April 13, 2011
ASSOCIATION OF STOCK BROKING HOUSES OF NIGERIA
Securities and Exchange Commission
Plot 272 Samuel Adesujo Ademulegun Street
Central Business District
RE: DIRECTIVES TO THE COUNCIL OF NSE
Your recent directives to the Council of the Nigerian Stock Exchange to appoint your nominated candidates as public interest members to the council without any consultation with shareholders/members was discussed at the emergency meeting at Market Operators Committee and our conclusion was that the directive seem to be an overreach of the powers of SEC. The section 35(1) quoted as legal basis for the directives in our opinion has nothing to do with the internal governance of the Exchange. For a new SEC that is preaching corporate governance, we do not see how the appointment of members to the Nigerian Stock Exchange Council promotes good governance, if the NSE Council lacks independence. Our position is that the interim Administration has ended with the new CEO. The attempt to perpetuate the continued stay of the Interim Administrator as deputy of the NSE is not only legal, but high handed.
On November 23, 2010 Stockbrokers after an election, nominated 7 of its members to represent it on Council in accordance with our rules, only three of these members were co-opted purportedly because of subsisting court cases. We have not been informed of any changes in the situation. How are the new members to be appointed by SEC exempt from this legal barrier? We view the attempt to appoint majority of the members of this council as a way to exercise proprietorial rights which SEC does not have. This is particularly interesting because the same directives talks about the expanded Council preparing the Exchange for sale of its shares to the public (demutualisation) without the involvement of the owners. Demutualisation as being proposed, using the power of the Regulator to force things through, will amount to expropriation of the Exchange and we find this completely unacceptable. The role of SEC as the apex regulator is limited to approving the guidelines prepared by members for the demutualisation exercise and nothing more.
Let us again reiterate that the current governing rules of the Stock Exchange have no place for non members of the Council appointing members to the Council. We will advise that this wrongheaded idea be abandoned immediately to avoid creating a crisis for a market that is trying to restore investor confidence that was essentially lost because of regulatory ineffectiveness and arbitrariness.