SEC dismisses clamour for share buy back by shareholders


October 26, 2007/ Vanguard




Securities and Exchange Commission (SEC), apex capital market regulator has said that the Companies and Allied Matters Act (CAMA) and Investment and Securities Act (ISA) 1999 have no   provision for companies to buy back their shares as being demanded by some shareholders’ group.


The Deputy Director/Head, Legal Services, SEC, Mr. Edosa K. Aigbekaen in a chart with Vanguard said “If a company buy back its share, the implication is that such company would be reducing its capital. So SEC do not allow companies to reduce their capital under normal circumstances. If companies are allowed to buy back its shares, it means they would be using the shareholders’ fund.”



It would be recalled that some shareholders’ groups recently  have been asking the management of their companies to buy back their shares rather than adopting share reconstruction that has the tendency of reducing the value of their investments.



Many of the companies that have raised money through the capital market to beef up their capital base following the first consolidation exercise have resulted to adopting  share reconstruction as a means of reducing the volume of their issued shares and to enable them service the increasing number of shareholders in terms of returns on investment.



Meanwhile, in his presentation of the role of regulators in checking and preventing unethical and unprofessional practices in the Nigerian capital market, Aigbekaen said, “Inadequate or absence of regulation is detrimental to the capital market as it encourages sharp practices by participants (i.e. investors, operators and issuers). Regulation of the market is therefore necessary to check activities in the market with the ultimate aim of minimizing abuses which might mar investor’s confidence, the market integrity and stability.”



He explained that to avert these sharp practices, the government had  to introduce laws and other regulations to address ethical and other regulatory issues in the market.



According to him, “That is why a number of provisions in the Investment and Securities Act (ISA) as well as the Rules and Regulations were put in place  to address ethical issues. Under Section 8 (u) the Commission is to prevent fraudulent and unfair trade practices related to the securities industry. As a complement of this, a code of conduct for capital market operators and their employees were published in 1994.”



He further disclosed that the Commission has introduced a code for shareholders of quoted companies, saying, “It is expected that shareholders will imbibe on the contents of  the document. It is expected that only person who has shares in a company that is expected to attend its  Annual General Meeting (AGM).  An official of a shareholder group cannot attend an AGM when he/she  is not a shareholder of that company.” 



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