Stock Exchange Strengthens Investors’ Protection Fund

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  • Stock Exchange Strengthens Investors’ Protection Fund

The Nigerian Stock Exchange (NSE) has strengthened the governance of its Investors’ Protection Fund (IPF) with a new framework that outlines a broad-based board and competencies.

The NSE had in 2012 inaugurated its IPF, in line with the Investment and Securities Act (ISA).

Part XIV of the ISA requires the Exchange to establish and maintain an investors’ protection fund to compensate investors with genuine claims of pecuniary loss against dealing member firms resulting from insolvency, bankruptcy or negligence of a dealing member firm of a securities exchange or capital trade points; and defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received by the dealing member firm in its course of business as a capital market operator.

A new governance and management framework approved by the Securities and Exchange Commission (SEC) on December 5, 2018 for the NSE IPF indicated that the fund will be managed by a nine-member board, drawn from major stakeholders in the capital market.

According to the new framework, the board shall consist of a maximum of nine members including a representative each from dealing member firms, NSE, Central Securities Clearing System Plc, SEC, Institute of Capital Market Registrars, one person representing institutional investors, one person with proven integrity and knowledgeable in the capital market matters, one person representing registered shareholders association and one person who shall be a legal practitioner knowledgeable in capital market matters.

Under the new rules, the board members shall be appointed by the Exchange, subject to the approval of SEC, for an initial term of four years, renewable for a further term of four years only.

The board is IPF’s highest organ. It is responsible for the management of the IPF and shall hold, manage and apply the fund in accordance with the provisions of the IPF rules and the ISA.

To manage the fund, the board is empowered to engage such number of staff as it may deem necessary for the efficient performance of its functions, set up sub-committees to assist in the discharge of its functions, in particular for the purpose of determining the eligibility of an investor to receive compensation and the amount payable; and appoint a management sub-committee.

The board may also by resolution delegate to any sub-committee appointed by it all or any of its powers. Any power, authority or discretion so delegated by the board shall be exercised by members forming a majority of the sub-committee as if that power, authority or discretion had been conferred on a majority of the members of the sub- committee.

The board may remove any member of a sub-committee and may fill any vacancy while a decision of the sub-committee of the board shall have no effect until it is ratified by the board.

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

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