Investors seek review of protection mechanisms in capital market

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As the regulators strategise to increase retail investors’ patronage in the market, shareholders have stressed the need for a review of existing protection mechanisms for Nigerian investors in line with global principles, and articulate ways to conform to the right standards.

The investors who spoke in separate interviews with The Guardian said time is ripe for the regulator to review existing investors’ protection mechanisms and institute a model that would ensure that investors are protected in the event of bank collapse.

They believe that if adequate investors’ protection mechanisms are instituted in the market and followed strictly, it would boost investors’ participation and boost market capitalisation.

The shareholders also urged both the regulators and operators to forestall future losses arising from poor corporate governance, advisory services, regulation, and inadequate oversight of accounts among others in the market.

According to them, one of the reasons why retail investors had shown apathy to the Nigerian stock market since the meltdown in 2009 was because of the issue of nationalised banks.

They insisted that the low patronage and apathy witnessed currently in the capital market aside from losses investors suffered during the 2008-2009-market downturn, is as a result of the sale of the three nationalised banks: Keystone Bank Limited; Mainstreet Bank; and Enterprise Bank.

Also, the retail investors noted that the protection they got from the regulators in the past was not enough, and therefore developed apathy to return to the market.

Consequently, there has been an abysmal drop in retail investors’ activities, which hitherto constitute a large chunk to total transactions.

This has further depressed the equities market as retail investors dominated the market after the indigenisation exercise of the 1970s up to year 2000, contributing almost 70 per cent to total transactions.

Specifically, an independent investor, Amaechi Egbo said the major reasons investors patronise the stock market is for protection of their investment, noting that once investors feel that their investments are in safe hands, they remain in the market and increase their participation.

“There is a need to examine the protections that are currently available to investors in the market against global standards and best practices and confirm the level of compliance and conformity and subsequently articulate on what needs to be done to bring us to the right standards.”

He noted that governments and regulators across the world have taken several proactive steps, renewed and upgraded methods to ensure a safe and transparent investment ecosystem in their various jurisdictions.

Egbo pointed out that some of these steps were taken due to crises, while others were proactive measures put in place to forestall future uncertainties as well as potential loss of investment.

Professor of Economics, Babcock University, Segun Ajibola said the capital market has gone through a series of crises since the global meltdown of 2007/2008, which has necessitated major reforms and shakeouts in the operations of capital markets in many countries in order to restore investors’ confidence in the market.

“Investors lost their hard earned money during the 2007/2008 crisis due to a series of untoward practices such as insider dealings and manipulations. Some were thrown into a lifetime of penury but without any succour from the regulators and the State. The claim for investors’ protection gained currency from that moment.

“It is proper to have in place a vibrant investors’ protection insurance scheme against the unethical conduct of practitioners, which could lead the hapless and helpless capital market investors, prostrate.”

Besides, he also suggested that regulators must beef up their regulatory oversight to stem the unethical conduct in the market, noting that there must be a compensation scheme for investors who innocently fall victim to such underhand practices to boost investors’ confidence.

National Coordinator of Proactive Shareholders Association of Nigeria (ISAN) Boniface Okezie said the crises in the market will never be averted until the regulators have done the needful by instituting the mechanism that aids investors protection.

He said Nigerian investors have been subjected to untold hardship following persistent take over of banks by the CBN.

He urged operators and regulators to come together and articulate specific policies that exist for investors in the market and agree on the appropriate ways to protect investors in the market.