SEC Unveils New Rules On Demutualisation


The Securities and Exchange Commission (SEC) has released rules on demutualisation of securities exchanges in Nigeria.

According to information obtained from the Commission’s website, the rules are not specific to the Nigerian Stock Exchange (NSE) but aimed at operations of any other registered exchange in Nigeria.

Demutualisation is a process of conversion of a stock exchange from a non-profit, mutual organisation, into a for-profit entity with the attendant separation of membership rights from trading privileges held by members of the mutual exchange.

Under the new rules, the Commission recognised that the demutualisation process shall be exchange-driven. As such, members of an Exchange are responsible for determining the process and modalities for demutualisation.

According to the statement, in order for the Commission to be carried along by the securities exchanges at different stages of the demutualisation process, the rules provide for both the pre and post- registration requirements.

“The pre- registration requirements involve preparing documents such as, rules of the demutualised securities exchange, valuation report, profile of members of demutualisation committee and implementation plan.”

While the post demutualisation requirements entail providing documents/information like business development plan, audited accounts/statement of affairs and CAC incorporation documents.

It added that the rules provide that no single entity/person would be permitted to hold more than 5 per cent of the equity rights in the demutualised exchange. In addition, the aggregate equity interests of members of any specific stakeholder group shall not exceed 20 per cent.

According to the rules, a demutualised securities exchange must comply with SEC corporate governance code or any other applicable corporate governance code. As such, one-third of the board of demutualised exchange shall be composed of independent directors, and all appointment of directors and executive management shall require the prior written approval of the Commission.

The Commission under the leadership of the acting director-general, Mr Mounir Gwarzo, believes that demutualisation of the Exchanges would be immensely beneficial to the Nigerian economy.

Capital market participants have been eagerly waiting for the rules on demutualisation of the NSE in order to improve its governance, liquidity, transparency and global competitiveness.

Source : Leadership

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