Nigeria's Stock Exchange tackles Senate over planned amendment to AMCON law

The Nigerian Stock Exchange (NSE) has warned against blank exemption of Assets Management Company (AMCON), otherwise known as “bad bank” from complying with the provisions of the Investment and Securities Act (ISA ) in the proposed amendment of its enabling act.

CBN Gov, Sanusi

In its position paper to the Senate Committee on banking, insurance and other financial institutions on the AMCON amendment bill, the NSE said the proposed amendment could have a positive impact on the capital market, provided the bad bank is not exempted from compliance with the ISA.

“The positive impact of the AMCON Amendment Bill in the Nigerian capital

carket will be the increased powers of AMCON to create bonds, trade in them and participate in securities lending, as long as AMCON is not exempted from complying with all the provisions in the ISA, since it is the regulation which regulates all activities in the Capital Market,” the NSE said.

The capital market self-regulatory agency said the proposed amendment will provides the bad bank a source of funds to meet its obligations under the AMCON Act, which includes obligations arising from debt securities issued by it, part of which involve non-performing margin loans of stockbroking firms.

AMCON boss, Chike-Obi

It however want AMCON to “take advantage of the enabling environment created for securities lending activities and work with market stakeholders in order to make securities lending a success.”

On its objection to the certain provisions, which seek to exempt AMCON from ISA, NSE said section 60 of the proposed amendment of AMCON Act, which seek to ensure that AMCON is exempted from capital gains tax, the Companies Income Tax Act and the Stamp Duties, will also exempt AMCOn from complying with the entire provisions of the ISA.

“This total exemption is not advisable because the ISA makes provision for the rules and laws that govern and regulate the Capital Market. AMCON is an issuer primarily in bonds and is also potentially a major participant in securities lending as stipulated by the AMCON Act, both of these activities are extensively regulated by the provisions of the ISA. Part XV of the ISA deals with borrowing by the Federal, State and Local Government and their agencies and regulates activities involving bonds.

According to the Exchange, Part X of the ISA deals with the conduct of securities business, under which securities lending is regulated.

It therefore noted that to exempt the bad bank from the provisions of the ISA, will mean that the bonds issued by AMCON will not be regulated by any legislation since the AMCON Act does not have provisions regulating the issuance and dealing in bonds.   

The exemption, the NSE noted will also make it difficult for the capital market players to deal in AMCON bonds since the capital market players will be subject to the ISA whilst

NSE boss, Onyema

AMCON will not.

“This could lead to conflicting policies regarding actions that can be taken in respect of the AMCON bonds. This is the same situation with securities lending, as this is governed by the ISA and there are rules issued in respect of securities lending by both the Securities and Exchange Commission (SEC) and The Exchange.”

The NSE suggested that the specific areas in the ISA, such as transactional costs, tax, and regulatory fees which AMCON wants to be exempted from should be explicitly stated in

Section 6 of the AMCON Amendment Bill, rather than a blanket exemption from the ISA.