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Nigeria: SEC Issues Two New Stock Market Rules

(Oct. 2, 2008) The Securities and Exchange Commission of Nigeria issued new rules on September 15, 2008, in conformity with a Federal Government directive to stabilize the stock market. The rules follow the establishment of two technical committees, one to review the code of corporate governance for public companies and the other to review the structure and processes of the capital market.

Among the new provisions is Rule 109B, on the acquisition of their own shares (share buy-back) by companies. Rule 109B (3)(vi) states that shares will “only be re-purchased out of share premium account and or accumulated profit of the company which would otherwise be available for dividends and shall be reflected in the latest audited accounts”; the latter are not to be more than nine months old. (Nigeria: SEC Issues New Stock Market Rules, DAILY TRUST (Abuja), Sept. 17, 2008, available at The aggregate number of shares to be bought back, according to the SEC, is not to exceed 15% of the company's “existing issued and paid-up equity capital in any given financial year” (id.). Rule 109B (3) is further amended through the provision that the company resolution authorizing the share buy-back will be “a special resolution as provided in the Companies and Allied Matters Act (CAMA)” (id.).

Rule 31C concerns market makers. They are defined as “any entity desirous of performing the function of a market maker in the capital market.” Furthermore, a market maker is a “specialist permitted to act as dealer, any dealer acting in the position of a block [positioner], [and] any dealer who with respect to a security, holds himself out as being ready to buy and sell such securities for his own account on a regular and continuous basis.” (Id.) Market makers must file an application for registration with the SEC.

To be eligible as a market maker, a company must have at least N2 billion (roughly US$17.5 million) in paid-up capital and maintain sufficient liquid assets at all times to coverits current indebtedness. In addition, the market maker must “clearly state in its Memorandum and Articles of Association that it can deal in securities in the capital market and … convey any change in information which affects the status of the company to the Commission” as required by the rules and regulations. (Id.) Among other functions, aside from being a specialist in designated securities, the market maker is expected to promote continuous liquidity,”a smooth trading atmosphere,” market stability, and price discovery. It should also “have the capacity for continuous 2-way quotes in the relevant stocks throughout the trading session in a minimum quote size of 100,000 units of shares.” The market maker, according to the rule, cannot combine these functions with stock brokerage, but it may carry out underwriting. (Id.)