African Capital Markets News » Regulators

Nigeria’s SEC publishes new rules

Tom Minney — Wed, 28 Apr 2010 12:57:33 +0000

Nigeria’s Securities and Exchange Commission (SEC) has new rules, according to local press. The new rules, signed by Director General Ms Arunma Oteh, became effective from 1 April and reportedly cover:
• Appointment of directors of market operators,
• Bond issues: rules such as conditions to approve Initial Public Offer and listing by introduction, conditions for approval of offers and handling of certificates, rules on corporate and government (state and local) bonds, and cuts in SEC fees for the registration of bond issuance, as well as
• Money market fund rules
• Rules which regulate mergers, takeovers and acquisitions and can order the breakup of a company.
• Set Primary Market registration fee at 0.15%.
The SEC has set deadlines of 30 April for a wide range of companies to publish results. Public companies shall publish “signed” quarterly balance sheet, income statement and cash flow statements in at least one National daily newspaper, while the accounting policies, notes and other relevant information shall be posted on the company’s website which address shall be disclosed in the newspaper publication.
The SEC has directed 143 companies and others not listed, whose shares are quoted on the Nigerian Stock Exchange (NSE), to publish their audited or quarterly results on or before Friday, April 30, 2010. “Financial statements should therefore, be released in the format specified by SAS 30, IAS 34 and the SEC rule B4 (4), to the public, NSE and the commission at the same time.”
Any Company, the SEC warned, “that fails to file the report within the stipulated period would be penalised in line with the provisions of Section 65 of the Investment and Securities Act No. 29 of 2007.”
It reminds companies that such timely financial information serves as the basis on which the investing public takes timely investment and other decisions.
In line with this resolve, the SEC has invited company secretaries and financial controllers of quoted companies to a one-day meeting on 28 April “to address the lingering problem of non-rendition of quarterly and half yearly returns and the attendant penalties such actions attract.”

“Regulation stops SA from being centre for Africa’s mining finance”

Tom Minney — Fri, 09 Apr 2010 07:40:24 +0000

South Africa could be the centre of mining finance for Africa, according to Mick Davis, CEO of international mining company Xstrata (www.xstrata.com), as reported in the local Business Day (www.businessday.co.za) newspaper. However, he is reported to have told a business school audience that restrictions by the JSE Ltd stock exchange (www.jse.co.za) and remaining exchange controls made this almost impossible to achieve.
Africa contains some of the world’s richest untapped mineral deposits and could be the world’s next major copper- and cobalt-producing region. Mr Davis says that South Africa should allow free flow of funds in and out and scrap exchange controls completely if it wanted to attract foreign resources companies to the JSE.
Xstrata reportedly operates in 20 countries and is evaluating 20 new projects across the globe. It is listed in London and has 15% of its assets in South Africa, Mr Davis is described by the newspaper as “the maverick CEO who has built Xstrata into a major global resources player in just 8 years”.
According to the report, he said the commodities “super-cycle” was not over yet – but that if SA wanted to take full advantage this time, the government and mining industry had to work together to restore the mining industry’s competitiveness. He cited unstable transport and energy infrastructure, skills shortages and “constrained capacity” in regulatory bodies as factors that had prevented SA’s mining sector reaching its potential.
“The mining sector’s GDP (gross domestic product) contribution actually shrank by 1% during one of the greatest natural resource booms in history.”
The medium- term outlook for commodities remained very promising. Driving forces of the “secular change” in demand in recent years – industrialisation and urbanisation, particularly in China but also in India, Brazil and others – were still in place. However, the supply side remained fractured and the financial crisis has delayed many projects, making it more likely that the supply of certain commodities would fall significantly short of demand.
He also called for amendments to the regulations that prevent foreign-listed companies from enjoying full indexation on the JSE, saying without this there would be no liquidity in such companies’ shares, which would mean they would not be able to access capital in SA and so would not waste time or money listing on the JSE.
It is important for listed companies to be included in the FTSE/JSE indices so that funds that track the index are obliged to invest in their shares. Companies such as Anglo American, which moved its primary listing to London but retained a dual listing on the JSE, are included in the index. Newer entrants are not, such as British American Tobacco, which gained a secondary listing on the JSE in 2008. Xstrata has the fact that it cannot get indexed is a potential problem.
According to the newspaper, Mr Davis said major global players had operations across the globe and if there was uncertainty in one country about the regulatory, financial or political regime, investments would be diverted to another.
Security of energy supply was critical. Power utility Eskom should continue to be the major generator of power. However it was quicker and cheaper for resources companies to build their own generation capacity, all they needed was a credible price and the right regulation.

Zimbabwe SE seeks to restore IFRS compliance by listed companies

Tom Minney — Sat, 23 Jan 2010 17:49:17 +0000

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.

SA upgrades Companies Act and accounting standards

Tom Minney — Tue, 05 Jan 2010 09:12:11 +0000

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.

Botswana to upgrade rules for asset managers and advisers

Tom Minney — Tue, 05 Jan 2010 09:10:25 +0000

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.

Kenya seeks to change investor protection

Tom Minney — Sat, 19 Dec 2009 12:51:20 +0000

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.

African Stock Exchange views – news from ASEA 2009 in Abuja

Tom Minney — Sat, 19 Dec 2009 12:36:22 +0000

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.

New DG for Nigeria’s Regulator

Tom Minney — Thu, 17 Dec 2009 14:31:07 +0000

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.

Tighter regulation for Egyptian markets

Tom Minney — Thu, 19 Nov 2009 10:11:45 +0000

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.

Nigeria’s Securities and Exchange Commission calls in market operators

Tom Minney — Sun, 01 Nov 2009 19:09:23 +0000

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.