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Michael Itegboje, the president of the Chartered Institute of Stockbrokers (CIS), says stockbrokers should not be singled out for the stock market crisis that was also due largely to regulatory lapses.

How would you assess the capital market in the first quarter of the year?

Nothing much has
changed except that the market is a bit more stable now, unlike a year
ago. Since January, things have been better.

The market has
moved up slightly, though it also went down slightly. It is moving up
gradually now as more company results come in. People have confidence
in the ability of the companies to perform.

2010 performance
has shown that the companies are improving and most of them have
overcome the difficulties thrown up between 2008 and 2010.

Overall, you can say the market has gained about seven to 10 per cent.

Would you attribute this recovery to any deliberate effort by the regulators?

Like I said, the
companies’ performance are the major indices and not through any
regulatory effort. Companies are releasing their result, and investors
are beginning to see that there is improvement in their performance in
terms of profit, growth, and improvement in the balance sheet of many
of them.

What would you say about the environment in which you operate today?

The environment is hostile to stockbrokers in Nigeria. It is terribly hostile, especially from the regulatory point of view.

It seems in order
to bring confidence back to the market and correct anomalies of the
past, the regulators seem to blame everything on the stockbrokers,
forgetting that the whole crisis that happened in Nigeria and the rest
of the world was mainly due to regulatory failure.

The regulators
failed to do their job. In trying to do that, the regulatory
environment does not have to be hostile for sanity to prevail. Yes, we
all have learnt our lessons because if there is no business in the
market, there will be no other business for stockbrokers to do. Once
investors are not forthcoming, brokers suffer because there will be no
business.

That is why we have
been redirecting our resources to bring confidence to the market so
that our businesses can grow. Right now, our businesses are not growing
as we should expect.

While
brokers can be blamed partly for the crisis, what safeguard has the
institute put in place to ensure that your members do not repeat the
abuses of the past?

We have put some
things in place since October and have been training our members on the
code of ethics and standard of professional practice that would guide
them.

Secondly, we
introduced the continuing professional development programme in which
we are training our members on the current skills and knowledge in
capital market. The training is serious because credit points are
awarded for training a member who attends. We believe with that our
brokers are better prepared to face the task of the present and the
future.

Not only that, new ways of doing business in an environment that is dynamic. We are working on those areas.

I was actually
expecting you would talk about disciplinary measures put in place
against errant members to put off some of the hostilities of the
regulator?

Now, let’s get
something straight. The Chartered Institute of Stockbrokers has a
tribunal and on that tribunal, there is an assessor.

Previously, the
assessor used to be a SAN (Senior Advocate of Nigeria) but as part of
our reform agenda, we decided to make the assessor a retired justice
and we have right now, a retired justice of the Supreme Court on the
tribunal.

We also have a
prosecutor who is a SAN of many years standing. Over the years, even
before this crisis, this disciplinary tribunal has been there trying
cases and convicting brokers and any broker convicted, the press is
invited at the judgement to carry out widespread publicity of the
judgement we have given in the past.

But a case readily comes to mind here.

Which one?

Peter Ololo.

Yes, Peter Ololo is
a broker, but he doesn’t have any illegal transaction as a broker. Did
you notice that when some firms were suspended, his firm was not
suspended? So what is the problem with that?

If he did other
businesses outside the market, that is outside the market and not
inside the market. And then, that is something that is already in the
law court.

In terms of the stock broking profession, we can’t do anything unless the court finds him guilty.

So you are waiting for that judgment?

We just have to. We
cannot try him twice. Supposing we try him and say he is guilty and the
court finds him not guilty or the court finds him guilty and we find
him not guilty? So, we cannot do anything.

That case is in the
public domain and not within our purview for now. When the court
decides and passes judgement, we just have to accept the judgement.

What are your expectations from the new CEO of the Nigerian Stock Exchange?

One good thing
about the new CEO is that he is a stockbroker and he has practised in
what I may call an advanced market. That is a plus for him, the
Exchange, and the stockbrokers.

We have had
opportunity to discuss and share our views with him. We believe he is
putting his plans together and when he is through, he will release his
agenda.

We will work with
him to build a better organised market. He believes he can bring in new
product and new ideas. We will work with him.

What do you foresee, going forward?

It depends on the
regulators. They are building a world class market and we want to see
how they build it and we want to encourage them to make sure they
define it, so that in the process, it will not kill or destroy the very
owners of the business.

Whatever the
regulators do, they must take the interest of the brokers into account.
Though operators, they are members of the Exchange and as long as their
interest is not taken into account in whatever the future of the growth
of the Exchange will be going forward, it will not work.

We are interested
in a better regulated environment, a market that has a human face. A
market that is considerate of not only the investors, but also the
operators.

What is the missing link?

I believe that over
the years, SEC has paid too much attention to regulatory issues. SEC
should begin to look at developmental issues.

The government that
is interested in employing people should begin to look at the capital
market sector. There was a window of opportunity given to textile,
agriculture, and entertainment industries. We believe the time is ripe
to have a window for stockbrokers.

That way, we
address the issue of liquidity in the market. Margin trading is
exciting because it brings liquidity into the market. The government,
through CBN, can open a window of say N200 billion that stockbrokers
can access on behalf of their customers who want to do margin trading.

The investor does
not have to go to the bank. All he has to do is go to his stockbroker,
do all the paper work, and gets the fund for margin trading with a
regulation that once it gets to a certain percentage, he puts in more
funds.

The scenario you have just painted points to the absence of market makers.

Margin trading is
not for market makers. Margin trading is done between an investor and
his broker, not the one the banks were doing. The banks were simply
giving loans.

Margin trading has
set guidelines. If you bring 30 per cent and the broker buys for you
one hundred, once the market depreciates the money you bring, you have
to bring in more funds because you are not supposed to be exposed to
more than 70 per cent.

If you can’t, they
sell the shares and take you out. We did not follow that. Margin
trading is one way we can bring liquidity back to the market.

Have you made this position to government?

We have raised it somehow. We have raised it with the minister and we are still canvassing it.

Quite frankly, do you think this market needs market makers?

This market, for it
to develop the way it should be, needs market makers. I agree. We have
always said it. But then, what are they going to make? They need funds
to do market making, and it is not just borrowed funds.

SEC has approved
some market makers but why are they not operational? Because it is a
business decision they have to take and if it is not worth the
business, why do you have to make it? Nobody can force you to be a
market maker.

See the full interview at 234next.com