Archive for the 'Regulators' Category
January 23rd, 2010 by Tom Minney
The Zimbabwe Stock Exchange is seeking to reinforce International Financial Reporting Standards again on its listed companies. Many had stopped using the standards in runaway inflation (which reportedly peaked at over 231 million percent), but the introduction of US dollar-based figures and transactions allows them to reintroduce it.
South Africa’s W. Consulting (www.wconsulting.co.za), in partnership with the Institute of Chartered Accountants of Zimbabwe (www.icaz.org.zw) recently held a workshop with local firms on IFRS. W. Consulting is an independent technical accounting & professional skills training and advisory business based in South Africa, advising many SA listed companies and reportedly accredited to the JSE Ltd.
Currently, a ZSE panel of experts is responsible for checking IFRS compliance. It encourages accurate and correct presentation of companies’ financial accounts including historical data and internationally comparable balance sheets and disclosure. This makes it easier for investors, including external investors.
According to a report in the Herald newspaper, ZSE chief executive Emmanuel Munyukwi said that IFRS compliance is compulsory for all listed companies, but that some did not comply for the last financial period.
According to the newspaper, head of W. Consulting South African operations Tapiwa Njikizana said IFRS compliance was critical for JSE-listed firms to attract and retain foreign investors’ participation: “An investor sitting in China, Japan or somewhere else in Asia requires historical data about a company in order to make decisions. Without adherence to IFRS, he needs a lot of time to understand how and why certain things are done in Zimbabwe, but with IFRS he knows standards are uniform across the globe,” he said.
The Institute of Chartered Accountants of Zimbabwe has fought hard to ensure that the country’s accounting profession remains accredited or recognised by the International Accounting Standards Board.
January 5th, 2010 by Tom Minney
South African listed companies are to change accounting standards next July, after the Department of Trade and Industry in December released the long-awaited regulations to the new Companies Act of 2008. The changes are good for businesses but will mean extensive changes. They offer reporting flexibility to suit different business types but align standards between companies and the often smaller close corporations.
Companies that require auditing, including public, state-owned and private companies, will need to meet highest reporting standards. Accounting for smaller companies is expected to be aligned in a way that makes them more useful for shareholders, lenders and the SA Revenue Services tax authorities.
The new regulations are expected soon on the Department’s website. The Act was promulgated last April and is set to come into effect in July 2010.
January 5th, 2010 by Tom Minney
Botswana’s Non-Bank Financial Institutions Regulatory Authority (NBFIRA) is talking to the World Bank on technical help to update laws and develop rules. The authority aims to upgrade the Collective Investment Undertaking Act and to develop new regulations for asset managers, custodians and investment advisors.
The Botswana Stock Exchange (www.bse.co.bw) is primary supervisor for securities dealers and listed companies and in turn operates under NBFIRA supervision. general direction of NBFIRA. The Ministry of Finance and Development Planning is currently drafting a new Securities Bill and this satisfy NBFIRA which wants to update the BSE Act, according to a local media report.
NBFIRA’s 2009 annual report is reported as saying that it received all required reports from BSE and that the exchange did site visits to all securities dealers and held a disciplinary hearing against a securities dealer who did not submit audited financial statements on time and for irregularities in the statements.
The authority reports that lack of personnel has hampered capital markets supervision.
December 19th, 2009 by Tom Minney
Proposed amendments to Kenya’s Capital Markets Authority (CMA: www.cma.or.ke) Act would block institutional investors from getting compensation for money lost in cases of collapse of their stockbroker or any other investing agent. Currently all investors are eligible for compensation from the Investors Compensation Fund (ICF).
The draft CMA Act 2009 excludes financial institutions, insurance companies, collective investment schemes and other categories of investors who are generally recognised as “institutional investors” from drawing compensation from the ICF kitty. This leaves the “retail investors” as the only category of investors that can claim compensation for losses suffered due to failure or fraud by market intermediaries.
Current ICF regulations cap the maximum compensation payable per investor at KSh50,000 (US$667) and have called it to be increased to match commercial banks’ depositors compensation ceiling (KSh100,000).
Hong Kong-based International Securities Consultancy Ltd (ISC) drafted the proposed amendments jointly with local law firm Kaplan and Stratton Advocates. ISC’s Ray Astin reportedly says “It is generally assumed that the professional investors have the capacity to make prudent investing decisions and can look after themselves,”
Market players have argued that it will be unfair to compel institutional investors to contribute to the ICF pool while they do not expect to get any compensation for losses incurred. Mr Astin said contribution is guided by best practice recommendations by the International Organisation of Securities Commissions (IOSCO) of which the CMA is a member. The CMA uses allocations from new product listing charges and fees received from trading commissions in the secondary market to boost the ICF.
The ICF has had to pay out an estimated KSh302 million ($4 mln) to investors who lost money following the collapse of Nyaga Stockbrokers in March 2008, and the kitty is also likely to come in handy in paying claims to investors who also lost following the collapse of Discount Securities Stockbrokers early this year. About 90% of the estimated 27,879 Nyaga claimants were expected to receive full compensation for their losses, but some invested more than the maximum amount allowed
The CMA estimated that Nyaga could have gone under with over Sh800 million of investors’ funds, while there were allegations that Discount Securities had misappropriated Sh1.4 billion owed to the National Social Security Fund. The CMA’s financial statements for 2008 show the ICF had KSh227.5 million (June 2008), up from KSh165.2 mln (2007). “If you are investing a lot of money please take caution to know your broker and his lifestyle,” said the CMA chairman Micah Cheserem in September, according to reports.
Capital markets will be regulated by two sets of laws, the CMA Act, which deals with establishment of the regulatory body, and the Securities Industry Act addressing trading rules. The Central Depositories Act, which regulates custody of tradable securities such as shares and bonds, will also be amended.
The Nairobi Stock Exchange (www.nse.co.ke) has meanwhile introduced a mobile phone short message service (SMS) to receive complaints from all over Kenya. Complaints and questions can be sent to 8485, on both Safaricom and Zain mobile phone service at a cost of KSh10 per message.
“It is important to have an educated investor who understands the products traded and procedures governing transactions, said NSE chief executive, Peter Mwangi.
“Statistics show that 30% of the queries received at the Complaints Handling Unit (CHU) refer to a request for general information on processes, while a further 14% relate to questions on dividend issues by shareholders.”
Wycliffe Shamia, the market regulator for the Capital Markets Authority (CMA), reportedly praised the SMS complaints service and asked licensees and agents to provide clients with service charters. “Clients need to know beforehand what to expect from an agent or whoever they are dealing with, in order to make it clear what they offer, and avoid unnecessary delays and misunderstandings.”
The SMS service, which will also be used as a vehicle for investor education through the Complaints Handling Unit website (http://www.nsecomplaints.co.ke/chu) launched in August.
December 19th, 2009 by Tom Minney
It has been very difficult to get any news out of the African Stock Exchanges Association (www.africansea.org) conference in Abuja 2009 (Dec 2-4). As far as we can tell, no press releases were put out and neither ASEA secretariat nor the press liaison people from the Nigerian Stock Exchange have been replying to emails.
The following news extracts have been put together from a range of media sources:
West African Exchanges to integrate
Three West African stock exchanges signed an agreement to integrate their markets and to introduce common listing and trading rules, according to a joint statement issued at the ASEA conference. The bourses are Ghana SE, Nigeria SE and the Bourse Regionale des Valeurs Mobilieres, which serves Benin, Burkina Faso, Guinea Bissua, Ivory Coast, Mali, Niger, Senegal and Togo.
Ekow Afedzie, deputy managing director of the Ghana Stock Exchange, reportedly said they had agreed that stockbrokers who meet “certain standards” will acquire a “common passport” that will qualify them to trade on any of the exchanges in the region. Listing and trading rules will be harmonized and legislation will be changed where necessary to pave the way for the integration.
African Index
ASEA plans to create an African stock index in 2010, according to the GSE’s Afedzie. He reportedly said ten countries, including Ghana, Nigeria, Mauritius and Kenya, have signed up to participate. FTSE will compute the index and no decision has yet been taken on which companies will constitute it.
According to Bloomberg, African stock exchanges rank among the worst performers in 2009, although the MSCI Emerging-Markets Index surged 74%. Ghana’s All-Share Index lost 48%, more than any other of 90 primary indexes tracked by Bloomberg. The Nigerian Stock Exchange’s All-Share index is the second-worst performer, declining 36%, while Kenya’s Nairobi All-Share index is sixth-lowest, dropping 5.5%.
Integration and better regulation the answers
Integration of the 28 ASEA stock exchanges to make cross-listing and Africa wide issues easier will assist in capital raising and wooing back foreign investors who pulled out of Africa at the onset of the global crisis. Product diversification could be another tool to boost market liquidity.
Nigeria’s Vice President Goodluck Jonathan reportedly told the conference: “The timing of the crisis has given African capital markets the opportunity to learn from the mistakes of the more advanced markets in the developed world.” He urged the markets to work together to seek “protection from the consequences of the greed and regulatory failure in the more advanced markets”.
He said the crisis offers opportunities to players in African markets who are alert and able to adapt quickly to the changing environment. But he warned that market innovations must be based on economic fundamentals, warning that any irrational exuberance would always come back to haunt nations. Market development and growth must be inclusive and not limited to a select few people and the crisis has clearly demonstrated the critical role of the state in the financial intermediation process and in the maintenance of financial stability through appropriate regulation and supervision.
Acting Director-General of Nigeria’s Securities and Exchange Commission Daisy Ekineh called for retooling and re-orientation for market regulators and operators in the light of the several challenges facing them: “Such challenges as the shallowness of the market and the relatively unsophisticated investing African populace that is vulnerable to misguided investment advice and other malpractices must be addressed.”
Director-General of the Nigerian Stock Exchange Ndi Okereke-Onyiuke urged African Heads of State to make it mandatory for all African countries to establish commodities exchanges through which they can develop their commodities markets.
Zimbabwe Stock Exchange chief executive Mr Emmanuel Munyukwi was reported in local media as saying: “One thing that clearly came out was that there is still appetite for African markets and deliberations were centred on what we should do as the continent to sustain foreign investments.” He said the conference noted tight controls were one of the major impediments to the inflows of foreign funds on African markets.
Delegates examined the challenges faced by African securities exchanges in entrenching strong corporate governance, which was agreed to be more important than financial issues. The participants opted for regulations or compliance of upholding corporate governance ethics, in preference of self-regulation. A representative of the International Finance Corporation reportedly cited the Brazilian Stock Exchange as an example and urged African stock exchanges to adopt similar stringent listing requirements, disclosure mechanisms and high corporate governance standards. While disclosure and transparency were needed, the quality of information published was critical.
Pension funds could boost the growth of African markets and they could have a wider remit to invest in private equity and infrastructure. The size of pension funds could be increased through penetration into the informal sector, which enhances the contributory rate of pension funds.
December 17th, 2009 by Tom Minney
Another step has been taken towards the appointment of the new Director-General for Nigeria’s Securities and Exchange Commission. The Senate last week confirmed the appointment of Ms. Arunma Oteh, currently Vice President Corporate Management at the African Development Bank (AfDB – www.afdb.org) and focusing on the bank’s institutional development.
She has also been AfDB Treasurer (2001-6) and took overall responsibility for the Bank’s fund raising and investments in major international capital markets. Her previous job was Division Manager Investments and Trading Room (1997-2001) and Senior Investment Officer/Senior Capital Markets Officer (1993-7). She comes from Abia State.
The Senate Committee on Capital Market screened the recommendations of President Yar’Adua. The acting DG is Ms Daisy Ekineh.
Ms Oteh is reportedly of Nigerian/British nationality. Before joining AfDB in 1992, she worked in corporate finance, consulting, teaching and research for institutions such as Harvard Institute for International Development of USA and Centre Point Investments Ltd (Nigeria). Her qualifications include a Masters’ Degree in Business Administration from Harvard Business School and a 1st class BSc honours degree in Computer Science, from the University of Nigeria Nsukka. She has received a Harvard Fellowship Award and a National Merit Award.
She is on the Board of organizations including the Advisory Board of African investor and charity the International Financing Facility of Immunisation (IFFIM) set up by governments to fast-track immunization for achieving the Millennium Development Goals (MDGs).
It is not clear when she takes over the hot seat. Nigeria’s SEC is busy with investigations into capital market fraud and insider dealings as part of a grand clean up of the Nigerian financial sector. it does not have a website.
November 19th, 2009 by Tom Minney
The recently formed Egyptian Financial Supervisory Authority (www.efsa.gov.eg) is tightening regulation for listed companies and other financial market intermediaries. It is working with the Egyptian Stock Exchange (www.egyptse.com) to combat insider trading and improve disclosure, including urging better investor relations skills. Good regulation is critical to attracting local and foreign investment.
Penalties in recent months include “hefty fines” on companies and individuals for violations, according to an interview with EFSA Chairman Ziad Bahaa El-Din with newsagency Bloomberg. “Most of those cases get settled by people paying very hefty fines and that’s quite a severe punishment. In the longer term what I would like to do is to improve the structure of the market and of regulation.”
Bloomberg adds that the Egyptian SE suspended trading in 26 stocks last month to understand why shares rose as much as three times without any apparent justification. It says Egypt’s EGX70 Index (small- and medium-sized companies) climbed 59% this year and then fell after the suspensions. The benchmark EGX30 Index has soared 46% in 2009..
The EFSA started operations on 1 July 2009 and replaces the Egyptian Insurance Supervisory Authority, the Capital Market Authority, and the Mortgage Finance Authority. According to its website, it is “responsible for the supervision of non-bank financial markets and instruments, including the Capital Market, the Exchange, all activities related to Insurance Services, Mortgage Finance, Financial Leasing, Factoring and Securitization. The objective is to ensure market stability as well as to regulate the concerned activities, and maximize their competitiveness to attract more local and foreign investments”.
According to Bloomberg, the EFSA suspended Cairo-based Beltone Arabia, part of investment bank Beltone Financial, for 30 days in August for unspecified violations. Beltone Securities had to deposit 10 million Egyptian pounds ($1.8 million) in the EFSA’s Investor Protection Fund for a year. The regulator also suspended Cairo brokerage firm Al-Amal for 30 days in August but did not disclose details. The ESE asked the suspended companies to report future plans and trading later started again in some 17 counters.
Bahaa El-Din was reported as saying the action “seems to have improved the level of disclosure. It’s also sending a message to those that have been concerned from time to time about insider trading and manipulation that the exchange and the regulatory body are taking it seriously.”
He added that some disclosure problems may not be criminal in intent, but occur because of “bad reporting” on behalf of the companies. Companies should give their investor relations officers more training.
Penalties for insider trading include fines and prison. EFSA recently changed the definition of insiders to define more accurately who are insiders, i.e. not just relying on family relationships but pointing to people who may have insider information because of their jobs. Insiders may not trade the stock 15 days before and three days after material news is announced.
November 1st, 2009 by Tom Minney
From 9 November, Nigeria’s Securities and Exchange Commission is to call stockbrokers and other market participants before its Administrative Proceedings Committee (APC). This is part of joint investigations into the financial sector, which have already led to the firing of chief executives and top management of 8 banks for recklessness and lack of governance, and a Naira 620 billion (US$4.1 bln) bailout programme.
The SEC is to “invite some capital market operators to its APC hearing, to explain their roles in unwholesome practices in the market”, according to SEC’s Head of Media, Lanre Oloyi. “At the end of the hearing, the Commission would impose appropriate sanctions on erring operators found to have engaged in acts that have brought disrepute and erosion of investors’ confidence to the capital market.”
The hearings follow a report submitted by SEC investigators into transactions including those of the bailed out banks. The SEC, the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) formed a joint investigating team.
Troubled banks include Oceanic Bank International, Afribank Nigeria, Union Bank of Nigeria, Finbank and Intercontinental Bank, bailed out with N420 billion, after their executive management teams were sacked on 14 August. The non-performing loans book has been found to be more than the initial N747 billion. Chief executives were also replaced on 2 October at Bank PHB, Spring Bank and Equatorial Trust Bank and they received a N200 billion injection. Unity Bank and Wema Bank were ordered to recapitalize by June 2010.
The CBN released the list of debtors. These included capital market operators, many accused of using borrowed funds to manipulate share prices on behalf of the various banks, including borrowing to buy up the banks’ shares, ensuring steady price appreciation. Peter Ololo, chief executive of Falcon Securities Ltd is alleged to owe the five banks about N88 bln and Bank PHB N201.266 bln. Banks also used their capital market subsidiaries to borrow money, include Platinum Capital (owing N11 bln), PHB Assets Management (N6.5 bln), Wema Securities & Finance (N6.1 bln) and Wema Assets Management, (N8.1 bln).
The equity price crash since March 2008 has led to huge non-performing loans. The arbitrary pricing of equities that resulted from the manipulation disturbed investors and wrecked confidence, compounding Nigeria’s crash.
Based on reports by This Day, Daily Independent and Daily Champion newspapers.
October 12th, 2009 by Tom Minney
A bill to regulate the capital markets and collective investment schemes was tabled in the Rwandan Parliament last week. According to New Times newspaper, Trade and Commerce Minister Monique Nsanzabaganwa introduced the bill on 7 October.
She said a law is necessary before local companies begin full scale trading on the Rwanda securities exchange. Only companies that have embraced minimum corporate governance standards shall be allowed to be listed for trading and the law would create more investor confidence.
Rwanda currently operates as an Over-The-Counter (unregulated) market and the only share listed for trading is Kenya Commercial Bank shares, dual-listed with Nairobi and Dar Es Salaam stock exchanges and the Uganda Securities Exchange. Bonds are traded on a Rwanda bond market. However, the government plans to sell shares in some state-owned companies through the future Rwanda Stock Exchange.
The bill also proposes a Capital Markets Authority to replace the current Capital Markets Advisory Council (www.cmac.org.rw), which was established in 2007 and, in turn, set up the market. The future CMA would regulate securities exchanges and collective investment schemes, including mutual funds, unit trusts and contractual savings schemes.
Rwanda is already a member of the East African Securities Regulatory Authority. It is seeking to join the International Organization for Securities Commissions (www.iosco.org).
October 8th, 2009 by Tom Minney
Kenya’s Capital Markets Authority (www.cma.or.ke) is giving limited refunds to people who lost money with stockbroker Nyagah Securities which collapsed in 2008. It has also set up a telephone hotline for people to report suspect dealings by stockbrokers or investment banks.
Finance Minister Uhuru Kenyatta was reported in local press and on Reuters last month as saying the total payout will be KSh302 million (US$4.0 million) to over 25,000 shareholders who registered claims by August. It is the first payout from the Investor Compensation Funds (ICF), where payouts are limited to KSh50,000 ($666) per investor.
According to Kenya’s Daily Nation newspaper, remaining investors would only get full compensation if the Government gains KSh120 mln by selling the assets of top management of the failed stockbroker. The CMA is reported to have instituted judicial proceedings to sell property of Nyagah managing director Patrick Gakiavih.
However the newspaper also reported that a forensic report by PricewaterhouseCoopers suggested losses were KSh1.3 bln and criticized the role of the CMA for failing to act earlier on information.
More recently the CMA published hotline numbers in the local press to help people reach its anti-fraud unit. Chairman Micah Cheserem is reported as saying the authority is seeking to reduce fraud and protect investors by getting information promptly.
Two other stockbrokers – Francis Thuo and Discount Securities Limited –also folded in the last three years and the resulting lack of confidence saw Nairobi Stock Exchange (www.nse.co.ke) share prices sink fast. The CMA has been tightening reporting and compliance requirements in a bid to restore health in the capital market.
The compensation move may bring hope to investors who lost funds with Discount Securities Ltd, which is also under receivership.