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Tuesday, November
05, 2019 /11:20 PM / By SEC / Header Image Credit: Dreams Time
Sundry Amendments
1. Proposed Amendment to Schedule I- Registration Fees, Minimum Capital Requirement, Securities & Others
2. Proposed Amendment of Rule 27- Fidelity Bond
3. Proposed Amendment to Rule 199(3) - Removal from Listing
Details of the proposals are as
follows:
Legend:
1. Proposed amendment to Schedule I (Registration Fees, Minimum Capital Requirements, Securities and others), which seeks to create a new "Part E" to provide for annual regulatory charges to be paid by Securities Exchanges and FMIs.
Part E
1. A registered securities exchange shall pay to the Commission, within thirty days of end of each financial year, an amount equal to 2.5% of the aggregate listing fees paid to it by issuers whose securities are listed or admitted on it, during that year;
2. A depository shall pay to the Commission, within thirty days of end of each year an amount equal to 2.5% of the aggregate annual depository fees paid to it by the issuers whose securities are deposited with it;
3. A registered clearing house or central counter party clearing house shall pay to the Commission, within thirty days of end of each financial year, an amount equal to 2.5% of the aggregate clearing fees charged by it for clearing functions.
4.
Other FMIs shall be required to pay
annual fees to the Commission as may be determined from time to time
Justification
In order for the Commission to
continue to effectively carry out its core mandate which is increasingly
becoming more expensive due to the expansion of the market in terms of
size, complexity and product offerings, it is imperative that the
Commission charges annual fees on Exchanges and FMIs. The
Commission expends huge resources in the course of regulating these entities,
ranging from costs of target and periodic inspections/investigations,
review and approval of requests for rules making/amendments, etc.
Currently, Exchanges and other FMIs do not pay renewal fees.
2. Proposed amendment of Rule 27 and creation of new Rule 27A of the Rules
and Regulations. Details of the proposals are as follows:
A. Existing Rule 27: Fidelity Bond
1. Every registered corporate body shall provide and maintain a bond
which shall be issued by an insurance company acceptable to the Commission
against theft/stealing, fraud or dishonesty, covering each officer, employee
and sponsored individual of the company;
Proposed amendment
to Rule 27(1)
1. Every registered corporate body other than a corporate body
licensed as a dealing member of a securities exchange and capital market
experts/professionals shall provide and maintain a bond which shall be
issued by an insurance company acceptable to the Commission against
theft/stealing, fraud or dishonesty, covering each officer, employee and
sponsored individual of the company;
B. Proposed creation of new Rule 27A - Insurance Policy for Corporate Bodies Licensed as a Dealing Member of a Securities Exchange
27A
Insurance Policy
1. Every registered corporate body licensed as a dealing member of a
securities exchange shall procure and maintain an insurance policy issued by an
insurance company acceptable to the Commission. The policy shall cover all
aspects of the insured business activities and risks including but not limited
to the following:
a. fidelity guarantee against theft/stealing, fraud or dishonesty, covering
each officer, employee and sponsored individual of the company;
b.
professional indemnity in respect of
loss arising from any claim or claims for any act or omission or breach of duty
by officer, employee and sponsored individual of the company;
c. directors liability in respect of claims against wrongful acts
committed in the capacity of a director;
d. legal liability, or other third-party claim;
e. other risks associated with its products and services.
Provided however that the
insurance policy shall take into consideration the situation whereby the
dealing member is a member of multiple securities exchanges
2. Every corporate body licensed as a dealing member of a securities
exchange shall procure and maintain an insurance policy which shall where
applicable, as may be determined by a securities exchange, name the securities
exchange's investors' protection fund as the co-insured.
3. Payments from the policy shall be utilized by the securities exchange's
investors' protection fund towards compensating investors who have suffered
losses on their securities traded on a securities exchange from the occurrence
of the risks covered by the insurance policy.
4. The insurance policy maintained by a dealing member of a securities exchange shall provide that payment under the insurance policy can be made directly to the:
a. securities exchange's investors' protection fund which shall compensate investors who have suffered losses or;
b. affected dealing member with the prior written consent of the securities exchange's investors' protection fund.
5. The insurance policy shall provide that it shall not be cancelled,
terminated or modified by the dealing member of a securities exchange without
the prior written consent of the securities exchange's investors' protection
fund and the Commission. Where the cancellation, termination or modification is
at the instance of the insurance company such cancellation, termination or
modification shall not be carried out except after written notice shall have
been given by the insurance company to the Commission and the securities
exchange's investors' protection fund, not less than sixty (60) calendar days
prior to the effective date of cancellation, termination or modification.
6. The insurance policy shall be provided in such reasonable form, terms
and under such premium as the fiduciary duties of the officer, employee or
sponsored individual require, but with due consideration to all relevant
factors, including but not limited to the risks insured, products and services,
clientele, the value of the aggregate assets of the dealing member of a
securities exchange in relation to all its registered functions, to which any
officer, employee or sponsored individual may have access, the type and terms
of the arrangements made for the custody and safekeeping of assets and
securities in the company's portfolio.
7. The insurance policy shall cover not less than 20% of the minimum paid up capital of the dealing member of a securities exchange.
8. Every dealing member of a securities exchange shall file with the Commission and the securities exchange:
a. A statement of the nature and value of a claim within five (5) business days after the making of any claim under the insurance policy; and
b. A copy of the terms of the settlement of any claim made under the insurance policy within five (5) business days of the receipt thereof.
9. Every securities exchange on the advice of the securities exchange's
Investor Protection Fund (IPF) shall provide quarterly reports to the
Commission on all claims settled under the insurance policy, and the report
shall include the name of the investor and the sum received under the insurance
policy.
Justification
The proposed amendment to Rule 27
and creation of new Rule 27A is to exempt capital market experts/professionals
from maintaining fidelity bonds and enable the establishment of an
insurance product for Dealing Members of securities exchanges to cover the
risks associated with stockbroking operations and protect investors in the
event of the occurrence of the risk or loss insured.
3. Proposed
amendment to Rule 199(3) - Removal from Listing
Existing Rule:
The issuer of a security listed
on an exchange may file an application to withdraw the security from listing on
any exchange in accordance with the rules of that exchange and notify the
Commission accordingly. The exchange shall within ten (10) days consider
and dispose of the application and notify the Commission when such application
is approved.
Proposed Amendment:
The issuer of a security listed on an
exchange may file an application to withdraw the security from listing on
any exchange in accordance with the rules of that exchange. The Issuer
shall give prior notice of such an application to the Commission and notify
the Commission accordingly. The exchange shall within ten (10)
days consider and dispose of the application and notify the Commission
when such application is approved.
Justification:
Rule 199 (1) requests an exchange
to notify the Commission seven (7) days prior to delisting an issuer when
the initiative to delist is from the exchange itself. Thus similarly
when such initiative is from the issuer, it is proposed for the concerned
Exchange to similarly notify the Commission before delisting the issuer.
All comments and input should be forwarded by e-mail to the Secretariat, Rules Committee of the Commission, at rulescommittee@sec.gov.ng or by letter addressed to the Director-General, SEC, not later than two (2) weeks from date of publication.
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