LEGAL AND INSTITUTIONAL FRAMEWORK REGULATING PUBLIC OFFERING OF SECURITIES IN THE NIGERIAN CAPITAL MARKET
ABSTRACT
The Money Market, Capital Market, and Insurance Market comprise a country’s financial system. While the Central Bank of Nigeria is the apex regulatory body of the Nigerian Money Market, the Securities and Exchange Commission (SEC) is the apex regulatory body of the Nigerian Capital Market, and the National Insurance Commission (NAICOM) is the apex regulatory body of the Insurance Sector.
Simply put, the capital market is a market for raising long-term funds. It is the financial market segment that represents the intricate intermediation functions and processes of a network of individuals, institutions, and financial instruments between the users and providers of long-term funds that are mobilized and channeled into productive investments through the issuance of equities and interest bearing securities.
The market also offers a mechanism for the transfer of existing securities (secondary market), allowing those who want to sell or buy secondary securities to do so. Thus, liquidity in the capital market is created, and participation in primary issues is increased.
The capital market facilitates capital formation and accelerates economic development, which ultimately leads to societal well-being through its vital functions of resource mobilization and allocation. It provides a means for the general public to participate in an economy’s corporate sector through the ownership of securities.
Because of the potential benefits of a capital market to an economy, regulatory frameworks are typically put in place in many countries, including Nigeria, in order to develop an active and efficient capital market.
Such a regulatory framework may be self-imposed by system operators or statutory, such as Acts of Parliament. The need for regulation, in one form or another, stems from the fact that a lack of regulation could lead to chaos and anarchy in financial transactions, as well as the system’s eventual collapse.
For example, in response to the 1929 stock market crash, the United States of America established the Securities and Exchange Commission through the SEC Act of 1933. In Nigeria, capital market regulation can be said to have begun with the passage of the Capital Issues Commission Act of 1962,
which was a direct regulatory requirement of the establishment of the Lagos Stock Exchange two years earlier. The issuance of securities in the Nigerian Capital Market is a critical step in obtaining funds from the market, and the resulting transaction chain serves as the pivot around which Primary and Secondary Market activities revolve.
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LEGAL AND INSTITUTIONAL FRAMEWORK REGULATING PUBLIC OFFERING OF SECURITIES IN THE NIGERIAN CAPITAL MARKET
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