November 29, 2010 4334 VIEWS



"It is not because things are difficult that we do not dare, it is because we do not dare that they are difficult."- Seneca
Dateline was November 24, 2010, Abuja and the first commentary was from MBC Newscorp followed by an article titled SEC’s Unreported Money – He who comes to equity...  and soon the media did what it does best. Enter SEC’s response ( on November 28, 2010 and now we are officially in the ‘silly’ season.
The SEC Head of Media must have found the cliché, not its full meaning irresistible, for, calumny is a word used to describe defamation, vilification, slander, and at the extreme, libel.  To describe the engagement of others in a free market environment as a ‘campaign of calumny’ is to accuse people of “communicating or cause to be communicated, statement(s) that makes a claim, expressly stated or implied to be factual, that may give an individual, business, product, group, government, or nation a negative image.”
This best-practice gap is unfortunate as the descriptive narration of proceedings at a public hearing cannot and must not be considered to be ‘a campaign’ much less a ‘calumny or attempt to slander’ communication. Where specific platforms got things wrong, the media managers at the commission should engage them directly or issue records of proceedings to highlight and correct the gaps.
While it would appear that the general import of SEC’s press release relate to concerns over news reporting of developments in the ‘political market’ that appears to distort realities amongst stakeholders; its resort to a ‘siege mentality’ on a subject of its management strategy is not excusable, and almost laughable. The concerns are possibly true but no sympathy will be extended its way because its own modus operandi is predicated on this approach.
The “Regulator-by-the-media” approach has manifested its side effects; and just at a time when the twin issues of SEC finances and legislative regulatory oversight hearings raised the ante. The import of the release therefore appears two-fold: assure the market and constituency that all is well and to pave the way for its select group of public commentators who run more with headlines than content.
It appears that the SEC are seeing bogeymen were none exist.
Nobody is trying to defame the institution/individuals or prevent them from carrying out their core mandate and the newly added job description – the NSE Reform. Every well meaning stakeholder is all for reforms that will improve transparency, efficiency and development at the NSE. Yet, the SEC has to be subject to the same level of scrutiny too (if not higher). Our recent history of these institutions suggest that the difference between them is no more than that between six and half a dozen - very little to choose in between; and recent actions have rather than encourage optimism, raised concerns where their ought not to be one. Not therefore operating a dictatorship, it is imperative that as independent analysts, we maintain continued vigilance to ensure that there are checks and balances in the administration and regulation of the market.
The recent release of the financials for the period ended December 31, 2009 on Sunday November 28, 2010 offer relief but only goes to confirm that had certain persons not stood up to make such demands, the commission may never have made such information public. This is at the very core of the interest in the SEC’s affairs, an interest that predates the current management.
It is instructive to note that the press release had created the impression that such a report had always been online. This is not the case as the web post is dated November 27, 2010. Work is currently ongoing with regards to the recently released 2009 SEC financials (
Follow Up on SEC Finances  
We have had to conduct a review of the proceedings at the NASS public hearing last week and hereby offer a few commentaries:
1.    The Securities and Exchange Commission (SEC) ought to have recorded more revenues in the period 2006 to 2009, based on information sourced from its own website and communications over time.
2.    It appears improbable for The Exchange to have earned more than the Commission from the market during the period, given the Commission’s wider revenue base and higher charge on market participants.
3.    In February 2007, the Commission actually expressed displeasure when based on representations from market stakeholders The Exchange reluctantly effected a downward review of its fees. See SEC letter of 13th February 2007. This is a major source of difference between earnings by The Exchange and SEC during the period, as SEC did not adjust its rate downward until sometime in 2008.
4.    The revenues of SEC, relative to the revenues of The Exchange, should be thus:
a.    The NSE’s income from the Primary Market and Secondary Market + Income from Private Placement + Income from Mergers and Acquisitions executed by unlisted companies.
b.    Consequently, during the period under reference, it is expected that SEC would always earn more than The NSE from the operations of the Nigerian capital market.
5.    In specific terms, SEC’s principal revenue sources include:
a.    Registrations fees (for securities and operators)
b.    Application Fees (for new issues)
c.    Transaction Fee (for transactions on The Stock Exchange)
d.    Fines and APC Appearance Fee
6.    Curiously, the Annual Report of the Commission is not publicly available (only 2009 was posted on its site yesterday). This must be a deliberate corporate policy because on its website, the Commission purported to publish its 2008 Annual Report and Accounts but ended up with only the Report, without the Accounts. Please see, and this was the only attempt by the Commission to publish its accounts till date. 
7.    Working with figures published by the Commission on its website, it could be seen that in addition to processing and registering new issues that passed through The NSE, SEC considered private placements (for which it earned fees) and registered bonus issues at the rate of 1% of consideration.
8.    It must be observed that there is also a lot of inconsistency in the published figures of transactions processed by the Commission and on which it earned income, raising questions of integrity of figures emanating from the Commission. For instance, the tables below were published by the Commission at different times in respect of activities in the capital market, yet the figures are contradictory for the periods they covered.
Table 2 is a summary of transactions registered by SEC in 2008, yet the total value does not agree with the figure reported for the period in Table 1. Also, it is not possible that The Stock Exchange processed more applications than the Commission, given that an issue would not open without prior SEC registration.
9.    The table below explains the basis of the revenue projected for SEC in the period 2006 to 2009:
NB:In May 2007, the fee payable to SEC on transactions on The Nigerian Stock Exchange was adjusted downward from 1% to 0.6% of consideration. Subsequently in September 2008, the fee was further adjusted downward by 50% to 0.3%. Also, there was adjustment in Primary Market fee, which has been reflected in the projected income above. Further note that the projected income understated the actual income of the Commission, given that the Private Placement figures for 2006 and 2009 were not available, and the computation excluded incomes from other sources as earlier enumerated.
Closing Remarks:
So, what do you think? Does this resemble a campaign of calumny or demand for accountability and integrity of data?
At this juncture, it might help to remind the communications managers at/of the SEC/NSE to take time to reflect on why the public/media that was ‘on board’ now appear to be asking questions?
At best, it is a fact that stakeholders would like to move beyond talk about the Ex-NSE DG, scoops about the Council of the NSE and who becomes the DG, hold the SEC/NSE accountable for actions in the market that concerns securities trading and wealth creation, treat with healthy suspicion the new found interest of legislators in the market and put to bed the ‘rumour mill and distrust of motives’ – all things which the recourse to sensationalism of market issues have created. The past is steeped in too much conflicts and mutual distrust for which we need to get away from, yet for all these expectations, each new day continues to deliver a rehash of the same cycle of negativity. Is there nothing new and positive that can come after such a raised expectation?
Thus, taking a second look at the internal workings of the SEC itself – asking questions about the foundational gaps in reporting structure, operational approach, processes and its people; appears to be a natural response to challenge the system – not an attack; especially when it has to do with facts and data. Is it too much to demand for a higher standard of accountability and efficiency from a public institution?
Prepared by Proshare Project Research Team and Dr. Ibrahim Bello, Proshare Canada. All opinions on this page/site constitute our best estimate judgement as of this date and are subject to change without notice. Investors should see the content of this page as one of the factors to consider in making their investment decision. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All enquiries should be directed to
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