Infraction: SEC sets aside N5bn for investors’ compensation

By Nkiru Nnorom

The Securities and Exchange Commission, SEC, has set aside N5 billion as a seed capital to jump-start the National Investors Protection Fund, NIPF, to compensate investors who may suffer pecuniary losses in the course of their transaction in the capital market.

The NIPF is a scheme being promoted by the SEC to compensate investors that suffer  losses due to the insolvency, bankruptcy or negligence of a capital market operator, CMO.

The NIPF, according to the set of rules approved by the SEC’s board earlier in the year, will apply only to defalcations by insolvent or bankrupt capital market operators that are not dealing with members of any Securities Exchange or Capital Trade Points.

Accordingly, the NIPF will be for the purpose of compensating investors whose losses are not covered under the NIPF administered by SEC and Capital Trade Points.

Speaking at the post Capital Market Committee, CMC, press briefing in Lagos, the Director General, SEC, Mr. Mounir Gwarzo, said the Commission has also pegged compensation at N200,000.

He explained that the NIPF covers the entire capital market and is broader in scope than a similar fund being promoted by the Nigerian Stock Exchange, NSE, that seeks to provide respite to investors who suffer losses as a result of defalcation by dealing member firms of the Exchange.

He noted that the SEC taxed itself to provide the initial grant, saying that subsequently, operators in the market would make annual contribution to the fund.

He stated that the first set of beneficiaries would be compens- ated before the end of the year.

“The National Investors Protection Fund is not meant to pay an investor all he has lost in the market; it is just a temporary measure. So, if you have invested N1 million and for certain reason you are not able to get to N1 million in between the time before further investigations are done, before that operator is called to explain and the assets of the operator are sold and the proceeds used to pay the investor, the SEC will use the NIPF to pay you the maximum amount of N200,000 before you get the final amount,” he stated.

“So, the sum of N5 billion has been set aside for that purpose. This I think is an excellent feat that has been achieved by the SEC, even though we have very limited resources.

“We have not been funded for quite a while by the government and everybody knows that the market has gone down. So, we have to even sacrifice some of our key initiatives. We sacrificed some of the trainings that our staff needed to attend just for us to be able to set aside this money, and this amount of money is solely set aside by SEC, but as we move forward, the National Investors Protection will be funded by the market,” Gwarzo added.