Exposure Of Sundry Amendments To The Rules And Regulations Of The Commission

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:

·
Additions are underlined

·
Justifications are italicised

 

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 counterparty 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.

 

Provided
however that where the dealing member is a member of multiple exchanges,
payment shall be made to the relevant securities exchange where the defalcation
occurred.

 

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.