Why FG should drive listing on Stock Exchange –Gwarzo, SEC DG

By Omodele Adigun

Contrary to moves in some quarters to get some firms listed by fiat, the Director General of the Securities and Exchange Commission (SEC), Mounir Gwarzo, thinks otherwise.He would rather prefer that the Federal Government be the arrowhead. According to him, it is the government that drives listing worldwide. For this reason,he pledged to canvass government’s involvement in wooing more companies to the Nigerian Stock Exchange.
Briefing the media on the outcomes of the Capital Market Committee(CMC ) meeting held in Lagos recently, Gwarzo disclosed, among others, that shareholders, for the first time, would have their dividends paid directly into their bank accounts, just to level the mountain of unclaimed dividends in the country.
Excerpts:

Recapitalisation
Early this year, we said it over and over again  that  September 30 (recapitalisation) deadline would be sacrosanct, and that any operators that do not meet the minimum requirement will not fit in.  We are happy that a lot of CMOs (Capital Market Operators)  responded and submitted their documents.  We have reached almost 90 per cent in terms of review of the submissions. We have also engaged three accounting firms to review the work of the 16 accounting firms and they will start working next Monday.  Before December 31, we will come up with the final list.
Dematerialisation
This is an issue we have been battling with for the past 30 to 40 years in the market. The records of the CSCS and the record the registrars have never been the same. For us to move forward, they must have a handshake.  All the records with the registrars must be transmitted to the CSCS data.  And with the support of all the registrars and the excellent dedication and commitment of Joe Mekiliuwa, (CSCS General Manager, Operations) we  will be able to do that. He reported to the house that as of Thursday, November 26, we have reached 90 per cent compliance level.  And by next week, we will be able to achieve 100 per cent.
E-Dividend
You are aware of the excellent support, dedication and cooperation we have been receiving from the CBN and the NIBSS(Nigeria Interbank Settlement System) in terms of provision of the BVN(Bank Verification Number) platform.  Work is ongoing, a lot of reconciliation is taking place, public enlightenment is also ongoing.  We have reached about 70 to 75 per cent compliance level.  We believe that a lot of public enlightenment will also enhance the initiative.. We have got the support of the banks and they have agreed to provide any investor that reaches them with all the necessary data.  So, you either go to a bank or go to a registrar, they will give you an e-dividend form to complete.  The moment they give you , you write your BVN, your CHN(Clearing House Number) and fill the rest.  The moment you complete it and they input it into the system, it will automatically go to the CSCS.  We are determined to see that for the first time, e-dividend issue is going to be (solved) through implementation. Unclaimed dividend will be sorted out and investors will be able to come back to the market.  If you ask, some investors would tell you that, I have not got my dividend warrants for so so number of years; or somebody that is living in Mararaba or Ajegunle and he has a dividend of N1,000 and it would cost him or her N1,000 or N2,000 to come to Lagos Island to collect the dividend warrant or cash dividend. By the time you compare that with what you are earning, you will decide to just leave it.  But this time, dividend will be paid directly into the clients’ accounts.
Direct Cash Settlement
This is another initiative we have been able to conclude.  Direct Cash Settlement is the process whereby an investor gives a mandate to broker to sell his or her shares. Once those shares have been sold, payment will be made directly into the client’s account, as against the former practice where the consideration would be paid into the broker’s account and the stockbroker would now take his fees and remit the balance to the client.  During this process in the past, a lot of things used to go wrong.  I am happy to report that at CMC, the market unanimously agreed that the commencement of direct cash settlement is January 2, 2016. This is sacrosanct.  So we believe this will also improve investor confidence in the market,.
Public enlightenment
Like I said, public enlightenment is ongoing.  We are using radio jingles, we are using the print media, the electronic media to propagate the gospel of (investor’s) coming back to the market.  We are also looking in-house in terms of strengthening our activities.  Part of the initiative within the master plan is the need for SEC to strengthen its capacity. We do not think we know it all. But we think SEC should be the reference point in this market in terms of knowledge.If you are looking for somebody that is very knowledgeable in mergers and acquisitions, you need to come to SEC; if you are looking for somebody that will enlighten you on how to structure finance, you come to SEC; if you want knowledge on investor protection, you come to SEC. So we are upscaling our capacity.  We are bringing a professor of Econometrics to head our Economics desk.  There are other divisions too that we are fortifying.  The whole idea is to make SEC the point of knowledge.
Corporate governance scorecard
You are all aware of the launch of the corporate governance scorecard on Thursday, November 26.It was an excellent outing for us.  We had the representative of IFC, who informed the gathering that the scorecard was the first to be launched in Africa, not even in Nigeria.  We worked with the IFC for about 9 months for the dynamics of the scorecard.  Before the launch we had a training programme for company secretaries of quoted companies on how to fill the scorecard. Implementation of the scorecard is mandatory, we already have a provision in our rules on the corporate governance scorecard.  And we are going to jealously monitor companies to ensure compliance.
National Investor Protection Fund (NIPF)
SEC, few years ago took a giant step within its limited resources to set aside certain amount of money, about N5billion, for the National Investor Protection Fund (NIPF).  The NIPF is different from the Investor Protection Fund (IPF) being managed by the Nigerian Stock Exchange (NSE). IPF addresses issues relating to brokers and dealers or brokers and investors.  So it is strictly for the dealing members of the Exchange, whereas the NIPF is going to cover the entire market on issues about registrars, solicitors, issuing houses, fund managers etc. We also launched it on November 26.   The rules on its operation is already on our website.  Whoever wants to know the modalities can go there.  Apart from the fact that the board was inaugurated, the verification committee was also inaugurated.  We hope that before the end of this year, the first beneficiaries of the NIPF will be paid.  The maximum that you can be paid as an investor is N200,000. It is not meant to cover your entire financial loss, but it is just stop gap measure to help you tide along before you recover fully from the loss in the market.
CAMMIC
The Capital Market Masterplan Implementation Council (CAMMIC) was also inaugurated that Thursday.  The idea of the CAMMIC is to have a body that will engage the executive, the legislature and the judiciary in terms of certain initiatives within the market.  We need higher level intervention.  So for instance, now that the NSE is on the verge of demutualisation, there are different ways they can follow the process; either there would be a law that will be enacted by the National Assembly to give rise to the demutualisation proess or certain provisions of CAMA (Companies and Allied Matters Act) be amended.  So you need a lot of advocacy.  So CAMMIC will now be the vanguard to either interface with the legislators or the executive to get that law changed or enacted.  CAMMIC will also do a lot of work.  We have been yearning for companies to be listed on the Stock Exchange.
There is a lot of interface with telecoms, with the Discos and the Gencos.  CAMMIC will also have the opportunity to engage both the BPE and the executive on the need for government to be on the driver’s seat for the listing of companies. Government is the major driver of all companies to be listed on the Exchange, both in grown and emerging markets.  It is the government that drives listing.  And when you look at the companies that are listed on our exchange, 90 to 95 per cent of them are through government initiative: Indigenisation 1, Indigenisation 2; Privatisation 1; Privatisation 2, Isn’t it?  We think government should also take the driver’s seat.  So CAMMIC comprises eminent Nigerians; people of high integrity; people that  know the market; the CAMMIC council is going to be chaired by Mr.Tola Mobolorin, whom you can call the doyen of the market.  He has seen it all.  He is going to drive the committee, other members include Professor Kanyinsola Ajayi, SEC is a member, Stock Exchange is a member, PenCom is a member and CBN is a member.  Apart from individual capacity, we also look at institutions that have key roles to play in the capital market.  If there are issues that do with PenCom, they need to ammend some of their guidelines to give room for better investment by the PFAs. PenCom is being represented on the board.  And within the CAMMIC, we also have the project monitoring team.  The team will serve as secretariat.  So if there are issues they need to look at, the project monitoring team will look at those issues, do research, prepare papers and pass it through CAMMIC.
Outlook for 2016
Some of the initiatives we are looking at within the capital market master plan for 2016 include:
Transaction cost
We did an excellent research, and it shows that the Nigerian market is relatively expensive in terms of conducting transactions.  A committee has been set up under the leadership of Ade Bajomo, the Executive Director of NSE, to look at how we can make transaction in the market a little bit cheaper.  And it means every key player in the market, SEC,NSE, CSCS, brokers, issuing houses, registrars,among others, will have to look at ways to reduce their fees.
We have looked at fee structures in many jurisdictions.  So what we are looking at is how we can benchmark the market.  We believe that if the fees are relatively low, it will probably spur more transactions in the market. So what we may lose in the short term, in terms of drop in income, it may be compensated in the middle to long term by big transactions.  I am told that by January, the work of that committee will be concluded.  So as at next CMC meeting, we will present them with that report.
Licensing models
One of the key issues we are facing in this market is liquidity. The whole idea of licensing model is to allow market operators to have access to the liquidity window of the Central Bank. So we are partnering with the CBN on that. But the operators will have to upscale their capacity, although it depends on the CBN.It can say for you to enjoy its window, you must have N2billion, N3billion or N5billion level of capital.  We think, by having that liquidity window of CBN, we will be able to have the needed finance in the market.

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