Code of Conduct for Capital Market Operators and their Employees
The Nigerian Capital market has experienced considerable growth and development in recent years. The number and range of Issuing Houses and Stockbrokers have expanded significantly. Similarly, there has been considerable growth in the number of other market operators such as Registrars, Trustees and Financial Advisers. A natural consequence of this growth has been the increase complexity of transactions. In such an environment, there is a paramount need to ensure discipline enhance professionalism, integrity and protect the interest of clients of market operators and indeed the reputation of their institutions. It should be borne in mind that the entire institution and the securities market. The following code of ethics is merely a guide as each institution is free to add to it, in line with observed practices.
SEC or Commission – Securities and Exchange Commission;
APC - Administrative Proceedings Committee of SEC;
Operators/Registered– All capital market operators and Individuals registered with Institution the Securities and Exchange Commission
SRO - Self-Regulatory Organisation;
HIS - Refers to both genders;
Director - Refers to Executive or non-executive directors.
All operators and their employees are bound by this code. When in doubt about any of the provisions of this code, clarification should be sought from the S.E.C
Persons having business interest with these institutions such as auditors, accountants, lawyers etc., who in the course of such business relationship might have access to price-sensitive, non-public information about clients of registered institutions, must enter into an undertaking (oath of secrecy) to keep such information confidential.
It is obligatory for employees to bring to the notice of management, suspected breaches of the securities laws or other unethical behaviour by other employees. Such reports should be treated in strict confidence. In essence, the identity of the reporting officer must under no circumstance be disclosed to other member of staff.
1. Code of Conduct for Capital Market Operators (Institutions) All Operators
I. Shall strictly abide, at all times, by all existing Securities Laws, Rules and Regulations made there under;
II. Shall ensure that any dispute among themselves will initially be referred to the relevant SRO or other organization established for the resolution of dispute between members. If this body is not able to settle a dispute to the satisfaction of the parties involved, such dispute will then be referred to the Administrative Proceedings Committee of SEC. Under normal circumstances, it is only where the APC is also unable to resolve such dispute to the dispute to the satisfaction of all the parties involved that a court action can be instituted in respect of such dispute;
III. shall not engage in any act that would adversely affect the general investing public’s image of, and confidence in, the capital market;
IV. shall ensure that their employees act in a manner that is consistent with the best of interest of their clients. To this end, operators shall preserve the confidentiality of all information
V. shall operate securities trading accounts strictly according to clients’ instructions;
VI. shall segregate clients’ monies and keep such funds in a separate account;
VII. shall ensure that employees maintain their securities trading accounts with their employers, where practicable, or provide full disclosure of such accounts and all activities therein to their employer;
VIII. shall monitor the transactions in securities by all directors, employees and their spouses, dependent children and relatives;
IX. shall have a duty to report in writing to S.E.C any actual or suspected breach or infringement or non-compliance with any of the regulations of the SEC. Operators will immediately notify the Commission in writing of any other events or matters that the Commission may from time to time specify;
X. shall not recommend or connive in the employment of any person who has been employed by another operator and has had his employment terminated or who was dismissed for reasons relating to fraud, dishonesty or any such dishonorable behaviour, or who has been convicted of an offence involving same;
XI. shall communicate to the S.E.C and SROs the names of staff dismissed for any fraudulent act, dishonesty, misbehaviour or, any other acts of misconduct;
XII. may pay or be paid for services provided free of charge with respect to financial products and services. For example, research material may be provided to investment companies in return for commission income from securities trading orders. However, in such cases the volume/amount of financial products and services must be reasonable and commensurate with the services provided; and
XIII. shall not discriminate or give preferential treatment to any customer, including members of the general public, in the conduct of their professional business.
2. Code of Conduct for Employees of Capital Market Institution (Operators)
An employee shall
I. at all times conduct himself with integrity and display high level of professionalism expected of the industry;
II. not engage in any act that would adversely affect the general investing public’s image of, and confidence in, the capital market;
III. not discriminate or give preferential treatment to any client, in the conduct of his professional business;
IV. comply with all existing securities laws, rules and regulations thereunder.
Disclosure of Information by Employees
I. To prevent possible conflict of interest, insider dealings and impropriety, an employee must disclose to his employer, transaction in securities by himself, spouse, dependent children and relatives;
II. Periodically, (as may be determined by the institution) employees must submit to management statement of their personal securities investment portfolio in the securities market;
III. All new employees must at the time of assumption of duty lodge details of their holdings in long term securities of government and public companies with their employees;
IV. Although employees may be allowed to invest in securities of private companies, such investment shall be disclosed to the employer when the affected company is about going public.
Avoidance of Conflict of Interest
An employee shall ensure that his personal interest does not at any time conflict with his duty to his employer’s clients. In this regard, all personal interests beneficial or not, in any company assigned to him must be disclosed to his employer. He must also ensure that his advice to clients or his employer on investment decision on behalf of clients is not be concluded by any conflict of interest which might exist. In other words, in the performance of his duty, his client’s best interest must be given priority over his personal interest.
An employee shall not engage in any activity which might directly or indirectly influence his judgment prior to or during a business transaction.
Trading with Insider Information
An employee shall not trade in securities either for himself or on behalf of others based on non-public price-sensitive information. Such information shall under no circumstance be disclosed to a third party for the purpose of trading. Employees of Brokers/Dealer firms must pay particular attention to substantial orders from clients in companies in which such clients are directors, employees, or have business relationship e.g. Auditors, reporting, accountants and lawyers. Furthermore, all orders which are out of tune with established trading pattern should be investigated.
All suspected cases of insider dealings including those involving employees should be promptly brought to the notice of management which should in turn lodge a formal report with the S.E.C for necessary action.
An employee must not on his own or in connivance with others engage in activities aimed at manipulating the market. Unverified information which might impact on the market must not be circulated or form the basis of advice to clients.
An employment shall not recommend or connive in the employment of any person who has been employed by another operator and has had his employment terminated or who was dismissed for reasons relating to fraud, dishonesty or any such dishonourable behaviour, or who has been convicted of any offence involving same.
An employee shall uphold the confidentiality of clients’ accounts. No information in a clients’ account must therefore be disclosed to other employees who have no bona-fide reasons to know.
Deposits/Credit Arrangements and Gifts
An employee shall:-
Duty of Employer
An employee shall not, except with approval of his employer, engage in any activity whether or not for compensation, which is in direct competition with his employer.
3. Code of Conduct Peculiar to Employees of Broker/Dealer Firms
An employee of a broker/dealer firm shall:-
An employee of a broker/dealer firm shall not:-
4. Code of Ethics Peculiar to Employees of Issuing Houses
Once an issue is before an issuing house for sponsorship, an employee with unpublished price-sensitive information shall not:
An employee shall not:-
An employee shall:-
5. Code of Ethics for Investment Advisers/Portfolio Mangers
An investment adviser shall:
6. Code of Ethics Peculiar to Employees of Registrars’ departments
An employee of a Registrars’ Department shall:
Sanction for Violations
1. A registered capital market operator who shall be found guilty under a disciplinary proceeding of a registered SRO or of S.E.C. for a violation of any provision of this code of conduct shall be suspended or expelled from the capital market and may in addition be liable for any other penalty prescribed by law.
2. (a) Any violation of this code of conduct by a member of an SRO or registered individual or employee of a market operator shal be cause for appropriate disciplinary and/or remedial action by the market perator or for disqualification from membership of an SRO which action may be in addition to any other penalty prescribed by law.
(b) Remedial action by a market operator may include:
I. Changes in assigned duties;
II. Divestment by sponsored individual or an employee of his conflicting interests;
III. Disciplinary action; or
IV. Disqualification for a particular assignment.
(c) Any disciplinary or remedial action taken by a registered market operator shall be reported in writing to the appropriate SRO and to the Commission.
(d) Any suspension or expulsion of a member by an SRO for violation of this code shall be notified and communicated in writing to the Commission.
Securities & Exchange Commission