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Eager to achieve zero tolerance against infractions of its rules as a way to boost investors’ confidence in the nation’s capital market, the interim administration of the Nigerian Stock Exchange (NSE) last week got the approval of its council to sanction errant members.

While it already presented a draft of the recommended penalties to market operators, the Exchange said the implementation of the suggested punishments will take effect after a review of all comments and contributions received from operators, latest last Friday. Some of the penalties include issues on unauthorised sale of securities, shares, misappropriation of funds, third party transactions, and maintenance of clients’ accounts.

David Amaechi, an executive member of the Shareholders Association of Nigeria, said the recent move by the NSE “is a great step towards curbing abuses in the market such as insider trading,” common among stockbroking firms.

However, he said, “Regulators must go beyond just creating rules and regulations; they must start enforcing these rules, name names, and bring naughty dealers to book.”

He said investors’ confidence, which is presently at its lowest ebb, can only be gained back in the market “if regulators do their work well.”

The chairman of the Association of Stockbroking Houses of Nigeria, Ola Yussuff, said the current market performance will see more improvement if the NSE does justice to operators involved in different market infractions, adding that “a standard market must be transparent to gain investors’ confidence.”

However, Mr. Yussuff, who is also the chief executive officer of Trust Yield Securities Limited, a stockbroking firm, said market regulators must ensure that dealing members not involved in any sharp practices in the market are treated fairly and encouraged.

“Stockbrokers are not as active as they should be right now because of the several problems in the market. The people that get more indigenous investors to come to the market are the stockbrokers who go about marketing in all the nook and cranny of the country. But they are presently not encouraged,” he said.

Clarity of rules

In the mean time, Arunma Oteh, director general of the Securities and Exchange Commission (SEC), in a statement posted on SEC’s website last Thursday, said the new rules are meant to shape behaviour, set standards, and create a level playing field for participants in the market.

“Our assessment of the (global) crisis revealed that the absence or inadequate rules in some respects contributed to the scale of the crisis in Nigeria,” Ms. Oteh said.

Citing an example, she said the margin trading exposures of banks and brokerage firms was fuelled by the absence of adequate margin trading regulation.

“New rules have been introduced, while some existing ones were amended and others completely expunged to ensure alignment with international best practice,” Ms. Oteh said.

She said some of the new rules were introduced to encourage the emergence of new products, strengthen the protection of customer assets in the market, and improve financial reporting and governance of public companies.

“Some of the rules have emerged from the collaborative efforts of financial sector regulators. An example is the margin trading rules which were developed and have been jointly issued to banks and market operators by the Central Bank and the Commission,” the Exchange Commission’s boss said.

Last month, SEC enacted some new rules and amended some of its old rules and regulations. Some of the new rules include rules on negotiated settlement; conditions to grant waiver on bonds that are not backed by an irrevocable letter of authority; custodial services for registered collective investment schemes; securities lending and borrowing; and Exchange Traded Funds.

The Exchange Commission also said it approved the implementation of a new code of corporate governance for quoted companies, adding that the code will become effective from April 1.