OUTLINE

• Introduction• Background of Securities Regulation• Objective of Securities Regulation• Violations under the Securities Industry Law• The Securities Industry Law and the Media• Conclusion

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INTRODUCTION (2)

• Capital Markets play a key role in the development of every economy, and as a result, governments in various countries deem it necessary to regulate these markets.

• Financial markets have only one asset that really matters and that asset is PUBLIC CONFIDENCE.

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INTRODUCTION (3)

• In order for capital markets to thrive, there must be adequate safeguards, which will enhance public confidence in the markets.

• These safeguards are usually the investor protection roles and functions of regulatory bodies of the capital markets.

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INTRODUCTION (4)

• Investor protection is intended to enhance investors’ confidence in the capital markets.

• Confidence in any capital market, is perhaps the single most important pre-requisite for its sustenance and growth.

• It is in this context that the SEC plays a vital role.

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BACKGROUND OF SECURITIES REGULATION (1)

• Modern securities regulation started from the United States of America (US) in 1933.

• The 1920s in the US, when there was the absence of the full disclosure principles, were a time of fraudulent market practices, contributing to the market crash of 1929.

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BACKGROUND OF SECURITIES REGULATION (2)

•The Securities Act of 1933, also known as the “truth in securities act” was the first legislation passed in the US to govern the securities industry.

•The Act requires full disclosure of relevant information relating to the issue of new securities.

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BACKGROUND OF SECURITIES REGULATION (3)

• The Act also provides for civil and criminal penalties for fraud or misrepresentation.

• In 1934 the US government passed the Securities Exchange Act of 1934 which established the Securities and Exchange Commission (SEC), U.S.A to administer the provisions of the Securities Act of 1933.

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BACKGROUND OF SECURITIES REGULATION (4)

• The Act extends the disclosure principle of the Securities Act of 1933 by requiring periodic disclosure of relevant financial information on securities traded on the secondary markets.

• It also empowers SEC to register and regulate securities exchanges, over the counter trading, security brokers, and security dealers.

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BACKGROUND OF SECURITIES REGULATION (5)

•The securities industry operates within the international financial system and therefore various countries have also deemed it necessary to adopt the concept of regulation and the principle of full disclosure.

•Since the beginning of market regulation in the US, many countries have embraced the concept and have established institutions charged with capital markets regulation as pertains in Ghana.  

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BACKGROUND OF SECURITIES REGULATION (6)

• An International association of regulators,the International Organisation of Securities Commissions (IOSCO) has been formed to ensure co-operation among regulators.

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OBJECTIVES OF REGULATIONS

• The are three (3) core objectives of securities regulation:Investor protectionEnsuring that market are fair efficient and transparent

The reduction of systemic risk.

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OBJECTIVES OF REGULATIONS (2)

• Investor ProtectionProtection against misleading, manipulative or fraudulent practices, including insider trading, and the misuse of client assets 

Full disclosure of information which is material to investors’ decisions .

Quality of disclosureOnly duly licensed or authorized persons should be permitted to hold themselves out to the public as market operators 

Supervision of market participants 

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OBJECTIVES OF REGULATIONS (3)

•Ensuring that markets are fair, efficient and transparentThe regulator’s approval of exchange and trading system operators and of trading rules helps to ensure fair markets.

Dissemination of relevant information is timely and widespread and is reflected in the price formation process 

Information about trading in the market is made publicly available on a real-time basis 

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OBJECTIVES OF REGULATIONS (4)

• The reduction of systemic riskReduce the risk of failure (through measures including capital and internal control requirements) 

Respond to market disruptions through facilitation of stable domestic and global cooperation and information sharing.

Ensure that capital and other prudential requirements are sufficient to address appropriate risk taking.

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ROLES/FUNCTIONS OF THE SEC

• Regulation

To maintain surveillance over activities in securities to ensure fair, orderly and equitable dealings in securities.

To license, authorize and regulate stock exchanges, dealers, investment advisors, other operators and their representatives.

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ROLES/FUNCTIONS OF THE SEC (2)

• Regulation

To license, authorize and regulate collective investment schemes such as unit trusts and mutual funds.

To maintain proper standards of conduct and acceptable practices in the industry and monitor the solvency of license holders.

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ROLES/FUNCTIONS OF THE SEC (3)

• Regulation

To protect the integrity of the market against any abuses arising from the practice of insider trading.

To adopt measures to minimize and supervise any conflict of interests that may arise for dealers.

 

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ROLES/FUNCTIONS OF THE SEC (4)

• Regulation

To formulate principles for the guidance of the securities industry.

To review, approve and regulate takeovers, mergers and acquisitions and all forms of business combinations.

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ROLES/FUNCTIONS OF THE SEC (5)

• Legal and Enforcement

The Enforcement Department is responsible for investigating breaches of the securities laws.

It is charged to initiate investigations on complaints and evidence of possible violations of the securities laws.  

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ROLES/FUNCTIONS OF THE SEC (6)

• Market Surveillance

Responsible for establishing and maintaining standards for the fair, orderly, and efficient operation of the securities market.

It is also responsible for licensing operators, monitoring their operations to ensure compliance with the securities laws.

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ROLES/FUNCTIONS OF THE SEC (8)• Investment Management

Responsible for supervising and regulating all aspects of the operations of collective investment schemes such as unit trusts and mutual funds.

It administers the securities laws applicable to CISs with a view to improving disclosure and minimizing risk for investors without imposing undue costs on regulated entities.

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ROLES/FUNCTIONS OF THE SEC (9)

• Market Development

Undertaking market-related research activities to assist the Commission in creating the necessary atmosphere for the orderly growth and development of the securities industry.

Formulating and implementing the market development and investor/Public education strategies of the Commission.

Advising the Ministry of Finance on all matters relating to the securities industry.

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Powers Of The Commission

• May require the production of any register for the purposes of inspection or for the making of extracts.

Failure to maintain or produce a register when required constitutes an offence under the Law

• May require the proprietor or publisher of a newspaper or periodical to supply it with names and addresses of any financial journalist or all financial journalists who have contributed any advice or prepared any analysis or report published in such newspaper or periodical during a specified period of time.

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CONCLUSION (1)

• The capital market is essential for the development and economic growth of the economy.

• The regulation of the capital market is essential for the market to play its economic and developmental role.

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CONCLUSION (2)

• As a relatively new Commission, it is the objective of the Commission to:

Develop the systems, regulations and codes of

conduct to guide the market.

Contribute to both the protection of investors as well as the orderly development of the capital market.

Adoption of Good Corporate Governance practices.

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CONCLUSION (3)

• The media (Financial Journalists) play a key role in the dissemination of information regarding securities markets to the public.

• More interaction with the media to sensitize the public on securities matters,  thereby  enhancing  investors’  education  on  the  capital (Securities) markets.

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