Investor Protection Efforts by the NSE Presented By Tinuade Awe Head, Legal and Regulation Division To the Investors Clinic for Registered Shareholders’ Associations MARCH 19, 2014
| Contents | • Introduction 1 • Key players of the market 2 • NSE’s Vision 3 • NSE’s obligations to investors 4 • NSE’s Initiatives for Investor Protection 5 • Investors Protection Fund 6 • Conclusion 7
| Key Players in the Market | SEC (Apex Regulator) NSE (SRO) Maintains primary oversight Broker-Dealers of the capital market Enabling Framework: SEC Bring issuers to the market; Enabling Framework: ISA 2007 registration as an Exchange; execute buy/sell orders and SEC Rules (2013) ISA 2007 and SEC Rules (Nov Enabling Framework: SEC 2012); NSE MEMART; NSE registration plus NSE license; Rules CIS Act of 1992; ISA 2007, SEC Rules (2013), NSE Rules Registrars CSCS Maintain registers of Sole provider of clearing and company shareholders settlement services Enabling Framework: SEC Enabling Framework: SEC registration as a Registrar; ISA registration as a CSD; ISA 2007 and SEC Rules (2013) 2007 and SEC Rules (2013) Trustees Custodians Maintain assets on behalf of Maintain assets on behalf of investors investors Enabling Framework: SEC Enabling Framework: SEC registration as a Trustee; ISA registration as a Custodian; Investors/Participants Others 2007; Trustee Investment Act ISA 2007 and SEC Rules 1962; SEC Rules (2013) Originate orders Issuing houses, OTC (2013) platforms, fund managers etc. Enabling Framework: SEC Registration; ISA 2007 and SEC Rules (2013)
| Investors |
| NSE’s Vision | T o be the leading Stock Exchange in the African region for capital formation, driven by transparency , innovation efficiency and liquidity. Strong 21st Growth Targeted 5 year Regulation enabling Century Listing Target and market Technolog First rate and $1tr structure Supporting y product Investor Market Regulatory Strategies efforts Protection Cap Programs strategies
| NSE’s Obligation to Investors | Transparency and integrity Information equity Rules and regulations Enforcement
| NSE Initiatives for Investor Protection | Market Facing Rules and Local and Foreign Compliance Regulations Collaboration Collaboration with Investor Protection Rule benchmarking law enforcement Constant Disclosure Fund and review | | Transformation of Rules governing IOSCO, US SEC Inspection and Market transactions on Complaints Operators related parties Management X-Alert FSRCC Rules and Regulation Technology Governing Dealing Members Rules relating to Board X-Whistle Market Surveillance and General Meetings ISG of Issuers
| Investors Protection Fund (IPF) |
| X-Alert | Joint NSE/CSCS initiative Provides investors with details of transactions on their accounts via SMS Easy monitoring of accounts Serves as an effective fraud alert in cases of unauthorized transactions on accounts Reduction in time spent confirming trades Enhancement of transparency between trader and clients Improves confidence in the capital market Notification of corporate information( Dividends, Bonuses, Payment Date, etc.) to clients via SMS
| Transformation of Market Operators | Manpower and equipment Organizational structure and governance Effective processes Global competitiveness Technology
| Technology | Technology X-Issuer Timely release of financial information to the market Greater transparency in information dissemination Greater market integrity with significant reduction of leakage of material information X-Monitor Electronically updates all material information and can be called up when needed X-Gen High performance, robust, multi-asset, multi-market matching trading engine Encourages wider participation of middle – class and investing segment Enables investors to executive market orders on a wider range of devices including smart phones
| Market Surveillance | Daily monitoring of trading activities in the market Creation and analysis of alerts for unusual trading behaviour Preparation of surveillance reports on daily, weekly, monthly and quarterly basis Conduct detailed research and generate evidence of market abuse. Conduct investigations on suspected market abuse Prosecute and seek sanctions in appropriate circumstances
| X-Whistle | Whistle blowing portal for tips and referrals Anonymous and non-anonymous sources On-going engagement with source NSE review and determination
| Conclusion |
| Question and Answers |
Thank You Stock Exchange House 2 - 4 Customs Street P.O. Box 2457, Marina Lagos Island, Lagos, Nigeria tawe@nse.com.ng
BASIC INVESTMENT PRINCIPLES Presentation at the Nigerian Stock Exchange Investors Clinic for M A R C H 2 0 1 4 Registered Shareholders Associations INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING
Outline Understanding “YOURSELF” as an investor Peculiarities of Financial Products The Investment Process Why you need an “Investment Advisor”? UBA Capital Group – The One-Stop Shop for your Financial Need Products and Services Investnow.com.ng INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING 20
Understanding “YOURSELF” as an investor - The Age Factor The age factor in investing – it helps to define who you are The young generation can accommodate more risk The middle age category has a balanced risk appetite 20’s 30s-40 ’s 40s-50 ’s 60 ’s+ Old investors should A Starter Wealth Consolidation stage A fulfilled retirement be discouraged from accumulation stage Strong appetite and Preparing for Very low risk appetite taking “excess risk” natural headroom Split savings into retirement Less energy for high risk long- and short- Less appetite for Even within asset term goals risk, strong appetite Focus on stable Alternative income classes, consider age for physical assets income Think equities for sources in selecting specific like real estate long- term; “liquid” asset Less need for Fixed income products assets for short-term Increasing liquidity from and realty are often preference for Growth is the target investment the attraction income 21 INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING
Understanding “YOURSELF” as an investor - Investing The Four Cardinal Principles of Investing Set clear “Investment Minimize transaction Objectives” cost - This should include time horizon - Only buy and sell when necessary - Consider your liquidity needs - Ensure best execution - Risk tolerance and other constraints - Mutual Funds/ETFs minimize cost - Tax considerations etc Determine your “Asset Be Disciplined Allocation” - Focus on your objective - Ignore short term noises - The principle of diversification is crucial - Rebalance portfolios - Balance your risk with return expectation - Restructure when necessary - Within each asset, also diversify - Do not be part of the herd - Reset objectives if need be INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING 22
Peculiarities of Financial Products - Asset Classes Money Market Real Estate • • – Reliable source of income – Diversification from purely financial instruments – Flexible choice amongst quality, maturity dates, – A good hedge against inflation returns – Components of both long term capital – Liquidity appreciation and current return in form of rental income – Low risk investments – Moderate risk investment Bonds • – Steady income from coupon payments – Income also earned from capital appreciation Private Equity • – Traded OTC – Additional diversification opportunity to portfolio – Low risk investments – Commodities offer best hedge against inflation Equities • – Private equity provide market-independent – On a steady recovery path in 2012 (absolute) returns on investment – Historically, has outperformed all other – Lock-in periods (investment horizon) for private investment vehicles in the long run equity could be high – Good hedge against inflation – High risk investmenrts – Moderate risk INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING 23
Peculiarities of Financial Products - Risk Let’s think about the risk of financial products What are the risk factors that may 100.0% reduce return or Private Equity cause loss of value? Interest rate Real Estate Exchange rate R i Economic growth Equity s Fiscal policies k State & Corporate Credit risk Bonds FGN Bonds Corporate governance Which product does Cash (TBs, BAs,CPs,etc) these risk factors affect? 0.0% Potential Return INVESTMENT BANKING | ASSET MANAGEMENT | TRUSTEESHIP | SECURITIES TRADING 24
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