THE ROLE OF SECURITY AND EXCHANGE COMMISSION (SEC) AND IT’S IMPACT ON THE NIGERIAN STOCK EXCHANGE ( A CASE STUDY OF ABUJA STOCK EXCHANGE

THE ROLE OF SECURITY AND EXCHANGE COMMISSION (SEC) AND IT’S IMPACT ON THE NIGERIAN STOCK EXCHANGE ( A CASE STUDY OF ABUJA STOCK EXCHANGE

CHAPTER ONE

INTRODUCTION

BACKGROUND TO STUDY

The Nigerian Stock Exchange market started as Lagos Stock Exchange in 1960 but became the Nigerian Stock Exchange in 1977. (http://www.nigerianstockexchange.com). The Exchange currently listed 288 securities of which 33 are government stocks, 47 industrial loans stocks and the rest equity/ ordinary shares of companies. (Okoye and Nwisienyi, 2013). The majority of the companies listed in the exchange have foreign / multinational affiliation and representatives (http://www.nigerianstockexchange.info/facts_and_figures.php).  Some of the numerous functions of the Exchange include the registration of stock brokering companies, dealing members and individual stockbrokers. It also registers approved or authorised agents with whom stock brokering firms can share brokerage.

The Exchange provides capital market education to quoted companies and investors.  It protects investors from abuses by capital market operators, such as stockbrokers, registrars issuing houses and fund managers. The exchange has adopted a zero tolerance to fraudulent practices in the capital market. Violators are punished severely to safeguard the integrity of the security’s business. The exchange provides business and financial information through the daily official list.

Information about quoted companies and their performance is also provided to capital market operators to enable proper pricing of quoted securities. The Exchange has been in the vanguard of attracting foreign investments into the economy through various seminars, road shows and other international investment drives. The Exchange provides the All-Share Index is an economic indicator and a planning tool for the state to gauge the pulse of the economy at all time. (Abdullahi 1993).

The institutions expected to undertake capital market activities are the Securities and Exchange Commission (SEC) and the Capital Trade Point. This work therefore seeks to make an exposition of the meaning, structure and function of the capital market in Nigeria. It also considers statutory regulations of the capital market in Nigeria, public offer and sales of securities and invitations to the public which constitute investment business in Nigeria, and the role of the Securities and Exchange Commission in regulating investments and securities business in Nigeria which is carried out in the capital market.

Role of SEC is also about guiding management through managing the affairs of the market that leads to the achievement of the objectives whether those objectives are shareholders’ or stakeholders’ ones as far as management kept within the rule of the games (Friedman 1970). The Hampel Committee (1998) said, “Role of SEC must contribute both to business prosperity and market progress.” A lack of adequate SEC regulation may lead to market failures.  (http://www.dti.gov.uk)

According Mallin (2004) the market failures, resulted to SOX Act (Sarbanes-Oxley Act) in 200 in the US. While in the UK, the Higgs Report and the Smith Report were published in 2003, in response to the recent stock market failure and the need for an effective regulatory body. In South Africa, the first King Report (1994) was published in order to formalize an ongoing process of Securities and Exchange Commission reform. The report was a code of market practice and conduct based on a broad consensus of the South African business community. In Nigeria, companies need to adopt these regulatory frameworks in order to attract foreign investors.

STATEMENT OF PROBLEM

African countries have shown remarkable resilience over the past five years, with most achieving growth figures. Higher commodity prices and greater foreign exchange inflows have sustained growth, which is likely to continue in the coming years.  In the past five years, developing countries are restructuring and consolidating their business sectors to provide better conditions for investment in the private sector to aid economic developments. The major reforms in the market sectors in Nigeria and other African countries are the indications of economic growth in Africa however there is limited literature examining the effect and impact of the security commission responsible for formuilation of this reforms.

THE RESEARCH OBJECTIVES:

The aim of the research study is to investigate the effectiveness of role of Securities and Exchange Commission regulation in Nigerian Stock Exchange markets. The following individual objectives will use for the research:

1. To evaluate role of Securities and Exchange Commission regulation in Stock Exchange Market
2. To evaluate the effect of role of Securities and Exchange Commission regulation system in Nigerian Capital Market
3. To examine how management of the Nigerian Stock Exchange Market provide accountability to shareholders and stakeholders through effectiveness of Securities and Exchange Commission.

THE RESEARCH QUESTIONS

This research is an empirical investigation of role of Securities and Exchange Commission regulation in Nigerian Stock Market. The study seeks specifically to investigate and answer three main questions:

1. How does Securities and Exchange Commission regulation affect the Nigerian Stock Exchange?
2. Is the role of Securities and Exchange Commission efficient in the Nigerian Stock Exchange Market?

• How can management of the Nigerian Stock Exchange Market provide accountability to shareholders and stakeholders through effectiveness of Securities and Exchange Commission?

Significance of the Study

The Stock Market is a market place but to many people, it appears as a complex mysterious institution with it own jargons and unique methods of trading. Some see the Exchange as an elastic club which belongs to only few literates or financially literate people. It is hoped that this research work the same time demystify the working of the Stock Exchange, so that at the same time people understand how it works or what it does. They would see more clearly the vital functions of economy.

Secondly, it will show general success and failure of the Stock Exchange and the problems encountered in its day-to-day operations. In this regard, comparism can be made showing how the Nigerian Capital Market has fared in relation to other emerging Capital Market of the world such a result can be used to make useful inference about the performance of stock exchange and other co-operating institution such as the Securities and Exchange Commission [SEC] . Moreover, it is hoped that this work will enlighten Nigerian investors more on the need to speculate on the income and also from capital gains.

Finally, the conclusions drawn from the analysis of data collected would form a useful springboard for making recommendations to the public, the Nigerian stock managers, the stockbrokers, the government and future researchers in the area. It will be in addition to existing literature in the field.

Scope of the Study

The major scope of this study is to examine the effectiveness of the role of security and exchange commission (sec) AND it’s impact on the Nigerian stock exchange. The study examine how efficient, effective and sound the Capital Market is doing in relation to the regulatory frame works of the role of security and exchange commission case study of Nigerian stock exchange Abuja.

THE ROLE OF SECURITY AND EXCHANGE COMMISSION (SEC) AND IT’S IMPACT ON THE NIGERIAN STOCK EXCHANGE ( A CASE STUDY OF ABUJA STOCK EXCHANGE

Sharing is caring!