Transcript THE CAPITAL MARKET, THE LEGAL PRACTITIONER AND THE

The Capital Market, The Legal
Practitioner And The Investor:
A Career As A Capital Market
Solicitor
By:
Anthony I. Idigbe San
Definition of Capital Market
A place (not physically limited) where people buy
and sell securities.
A long-term financial market where funds are
mobilized and channeled into productive
investments for medium and long-term
development objectives.
Capital Market
Institutions/mechanisms
Securities and Exchange Commission (SEC)
Central Securities Clearing System (CSCS)
Nigerian Stock Exchange (NSE)
International Organization of Securities Commission
(IOSCO)
Capital Market Operators
Issuer (Company)
Registrar
Stockbroker/Issuing House
Reporting Accountant
Investor
Auditor
Capital Market Operators Cont’d
Trustees
Solicitor
Securities
A bundle of intangible rights sold to the public by
companies, authorities or institutions on which people
then trade in the capital market.
Functions
To provide a forum for companies and other authorities
to raise long-term funds at lower costs than the money
market for their operations.
Types of Securities or Bundles of
Rights
Shares
Debentures
Stocks/Bonds
Two Levels of the Market
primary market - where those wishing to
raise funds from the stock market sell
their securities to the public
secondary market - where those who
bought the securities in the Initial Public
offering (IPO) or in the capital market
can sell them anytime they wish
Information Driven Market
The purchaser (investor) in reaching his purchase
(investment) decision relies on information about the
company supplied by the directors or officers of the
company and verified by professionals.
Information includes projection of the future income
flow.
There is need for accuracy of the factors upon which
these projections are made.
Regulation
Both by the regulatory bodies and by the
professionals themselves (Self Regulatory
Organizations) e.g. CMSA
Ensures discipline and good corporate governance
Transparency
Professionalism
Reduction of systemic risks and
Maintains market integrity
This is in order to protect the interest of investors
The Legal Practitioner
Acts in two capacities
Solicitor to the Issuer in a public offering of securities,
responsible to the company, or
Solicitor to the Issue, responsible is to the investing
public, or
Solicitor to the trustee (where applicable)
Conducts litigation before the Investment and
Securities Tribunal (IST)
These solicitors play different roles in a Public offering.
Functions
ensure that issuer is in good legal and regulatory
standing with regards to the issue
ensure that the company’s MEMART and certificate
of incorporation reflects its status as a public
company
draft the vending, underwriting and other agreements
conduct due diligence on the claims and litigations of
the issuer and give opinion on their materiality
vet the trust deed to ensure conformity with
regulatory requirements
File all necessary documents
Investor
an individual/a company with purchasing power or
investible funds, which he wishes to invest in a
productive company for either medium/long term
development objectives
Relies on information given by directors and verified
by professionals
Interconnectivity
Where a company decides to raise
funds from the capital market, they sell
their securities in the primary market.
The investor with purchasing power but
ignorant of the viability of the company
relies on the information supplied by the
directors of the company and verified by
independent professionals before
purchasing these securities.
Capital Market Solicitors Association
A firm-based self-regulatory
organization.
Aim - to protect the general interest of
solicitors involved in capital market
operations/transactions.
Creating a platform for Solicitors to
effectively participate in the policy and
regulation process within the capital
market.
Code of Conduct
Sets standards of behavior for Solicitors
engaged in Capital Market Operations, in
order to preserve the integrity of the
profession and protect the interests of the
investor, the client and the Solicitor.
Imposes the obligation to report all cases of
fraud and suspected fraud.
The standard required of CMSA members is
higher than that required of the ordinary
solicitor.
Cont’d
supplements and should be applied in conjunction
with relevant laws, regulations and guidelines
applicable to participants within the capital market.
sets out requirements, guidelines and minimum
standards in respect of the conduct
Becoming A Capital Market Solicitor
become a lawyer with an indepth
knowledge of company law
register as a capital market operator
with SEC
membership of CMSA
Conclusion
when a company wants to raise funds from
the capital market, and when an investor
wants to invest funds in companies, there is a
reliance
on
the
opinion
given
by
professionals, as to the viability or otherwise
of the finances of the company.
The investor who has funds, which he wishes
to invest, and who has no knowledge of the
finances of the company, also relies on the
verdict.
Cont’d
The professionals thus, have a duty to show
due professional care and skill, integrity and
honesty when carrying out capital market
transactions.
Thus Issuers going to the market for funds
always employ professionals.
The professionals should also always carry
their duties with due diligence, and the
investors
should
always
study
this
information, preferably with their solicitors
before investing in this companies.
Thank you!