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BGL: Market Discipline, Transparency Not Compromised –Operators

Market operators condemn media reports that link the travails of BGL Group to poor disciplinary control which does not exist in the Capital Market

Sam Diala

Contrary to reports in a section of the media that Nigeria’s Capital Market is riddled with fraudulent activated by rogue traders, members of the Capital Market Alliance and other operators insist that the machinery of transparency and reliability put in place by the immediate past leadership of the Securities and Exchange Commission (SEC) are on course.

They also frown at the manner in which recent happenings at BGL Plc are used to generalize the mood of the market, creating the impression that many infraction-thirsty operators exist among the operators who are more inclined to resisting the transformation process introduced by the leadership of the market.

BGL Plc, a leading financial services Group with head office in Lagos, was suspended by SEC recently following allegations of infractions and corporate governance wrongdoings levelled against it and its leadership.

Following petitions to SEC by a number of investors against BGL, the market regulator last month announced the suspension of BGL Group. It said in a statement that the action was the outcome of a meeting of its Executive Management Committee, which considered the report of a detailed investigation into the various complaints received from investors against subsidiaries of the Group.

The committee also directed that BGL Asset Management Limited, BGL Capital Limited and BGL Securities Limited be suspended from all capital market activities and that all sponsored individuals of the subsidiaries whose particulars were contained in the commission’s record as at December 2014 be suspended from performing any capital market activity.

SEC also barred the Group Managing Director/Chief Executive Officer, Albert Okumagba, from any activity under the purview.

This development has led to negative reports on the activities of the Capital Market by a section of the media which creates the misleading impressing that the sanction imposed on BGL was only possible because the new leadership of SEC under Alhaji Munir Gwarzo has reinforced disciplinary control over the market.

A national tabloid (not The UNION) had reported that the travails of BGL hinge on market rot and decayed attitude traceable to the leadership of the immediate past Director-General of SEC, Ms Arunm Oteh, who retired in January at the end of her 5-year tenure. The report further insinuated that by sanctioning BGL, the capital market was on the verge of throwing up operators with contrary behaviour whose unworthy practices were being exposed by the leadership of Gwarzo.

Market operators who spoke to The UNION on the matter expressed anger and disappointment at the negative report which many of them considered misleading and borne out of mischief. They also extoled the role of Oteh in repositioning SEC through the war against corruption that she escalated at SEC during her 60-months tenure.

Mr Emeka Madubuike, Chairman, Association of Stock Broking Houses of Nigeria (ASHON), described the report as wrong and misleading, insisting that those who paint such scenario are not being sincere or opted for deliberate mischief. According to him, the transparency platform instituted in the market since 2009 stands it out as one that is on the progressive path to the league of outstanding markets in the world.

“It is a wrong generalisation that does not take into account the robust efforts on ground to strengthen the market and maintain its culture of transparency,”

A prominent market operator, Mr Sola Oni, of Sofunix Investments, also described the story as a wrong way of approaching a specific problem that does not have bearing on the entire market. “It is a specific problem. it will be an over-generalistion to draw such a conclusion,” Oni said when contacted last week.

A senior official of SEC who would not want his name disclosed, said that Oteh brought revolution to SEC in a manner that cannot be matched by any standard.

He said, “Oteh established a wellknown reputation for zero tolerance for market infractions through firm market enforcement. Two hundred and sixty-four (264) institutional and individual operators were dragged to the Tribunal in one fell swoop in addition to a string of other enforcement actions. The ETI corporate governance issue is well known.”

While announcing Oteh’s retirement in January, SEC, had described her as a leader who brought great innovation to the market and was in a hurry to see Nigeria achieve a world class capital market that will drive development and make the country one of the most attractive investment destinations in the world.

“The market witnessed significant product innovation, improved listing rules, landmark bond market reforms widening of participation in the markets through licensing and coming on stream of other capital trade points,” SEC said in a statement.

It also said Oteh was able to effect strong enforcement actions and improvement of rules and regulations, thereby restoring investors’ confidence, adding that she implemented reform measures driven by the vision to transform the Nigerian capital market to world class.

It was also noted that under her leadership as SEC DG, the Nigeria Stock Exchange witnessed a robust output and delivery in its operator/ oversight role, as her initiative to revive NSE listing rules led to landmark transactions in dual listing of SEPLAT Petroleum on the NSE and the London Stock Exchange in April 2014, as well as the development of an alternative securities market.

“She was in a hurry to see Nigeria achieve a world class capital market that will drive development and make Nigeria one of the most attractive investment destination,” SEC said.

Oscar Onyema, CEO, Nigerian Stock Exchange, has used every available opportunity to explain the measures introduced to achieve robust capital market and maintain a zero tolerance policy on all infractions.

“We have worked tirelessly to revise key rules for dealing members and issuers, and developed several new rules to create the much needed order, equitable treatment, efficiency and protection for all participants in our market. We congratulate the Securities and Exchange Commission for approving these rules,” Onyema disclosed at a lecture in Lagos last year.

To ensure that this is successfully achieved, SEC had through the NSE introduced a number of compliance measures which include:

(i) X-Issuer – a secure platform that allows issuers to electronically submit financial and other relevant information to the market and the Exchange in a seamless fashion. It was introduced to facilitate information disclosure, transparency and accountability in the market place.

(ii) X-Whistle – this became operational this year, and empowers participants to confidentially report any fraud, or possible violations of the rules and regulations of the Exchange and the Securities and Exchange Commission (SEC).

(iii) X-Compliance Report – is a transparency initiative designed to help maintain market integrity, by providing compliance related updates on all listed companies.

(iv) BrokerTraX – is a tool we introduced in 2012 to provide transparency into broker and brokerage firm compliance with the rules of the market.

(v) Market quality report (X-Qual) – also introduced in 2012, this is a tool which offers brokers and analytical investors insight into how to derive best execution of orders in the market, and the quality of execution that can be expected.

According to Onyema, “Our compliance measures are supported by tight enforcement procedures which include inspections, market surveillance and a vigorous penalty system. In any event, as a safeguard for the investor, the NSE has reinvigorated its Investor Protection Fund (IPF) which will provide investors a statutorily backed solution for reducing losses they might suffer as a result of the bankruptcy, insolvency, negligence or wrong-doing of a dealing member.”

Madubuike observed that with such a robust platform for transparency and zero tolerance to infractions which was the hallmark of Oteh’s tenure, it would be wrong to attribute the BGL travail to weak disciplinary control in the market.

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