Nigeria: IMF Report On SEC

Leadership (Abuja)

EDITORIAL

In a recent assessment of the Securities and Exchange Commission (SEC), the International Monetary Fund (IMF) declared that its overall level of technical expertise in key functions was less than optimal. The Fund went on to say that SEC has 17 departments and staff strength of over 630 out of which only 30 per cent or 189 are currently engaged in the core regulatory and supervisory functions. IMF added, "The coordination in a large organisation such as SEC is challenging and the current division of responsibilities among the departments seems to create inefficiencies and overlaps... the SEC's discharge of its functions falls short of expectations, mainly in the areas of inspections, investigations and enforcement." It, however, noted that since the adoption of the Investments and Securities Act (ISA) 2007 and the first set of rules and regulations of the SEC, the regulatory framework has been further strengthened and expanded.

We recall that part of the problem the director-general of SEC, Ms Arunma Oteh, had with her traducers in the House of Representatives was the issue of lack of technical expertise at the top echelons of the regulatory agency. This was blamed for the near-collapse of the capital market. Now the Bretton Wood institution is pointing out the same lapse. It is inexplicable that in an institution like SEC that ought to be an assemblage of professional people, well-heeled in the intricacies of capital market operations, only 189 of its staff know anything about capital market operations, the core function of the agency.

What this entails is that the bulk of the staff is composed of mere passengers out to earn a living. That is not good enough. SEC is a highly technical area that demands a high level of professionalism and there should be no sentiments about this because the agency is there to keep watch over investors' wealth especially by supervising the operators and how they do their job of asset management. In a situation where the regulator does not even understand what the business is all about, how can it monitor effectively the market to ensure that operators play by the rules? It is important that SEC, particularly its management, begin to pay adequate attention to issues relating to its human capital. The last time there was a hiccup in the capital market, investor confidence was threatened. We are not sure that the market has recovered from that shock.

To avert a similar development, we agree with IMF's position that a new, more robust regime would need to include ongoing monitoring and reporting requirements accompanied by robust enforcement which only core professionals can do.