SEC AND THE NEW CORPORATE GOVERNANCE CODE

The new corporate governance code recently unveiled for public quoted by the Securities and Exchange Commission (SEC) is long overdue. The fresh set of policies and laws will put the Nigerian capital market and the management and operations of public corporations under tighter regulatory oversight for better performance. Infractions will also be more speedily dealt with.

With this development, the era of insider abuse, low professional standards, conscious and unconscious biases, deliberate corruption such as declaration of false profits, and other unethical practices, might be over.

The new corporate code which was unfolded with fanfare by the Director-General of SEC, Ms. Arunma Oteh, is a 140-page document, detailing rules and regulations that public limited companies (PLCs) must abide by, as well as punishment for infractions. This new regulatory framework is in keeping with the statutory responsibility of SEC. The code is also informed by recent experiences in the capital market and the wide-ranging financial scandals in many quoted companies in the country.

Clearly, poor corporate governance has undermined integrity and public confidence in financial institutions and the capital market in the last two years. The code also became expedient in view of the recent global financial crisis and the failure of capital market operators such as the Nigerian Stock Exchange (NSE) to tighten their rules and regulations. This failure made investors victims of poor corporate governance in the sector. The expectation is that the new corporate code will bring about new platforms, policies and laws that will affect the way corporations are administered. These, hopefully, will cover the relationships among stakeholders and guidelines for attainment of the goals of the corporations.

The overall aim is to bring about sound market regulation, accountability of individuals in the organisations, as well as the institution of a mechanism that will reduce or eliminate principal/agent problems that have become commonplace. In that regard, the new corporate governance code seeks to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. We unequivocally support the new code. We regard it as an instrument for change which corporate Nigeria badly needs.

Every game needs a set of rules, both for reward and punishment. The corporate world is not an exception. As the overseer of the key participants in the capital market, including brokers, dealers, investment advisors and mutual fund managers, we urge SEC to use this code to promote capital formation that is necessary to sustain economic growth. Of great importance should be full disclosure of essential, capital market-related information that will help to check fraud in the system. The Nigerian capital market which until recently, was notorious for share price manipulation and falsification of financial records of organisations, needs new corporate direction. The fact is that the corporate world is fascinating and rewarding. But, it comes with its own peculiar challenges that need strict enforcement of rules and regulations to govern its operations.

In a country where there is little respect for ethics, strict and constant oversight and periodic enlightenment about the capital market are vital. Unlike the banking industry where deposits are guaranteed by government through the apex bank and the Nigerian Deposit Insurance Corporation (NDIC), stocks, bonds and other securities traded on the Capital Market do not enjoy such privilege. The last crisis at the NSE, which resulted in investors' loss of over N3 trillion in equities depreciation, is a case in point.

While the new corporate code is a welcome development, however, its enforcement will determine its ultimate success. This is where SEC should be vigilant. A law is as good as its enforcement. Investors should, at all times, be provided with information necessary for wise investment decisions. Often, brokers take undue advantage of dearth of information on market operations to shortchange buyers. Let this code be implemented with all sense of responsibility. Anything less than this will erode public confidence in the initiative and question its relevance.