SEC Re-introduces periodic registration renewal for CMOs to reduce unethical market practices

Charles Abuede

With a concerted effort aimed at bringing to the low the incidences of unethical practices by capital market operators (CMOs), the Securities and Exchange Commission (SEC) has re-introduced the periodic renewal of registration by the CMOs. The regulator said the move was aimed at having a reliable data bank of all CMOs in the Nigerian Capital market active and registered.

The SEC, in a circular published on Thursday on its website revealed that the re-introduction of the registration was also to strengthen supervision and monitoring of CMOs by the commission and CMOs have been handed an ultimatum to April 30, 2021 deadline for the completion of the registration renewal for 2021.

”SEC hereby notifies the general public and Capital Market Operators (CMOs) in particular, of the reintroduction of the periodic renewal of registration by CMOs. It will provide updated information on operators in the Nigerian Capital Market for reference and other official purposes by local and foreign investors, other regulatory agencies and the general public.

”Consequently, the Commission has amended its rules and reintroduced the requirement for yearly renewal of registration by all CMOs. This process will be carried out electronically in order to ensure efficiency,” the circular reads.

Recall that the SEC, earlier March 2021, released guidance on the implementation of sections 60 – 63 of the investment and securities act 2007 where it noted the occurring global corporate scandals were associated with weaknesses in financial reporting and accounting practices.

The guidance reads thus: “As part of the efforts to reform corporate financial reporting in Nigeria, the Federal Government of Nigeria passed the amended Investments and Securities Act (ISA), 2007 which provides as follows:

Section 60 (2) – the chief executive officer and the chief financial officer or officers or persons performing similar functions to personally certify the accuracy of the financial statements prepared by such a company.

Section 61 (1) – a public company shall establish a system of internal controls over its financial reporting and security of its assets and it shall be the responsibility of the board of directors to ensure the integrity of the company’s financial controls and reporting.

Section 61 (2) – the directors of a public company shall report on the effectiveness of the company’s internal control system in its annual report.

Section 63 – an auditor of a public company shall, in his audit report to the company, issue a statement as to the existence, adequacy, and effectiveness or otherwise of the internal control system of the public company.

According to the capital market regulator, the development of the framework was made up of industry-wide committee in the financial system, professional accounting bodies, audit firms and other stakeholders with the framework providing guidelines that are necessary for directors who will implement relevant Internal Controls over Financial Reporting (ICFR) and auditors who will review the ICFR and in turn issue a statement on its existence, adequacy and effectiveness or another way around.

Based on the drive by SEC, it also revealed that the re-introduction was to ensure that directors have a common procedure for the evaluation of the ICFR such that any other reasonably knowledgeable individual can re-perform the same procedure to arrive at the same conclusion as those auditors and sec committee.