The Nigeria’s capital market may soon transit from the manual-intensive, paper-based process of issuing securities to electronic offering. When the initiative is operationalised, shares will be issued and bought through electronic platforms and electronic devices, such as Unstructured Supplementary Service Data (USSD).
The market regulators, operators and other stakeholders have endorsed the transition to electronic offering (e-O) and are reviewing a draft framework for the implementation of automated electronic issuance system.
The Capital Market Committee (CMC), the largest consultative assembly of the capital market, has given its support to the transition. The CMC, chaired by the director-general of Securities and Exchange Commission (SEC), consists of chief executives of all registered capital market operators including stockbrokers, solicitors, custodians, fund managers, issuing houses, rating agencies, registrars, reporting accountants, trustees and consultants among others.
Other members included chief executives of the Chartered Institute of Stockbrokers (CIS); Nigerian Stock Exchange (NSE), Abuja Securities and Commodity Exchange (ASCE) and Central Securities Clearing System (CSCS).
The CMC also included two members each from observer groups, which included Asset Management Corporation of Nigeria (AMCON), Central Bank of Nigeria (CBN), Corporate Affairs Commission (CAC), Debt Management Office (DMO), Federal Ministry of Finance, Federal Mortgage Bank of Nigeria (FMBN) and Federal Inland Revenue Service (FIRS). Others are Nigerian Deposit Insurance Corporation (NDIC), Investment and Securities Tribunal (IST), Nigerian Investment Promotion Council (NIPC), National Insurance Commission (Naicom), National Pension Commission (Pencom) and FSS2020.
SEC Acting Director-General Ms Mary Uduk, at the weekend confirmed that the draft framework for the electronic offering was discussed at the just-concluded meeting of the CMC. CMC had met in Lagos on Thursday.
Speaking on the deliberations at the meeting, Uduk said the capital market community recognised the importance of the electronic initial public offering (E-IPO) project. The automated system will improve issuance processes and encourage more investor participation in the market.
She said the framework and rules guiding the e-IPO have been presented to stakeholders, who now have up till March 29, 2019 to review and send their suggestions as part of the rule-making process. After the review, SEC will consider the comments from stakeholders to finalise its framework and subsequently present the final framework to its board and supervising Ministry of Finance for approval.
A copy of the draft framework obtained by The Nation indicated that electronic offering will be done on a platform purposely established by an eligible service provider registered with SEC.
The framework described electronic offering (e-O) as the use of internet or other electronic means including mobile or USSD platforms to provide access to prospectuses, offering memoranda, subscription forms and other documentation for the subscription to securities and related documentation as well as payment for such subscription.
The e-O platform will translate the current paper-based process of securities offerings into electronic form through electronic display of offer documents, subscription and payment through a combination of web portals, mobile applications, USSD and other electronic means.
Under the e-IPO and other electronic public offers, investors will get allotment and value for their subscriptions within few days as against the current cycle of nearly four months.
The full automation of primary issuance will involve automation of the process, approval, documentation, subscription and allotment of all issues, especially IPOs and public offers. With this, investors will be able to subscribe and make payment for IPOs and public offers online with such orders being matched and allotted electronically and directly to the investment accounts of the investors at the CSCS and any other designated clearing centre.
The full automation will enable the primary market to operate within a designated transaction cycle, possibly within the T+3 four-day trading cycle being operated at the secondary market.
According to the draft guideline, the e-O platform shall give subscribers access to general information regarding the offer, the application input screen, download, view and print the offer documents, provide for electronic online payment options which shall be seamlessly integrated with the e-O platform, allow integration with identity management systems such as Bank Verification Number (BVN) database for the Know Your Customer (KYC) verification and integrate with the depository to enable electronic crediting of approved allotments to subscribers’ depository accounts.
The platform shall also permit subscribers to select a broker of their choice for the purpose of the electronic crediting of the approved allotment while providing mandatory information fields for subscribers to supply surname and other names, full company name and registration number, BVN or any other SEC-approved biometric numbering system, bank name and account numbers of subscribers and mobile telephone number and email address.
The platform is also expected to provide for the upload of provisional rights allocation for rights issues by the relevant registrar to the issue.
To strengthen investors’ protection, the platform must mandatorily require subscribers and end-users to confirm that the subscriber has been provided with sufficient opportunity to access the offer documents and the information disclosed therein and that the information provided by the subscriber is to the best of the applicant’s knowledge, true and accurate in all material respects before submitting the application.
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