The Nation Newspaper

Tag: Investors’ protection

  • Global regulators restate commitments to investor’s protection

    Global capital market regulators under the auspices of the International Organisation of Securities Commissions (IOSCO) will this week organise several activities aimed at enhancing investors’ education and protection.

    IOSCO-the global body of securities’ regulators, on Monday launched a week-long activities to mark the second annual World Investor Week (WIW), following the success of the maiden edition last year. The maiden edition attracted more than 1000 financial organisations, which showcased their initiatives for promoting investor education and protection across the globe.

    All through this week, securities regulators, stock exchanges, international organisations, investor associations and other stakeholders from more than 80 countries are offering an array of activities to increase investor education and protection awareness in their jurisdictions.

    Activities range from the organisation of workshops and conferences to investor education campaigns, games and contests, and many of these events will continue throughout the rest of the year.

    In Japan, where financial markets are the first in the world to open every morning, the Financial Services Agency on Monday inaugurated WIW with a formal ceremony at its headquarters in Tokyo.

    Chairman, International Organisation of Securities Commissions (IOSCO), Ashley Alder, said the global scale of World Investor Week and the encouraging collaboration between IOSCO members and their stakeholders in conducting these activities demonstrated IOSCO’s strong commitment to investor education and protection.

    IOSCO Secretary General, Paul Andrews said the global body welcomes this second edition of World Investor Week as evidence that the annual event is gaining the momentum it needs to protect investors and prepare them for dealing with the challenges of increasingly interconnected and digitalised capital markets.

    In addition to highlighting the importance of investor education and protection, a key objective of the WIW is to foster learning opportunities for investors – a particularly important goal in the current context of rapid technological innovation and increasingly interconnected financial markets.

    This year´s WIW not only seeks to promote the basics of smart investing, but to ensure that retail investors understand the risks associated with initial coin offerings, crypto-assets and other online investments.

    In Brazil, participants, this week, are using live sessions on social media to explain the rudiments of sound investing to the young; French groups are launching a radio campaign to spread the WIW´s key messages on investing wisely;  US participants are holding an educational summit on investing for retirement; in Romania, students are debating  financial issues in a public forum; Hong Kong stakeholders are staging an investor seminar titled: Changing landscape, changing risks.

    Undergraduates in Pakistan are also competing in an inter-university stock trading contest; in Kazakhstan, a financial literacy roadshow is focusing on green and Islamic finance; while Zambian entities are offering awareness programmes at schools and universities, workplaces and public forums, to name just a few of the many activities that are taking place in over 80 countries this week.

    International groups are also participating in WIW, which is endorsed by the Argentine G20 Presidency. The Financial Planning Standards Board (FPSB), together with its 26-member organisations representing 175,000 certified financial planners (CFPs), will celebrate World Financial Planning Day today to complement the activities of WIW.

    FPSB´s activities focus on debt management, home ownership, retirement and investment planning, to promote financial literacy further and encourage consumers to assume more responsibility for their finances.

    The International Forum For Investor Education (IFIE) offers a variety of activities in support of WIW that help build capacity at both global and regional levels. The IFIE Americas Caribbean Working Group—representing 16 jurisdictions across the Caribbean—has launched a Caribbean-wide video initiative to present Voices of the Caribbean: Empowering the Caribbean towards Financial Independence and Resilience.

  • Regulators renew commitment to investors’ protection

    Capital market regulators across the world rounded off their annual conference in Budapest, Hungary with a renewed commitment to protecting investors and ensuring fair and transparent markets amid concerns over the growing influence of digital coins and financial technologies (fintech).

    Members of the International Organisation of Securities Commissions (IOSCO) met last week for their 43rd Annual Conference to discuss issues facing securities market regulators and supervisors today. IOSCO is the global body of securities regulators and its members regulate more than 95 per cent of the world’s securities markets in more than 115 jurisdictions.

    In their meetings, the IOSCO Board, IOSCO´s Growth and Emerging Markets (GEM) Committee, the four Regional Committees and the Affiliate Members Consultative Committee (AMCC) advanced their initiatives aimed at protecting investors, ensuring fair, efficient and transparent markets, and mitigating systemic risk.

    The public sessions of the conference focussed on four key issues, including sale of unsuitable products to retail investors, challenges of Fintech and digitalisation, shift from active to passively managed collective investment schemes, and small and medium enterprises (SME) access to funding through capital markets.

    The conference, hosted by Magyar Nemzeti Bank, the Hungarian Central Bank, attracted some 650 securities regulators, industry representatives and other financial market participants from around the world.

    The IOSCO board discussed how best to approach the continuing growth of Initial Coin Offerings (ICOs) and agreed to develop a support framework to assist members as they consider how to address the domestic and cross-border issues stemming from coin offerings that could impact investor or consumer protection.

    The board also made progress on its work to protect retail investors from the risks stemming from the offer of binary options and other OTC leveraged products, particularly by unlicensed firms on a cross-border basis. Members discussed enforcement practices found to be effective in mitigating the risks of these products to unsophisticated retail investors.

    In addition, the board reviewed proposed measures to help members regulate retail OTC leveraged products, including a tool-kit of policy measures with guidance for members to regulate the offer and sale of these products by intermediaries; and a tool-kit of investor education material with guidance about the products and the firms that sell them.

     

     

    In the area of asset management, the IOSCO board discussed exchange traded funds and reviewed the progress of IOSCO’s efforts to complete its work on measuring leverage in investments funds.

    In the area of standards implementation, the board supported a proposal to assess the consistency in implementation by various IOSCO members of money market fund (MMF) reforms against IOSCO´s 2012 recommendations for MMFs.

    Members also  supported  a proposal for a third implementation review of the Principles for the Regulation and Supervision of Commodity Derivatives Markets. IOSCO issued the principles in 2011 to ensure a globally consistent approach to oversight that aims to improve price transparency and deter market manipulation in the commodity derivatives markets.

    Board members agreed to establish an information-sharing network among IOSCO members to gain insight into the issues around sustainability, including the details of issuer disclosure and its relevance to investor decision making.

    The board agreed to launch a Fintech Network to facilitate the sharing of information, knowledge, and experiences related to FinTech among IOSCO members. The Fintech Network also will serve as a forum for collaborative work on regulatory issues, trends, and emerging risks.

    Chairman, IOSCO Board, Ashley Alder, noted that IOSCO members have taken important steps to advance IOSCO´s priority work in focus areas such as market resilience, financial technologies, and information sharing among securities market regulators.

    He pointed out that the steps being taken will address some of the biggest risks to investor protection, market integrity and financial stability.

  • SEC votes N5b for investors’ protection

    SEC votes N5b for investors’ protection

    Securities and Exchange Commission (SEC) has voted N5 billion as take-off grant for the National Investors Protection Fund (NIPF). SEC, Nigeria’s apex capital market regulator, last week launched the board of NIPF, flagging off the special purpose vehicle that will compensate investors for pecuniary losses arising from the insolvency, bankruptcy or negligence of sundry capital market operators that are not members of a registered stock exchange.

    Director General, Securities and Exchange Commission (SEC), Mounir Gwarzo, disclosed this  at the weekend in Lagos.

    He said the launch of the NIPF has placed Nigeria within the elite group of countries with specialised compensation scheme for investors, noting that investors would now have a window to redress losses that arise non-investment risks.

    “While dozens of jurisdictions have functional investor protection funds run mainly by Exchanges and their dealing members, Nigeria is now among only a few countries to have a National Investor Protection Fund, to compensate investors for pecuniary losses arising from the insolvency, bankruptcy or negligence of non-broker/dealer capital market operators,” Gwarzo noted.

    He said SEC has played its part by providing the take-off grant for the initial operation of the NIPF, adding that the entire capital market community would now have to come together to discuss details of how to contribute to continue funding for this critical market vehicle.

    He assured that the commission would ensure that the fund is used to compensate investors in accordance with the rules guiding its operation.

    Gwarzo said the verification committee will quickly commence its assignment by scrutinising the already processed compensation claims so that the first set of beneficiaries from the Fund may emerge soon.

    He pointed out that since the 2008 financial crisis in which the Nigerian stock market lost about 70 per cent of its value, investor confidence had been eroded, creating apathy that still impacts the state of the market.

    He noted that SEC has a dual mandate of regulating and developing the capital market and as such has put in place several reform measures to restore investor confidence and attract investors back to the market, with the NIPF as part of the investors’ protection mechanisms.

    The inauguration of the board of the NIPF completed a cycle of protection for investors that suffered losses due to inactions of capital market operators. The Nigerian Stock Exchange (NSE) had earlier launched an Investor Protection Fund (IPF) that covers losses due to inactions or bankruptcy of its dealing members-stockbrokers and dealers.

    Under the rules of the NIPF, beneficiaries would include investors who suffer pecuniary loss due to the insolvency, bankruptcy or negligence of a capital market operator and defalcation committed by a capital market operator or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received or deemed received by the capital market operator in the course of its business as a capital market.

    The NIPF will cover the entire capital market activities under the regulation of SEC, a broader scope than the earlier IPF of the NSE, which covers only the operations of members of the NSE. The NIPF will apply only to defalcations by insolvent or bankrupt capital market operators not dealing members of Securities Exchange or Capital Trade Points. In other words, the NIPF will be for the purpose of compensating investors whose losses are not covered under the IPFs administered by Securities Exchanges and Capital Trade Points.

    Going forward, the NIPF will subsequently generate funds through grants, subventions, donations and annual contributions to be made by all capital market operators not subject to contribute to the IPF of Securities Exchanges and Capital Trade Points. The board of the NIPF is also empowered to obtain loans, subject to approval of SEC. Also, the NIPF can generate funding through assets, properties or cash that shall be realised from liquidated operators after compensation to investors and proceeds from investment of its resources.

    Under the NIPF, investors can only receive a maximum compensation of N200, 000. The maximum amount claimable under the NIPF is 50 per cent of the N400, 000 limit stipulated by the Investors Protection Fund (IPF) of the NSE.

    According to the rules, the maximum amount payable to an investor who has suffered loss shall be N200, 000 or its equivalent in form of shares and units of bonds. However, where the amount of loss is lesser, the investor shall be paid the calculated amount of loss.

    Beside the variance in the maximum compensation, the SEC’s NIPF also differs from the NSE’s IPF in the area of recognition of previous infractions and losses. Where the NSE’s IPF took on backlog of complaints from the NSE, the SEC’s NIPF will not recognise any claim prior to establishment of the NIPF.

    “Any claim prior to the incorporation of the Fund shall not be covered by the Fund,” the rules stated.

    However, the amount of compensation to be paid by the NIPF may be reviewed from time to time as approved by the board of the Fund.

    Besides, the rules underscored that “the Fund is not under any obligation to pay compensation to an investor”

    However, any client who participated in the wrongful act of the capital market operator shall not benefit from the Fund while the NIPF will also not apply to losses arising from transactions not regulated by the Commission.

     

     

  • Investors’ protection: SEC caps compensation at N200,000

    Investors can only receive a maximum compensation of N200,000 from the National Investor Protection Fund (NIPF) being established by the Securities and Exchange Commission (SEC). The maximum amount claimable under the NIPF is 50 per cent of the N400,000 limit stipulated by the Investors Protection Fund (IPF) of the Nigerian Stock Exchange (NSE).

    A document on the rules and regulations of the NIPF approved by the board of SEC indicates that investors that suffer any loss due to operations of capital market operators.

    According to the rules, the maximum amount payable to an investor who has suffered loss shall be N200, 000 or its equivalent in form of shares and units of bonds. However, where the amount of loss is lesser, the investor shall be paid the calculated amount of loss.

    Beside the variance in the maximum compensation, the SEC’s NIPF also differs from the NSE’s IPF in the area of recognition of previous infractions and losses. Where the NSE’s IPF took on backlog of complaints from the NSE, the SEC’s NIPF will not recognize any claim prior to establishment of the NIPF.

    “Any claim prior to the incorporation of the Fund shall not be covered by the Fund,” the rules stated.

    However, the amount of compensation to be paid by the NIPF may be reviewed from time to time as approved by the board of the Fund.

    Besides, the rules underscored that “the Fund is not under any obligation to pay compensation to an investor”

    The rules indicated that beneficiaries of the NIPF would be investors who suffer pecuniary loss due to the insolvency, bankruptcy or negligence of a capital market operator and defalcation committed by a capital market operator or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received or deemed received by the capital market operator in the course of its business as a capital market.

    The NIPF will cover the entire capital market activities under the regulation of SEC, a broader scope than the earlier IPF of the NSE, which covers only the operations of members of the NSE.

    SEC stated that the NIPF was in furtherance of the Commission’s mandate to regulate and develop the Nigerian capital market and in particular, its duty to ensure the protection of investors in the capital market.

    The NIPF will apply only to defalcations by insolvent or bankrupt capital market operators not dealing members of Securities Exchange or Capital Trade Points. In other words, the NIPF will be for the purpose of compensating investors whose losses are not covered under the IPFs administered by Securities Exchanges and Capital Trade Points.

    SEC is expected to provide the initial take-off grant for the NIPF. It will subsequently generate funds through grants, subventions, donations and annual contributions to be made by all capital market operators not subject to contribute to the IPF of Securities Exchanges and Capital Trade Points. The board of the NIPF is also empowered to obtain loans, subject to approval of SEC.

    Also, the NIPF can generate funding through assets, properties or cash that shall be realized from liquidated operators after compensation to investors and proceeds from investment of its resources.

    However, any client who participated in the wrongful act of the capital market operator shall not benefit from the Fund while the NIPF will also not apply to losses arising from transactions not regulated by the Commission.

    According to the rules, an investor must submit application for compensation within 12 months after the investor became aware or ought reasonably to have become aware of the status of the investments. The investor is also expected to back up his claims with relevant evidence.