LEGAL AND INSTITUTIONAL FRAMEWORK REGULATING PUBLIC OFFERING OF SECURITIES IN THE NIGERIAN CAPITAL MARKET

A nation’s financial system is made up of the Money Market, Capital Market and the Insurance Market. While Central Bank of Nigeria serves as the apex regulatory organization of the Nigerian Money Market, the Securities and Exchange Commission (SEC) is the apex regulatory body of the Nigerian Capital Market, while the National Insurance Commission (NAICOM) regulates the Insurance Sector. Capital Market, in simple terms, is a market for raising long-term funds.  It is that segment of the financial market which represents the intricate intermediation functions and processes of a network of individuals, institutions and financial instruments between the users and providers of long-term funds are mobilized and channeled into productive investments by the issuance of equities and interest bearing securities.  The market also provides a mechanism for the transfer of existing securities (secondary market), thus enabling those who wish to dispose or acquire secondary securities to do so. Liquidity in the capital market is thus created and participation in primary issues enhanced. By virtue of its vital functions of resource mobilization and allocation, the capital market facilitates capital formation and accelerates economic development, which ultimately engenders societal wellbeing.  It creates an avenue for the participation of the populace in the Corporate Sector of an economy through the ownership of Securities. Owing to the potential benefits of the capital market to an economy, regulatory frameworks are usually put in place, in many countries including Nigeria, in an effort to develop an active and efficient capital market.  Such regulatory framework could be self-imposed by the operators of the system or statutory, such as Acts of Parliament. The need for regulation, in one form or the other, arises from the fact that the lack of regulation could lead to chaos and anarchy in financial transaction and eventual collapse of the system.  For instance, in response to the stock market crash of 1929, the United States of America created the Securities and Exchange Commission by the SEC Act of 1933. In Nigeria, regulation of the Capital Market can be said to have started after the enactment of the Capital Issues Commission Act of 1962, which was a direct regulatory imperative of the establishment of the Lagos Stock Exchange two years earlier. Public offering of securities in the Nigerian Capital Market is a fundamental step in accessing funds from the market and the resultant transaction chain, is the fulcrum upon which Primary and Secondary Market activities revolve.