquisitions and business combinations.

In conclusion, in order to ensure a reliable and sustainable capital market the Securities and Exchange Commission ( SEC) must continue to put regulations first and ensure that there is a total compliance with the regulations by all operators in the capital market.

About The Author

Nweke Uchenna Fabian is a law student of Chukwuemeka Odumegwu Ojukwu University, Anambra State. He has Special interest in Security and Exchange law and capital market. He is a refined legal scholar and researcher and has several publications to his name.