The International

CapitalMarkets Review

Law Business Research

Sixth Edition

Editor

Jeffrey Golden

The International

Capitalmarkets Review

Sixth Edition

EditorJeffrey Golden

Law Business Research Ltd

PUBLISHER Gideon Roberton

SENIOR BUSINESS DEVELOPMENT MANAGER Nick Barette

BUSINESS DEVELOPMENT MANAGER Thomas Lee

SENIOR ACCOUNT MANAGERS Felicity Bown, Joel Woods

ACCOUNT MANAGER Jessica Parsons

MARKETING COORDINATOR Rebecca Mogridge

EDITORIAL ASSISTANT Gavin Jordan

HEAD OF PRODUCTION Adam Myers

PRODUCTION EDITOR Anne Borthwick

SUBEDITOR Gina Mete

CHIEF EXECUTIVE OFFICER Paul Howarth

Published in the United Kingdom by Law Business Research Ltd, London

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The information provided in this publication is general and may not apply in a specific situation, nor does it necessarily represent the views of authors’ firms or their clients. Legal

advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained

herein. Although the information provided is accurate as of November 2016, be advised that this is a developing area.

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i

The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:

ACKNOWLEDGEMENTS

AFRIDI & ANGELL LEGAL CONSULTANTS

ALLEN & OVERY

BHARUCHA & PARTNERS

BORENIUS ATTORNEYS LTD

DE PARDIEU BROCAS MAFFEI

DLA PIPER MARTÍNEZ BELTRÁN

FENXUN PARTNERS

G ELIAS & CO

HOGAN LOVELLS BSTL, SC

INTERNATIONAL COUNSEL BUREAU

KING & WOOD MALLESONS

KOLCUOĞLU DEMİRKAN KOÇAKLI ATTORNEYS AT LAW

MAPLES AND CALDER

MIRANDA & AMADO ABOGADOS

MKONO & CO ADVOCATES

MONASTYRSKY, ZYUBA, STEPANOV & PARTNERS

MORRISON & FOERSTER LLP / ITO & MITOMI

NIELSEN NØRAGER LAW FIRM LLP

PETER YUEN & ASSOCIATES IN ASSOCIATION WITH FANGDA PARTNERS

Acknowledgements

ii

PINHEIRO NETO ADVOGADOS

P.R.I.M.E. FINANCE FOUNDATION

REED SMITH

RUSSELL MCVEAGH

SIDLEY AUSTIN LLP

SYCIP SALAZAR HERNANDEZ & GATMAITAN

TOKUSHEV AND PARTNERS

URÍA MENÉNDEZ ABOGADOS, SLP

VIEIRA DE ALMEIDA & ASSOCIADOS, SOCIEDADE DE ADVOGADOS, SP RL

iii

Editor’s Prefaces ..................................................................................................vii Jeffrey Golden

Chapter 1 AUSTRALIA ............................................................................... 1Ian Paterson

Chapter 2 BRAZIL .................................................................................... 22Ricardo Simões Russo, Gustavo Ferrari Chauffaille and Luiz Felipe Fleury Vaz Guimarães

Chapter 3 BULGARIA ............................................................................... 30Viktor Tokushev and Nataliya Petrova

Chapter 4 CHINA ..................................................................................... 40Xusheng Yang

Chapter 5 COLOMBIA ............................................................................. 56Camilo Martínez Beltrán and Sebastian Celis Rodríguez

Chapter 6 DENMARK .............................................................................. 66Thomas Weisbjerg and Peter Lyck

Chapter 7 FINLAND ................................................................................ 77Juha Koponen, Janni Hiltunen, Mark Falcon and Matias Keso

Chapter 8 FRANCE .................................................................................. 87Antoine Maffei and Olivier Hubert

Chapter 9 GERMANY ............................................................................. 115Kai A Schaffelhuber

Chapter 10 HONG KONG ....................................................................... 126Vanessa Cheung

CONTENTS

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Chapter 11 INDIA .................................................................................... 139Vishnu Dutt U

Chapter 12 IRELAND ............................................................................... 150Nollaig Murphy

Chapter 13 JAPAN .................................................................................... 173Akihiro Wani and Reiko Omachi

Chapter 14 KUWAIT ................................................................................ 187Abdullah Al Kharafi and Abdullah Alharoun

Chapter 15 LUXEMBOURG ..................................................................... 198Frank Mausen and Henri Wagner

Chapter 16 MEXICO ................................................................................ 220René Arce Lozano, Mayuca Salazar Canales and Elías Muñoz García

Chapter 17 NEW ZEALAND .................................................................... 231Deemple Budhia and John-Paul Rice

Chapter 18 NIGERIA ................................................................................ 240Fred Onuobia and Bibitayo Mimiko

Chapter 19 PERU ...................................................................................... 249Nydia Guevara V and Álvaro del Valle R

Chapter 20 PHILIPPINES ......................................................................... 256Maria Teresa D Mercado-Ferrer, Joan Mae S To and Jo Marianni P Ocampo

Chapter 21 PORTUGAL ........................................................................... 274José Pedro Fazenda Martins, Orlando Vogler Guiné and Sandra Cardoso

Chapter 22 RUSSIA ................................................................................... 286Vladimir Khrenov

Contents

v

Chapter 23 SPAIN ..................................................................................... 301David García-Ochoa Mayor and José María Eguía Moreno

Chapter 24 TANZANIA ............................................................................ 312Kenneth Mwasi Nzagi

Chapter 25 TURKEY ................................................................................ 317Umut Kolcuoğlu, Damla Doğancalı and Aslı Tamer

Chapter 26 UNITED ARAB EMIRATES ................................................... 327Gregory J Mayew and Silvia A Pretorius

Chapter 27 UNITED KINGDOM ............................................................ 341Tamara Box, Ranajoy Basu, Claude Brown, Nick Stainthorpe, Caspar Fox, James Wilkinson, Jacqui Hatfield, Winston Penhall and Daniel Winterfeldt

Chapter 28 UNITED STATES................................................................... 370Mark Walsh and Michael Hyatte

Appendix 1 ABOUT THE AUTHORS ...................................................... 387

Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS ........ 405

Contents

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EDITOR’S PREFACE TOTHE SIXTH EDITION

There is a lesson from the international capital markets that took me, as a young ICM lawyer, a measure of time to both comprehend and appreciate. It was namely this: in matters legal, market participants have a marked preference for certainty above almost anything else. Even sometimes ahead of justice!

Market participants need to know where they stand.You see, you can trade or structure around a position that you know to be certain,

however undesirable that position may be, and whether or not you believe it to be fair. What is abhorred is not knowing what your position is. Eventually being told by a court after months or years of litigation, for example, that you were correct in your earlier view does not give a lot of comfort if, waiting on that answer, you stood ‘naked’ to a market that has moved on and significantly against you while you remained uncertain whether, when and to what extent to hedge your exposure or otherwise move in reliance on the position you had previously assumed.

Let me give you an extreme example of this preference for certainty over justice as it is reflected in the terms widely used by the derivatives markets when structuring a trade under my favourite contract form, the ISDA Master Agreement. There, a library of product-specific definitional booklets provide various terms tied to particular product markets, including details of pricing sources, relevant market conventions, and fallbacks and adjustments for when a given source may not be available and for other market disruptions. Relevant booklets can be incorporated into the parties’ trade confirmations and thus added to the parties’ contract on an ‘as and when needed’ basis.

Many of these booklets include a provision that is widely embraced for trades that base their prices on published and displayed screen rates. It provides, for example, that where a relevant rate for a pricing date is based on information from certain sources such as a Reuters screen page the rate is, as you might expect, subject to corrections made by that source – but only if the correction is made within one hour of the time when the

relevant rate is first displayed.1 After that, even if the displayed rate has an extra zero in it, and even if it is later corrected, the rate as it stood one hour out becomes the irrevocable basis for the relevant pricing of the transaction. That is the potentially harsh but, in order to ensure certainty, market-preferred position.

This desire for timely and reliable answers can also be seen by the considerable contractual privilege and discretion afforded, for example, to a non-defaulting party by allowing it to self-determine a close-out amount following its counterparty’s default. That determination is subject to good faith and reasonableness. However, a conscious decision was taken that the number of issues subject to referral to court for determination, and the evidentiary basis on which those issues should be decided, would, in each case, be narrow. It was intended that it should be of no consequence if, perhaps with the benefit of hindsight, a better answer could be determined by the court. It was thought more important by the markets that an answer honestly derived by a party could be relied upon as final so that the party could move on.

Whether it is the measure of their claims following a default, the scope of their exposure to market risk, or the strength of their collateral credit support, market participants hate surprises. They need to know where they stand. They seek authoritative answers that can be relied upon. And they trust in the rule of law.

My former law partner, Philip Wood CBE, QC (Hon) recently published a fascinating book.2 In it, Philip argues that the challenge set for our planet is survival, that the rule of law has supplanted religion in providing the basis for a morality that will be necessary to ensure that survival, and that it falls to lawyers to form a ‘priesthood’ capable of providing relevant answers, as well as preserving the certainty and order, that can contribute to that quest for survival.

And yet we look out at a marketplace with more than a little uncertainty at the moment (Brexit, a worrying US presidential election looming, equally worrying ongoing world political tensions and even conflict, a systemically relevant global financial institution facing crippling fines and a crisis of confidence, cyber insecurity, etc.). Perhaps not surprisingly then, the press reports that the value of initial public offerings has fallen by about a third this year when compared with last year in this period of market volatility and political uncertainty.

That is where this book comes in (with a new jurisdiction, Hong Kong, having been added). Our legal experts who have contributed have been tasked with promoting legal certainty through guidance about where matters relevant to the international capital markets stand in their home jurisdictions. They are our priests!

Join them, and take up Philip Wood’s challenge. If you are reading this book, it is almost certainly because someone is looking to you for answers – looking to you to provide the legal certainty the capital markets seek.

1 See, e.g., 2006 ISDA Definitions, Section 7.6.2 Philip R Wood, The Fall of the Priests and the Rise of the Lawyers, (Hart Publishing Ltd, 2016).

viii

Editor’s Preface to the Sixth Edition

My admiration for our contributing experts continues, and of course I shall be glad if their collective effort proves helpful to our readers when facing the important challenge of framing the correct answers.3

Jeffrey GoldenP.R.I.M.E. Finance FoundationThe HagueNovember 2016

3 Did I finally make it through a preface without mentioning the Global Financial Crisis?

Editor’s Preface to the Sixth Edition

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Chapter 18

NIGERIA

Fred Onuobia and Bibitayo Mimiko1

I INTRODUCTION

i The Investments and Securities Act, 2007

The Nigerian capital market is regulated by a panoply of laws, chief among them being the Investments and Securities Act, 2007 (ISA). Divided into 18 parts, the ISA makes provision for the establishment of the Securities and Exchange Commission (SEC or the Commission). The SEC is the apex regulatory organ of the Nigerian capital market. The SEC, inter alia, has the power to:a make rules and regulations for the market;2

b register and regulate securities exchanges and other self-regulatory organisations; c register and regulate the issuance of securities;3

d intervene in the management and control of failing capital market operators;4 and

1 Fred Onuobia is a partner and Bibitayo Mimiko is an associate at G Elias & Co.2 The SEC has issued the SEC Rules, 2013 (as amended) (SEC Rules): sec.gov.ng/regulation/

rules-codes.3 ISA, Section 315, defines ‘securities’ as:

(a) debentures, stocks or bonds issued or proposed to be issued by a government; (b) debentures, stocks, shares, bonds or notes issued or proposed to be issued by a body corporate; (c) any right or option in respect of any such debentures, stocks, shares, bonds, notes; or (d) commodities futures, contracts, options and other derivatives, and the term securities in this Act includes those securities in the category of the securities listed in (a) – (d) above which may be transferred by means of any electronic mode approved by the Commission and which may be deposited, kept or stored with any licensed depository or custodian company as provided under this Act.

4 ‘Capital market operators’ is defined in the ISA as ‘any persons (individual or corporate) duly registered by the Commission to perform specific functions in the capital market’, and covers brokers, underwriters, solicitors and their respective firms. ISA, Section 315.

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e in appropriate circumstances, impose penalties and levies on defaulting capital market operators.

Consequently, the Securities and Exchange Commission Rules and Regulation, 2013 made by the SEC pursuant to its powers, is considered as the market’s bible. The SEC periodically releases new rules to complement the SEC Rules.

Two other key bodies established by the ISA are the Administrative Proceedings Committee (APC) and the Investments and Securities Tribunal (IST). The APC is a committee of the SEC established as a quasi-judicial fact-finding body. The APC essentially provides the avenue for market operators, against whom complaints have been made by investors and the SEC alike, to be heard prior to the determination of the complaint by the SEC.5 It goes without saying that a decision of the APC will be regarded as a decision of the SEC, and an appeal therefore can be made to the IST.

The IST6 is established under the ISA to hear and determine any question of law or dispute involving:a a decision or determination of the Commission in the operation and application of

this Act, and in particular, relating to any dispute: • between capital market operators; • between capital market operators and their clients; • between an investor and a securities exchange or capital trade point or clearing

and settlement agency; or • between capital market operators and self-regulatory organisations;

b the Commission and a self-regulatory organisation;c a capital market operator and the Commission;d an investor and the Commission;e an issuer of securities and the Commission; andf disputes arising from the administration, management and operation of collective

investment schemes.

Decisions of the IST are to be enforced in the same manner as a decision of the Federal High Court (FHC). Appeals arising from decisions of the IST lie at the first instance to the Court of Appeal.

ii The Companies and Allied Matters Act, 20047 (CAMA)

The CAMA is secondary in its applicability to the capital market. It governs most aspects of the incorporation and operations of companies and other corporate bodies requiring

5 Under a SEC circular dated 16 February 2015 on complaints management, most complaints are now to be initially lodged and resolved at trade group level or by self-regulatory organisations, such as the Nigerian Stock Exchange. Complaints not resolved at this level are to be referred to the SEC. Consequently, market operators must register as members of their respective SEC-recognised trade groups. The objective of this arrangement is to secure speedy resolution of complaints.

6 See ISA, Section 274.7 The Companies and Allied Matters Act, Cap C20, LFN 2004.

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incorporation or registration with the Corporate Affairs Commission (CAC).8 To the extent that these companies and corporate bodies are participants in Nigeria’s capital market, CAMA provisions are significant and apply also to the capital market. For instance, Parts VI and VII of the CAMA make provisions on the nature and types of shares and bonds to be issued by companies. These securities end up being offered and traded in the Nigerian capital market.

iii Other relevant statutes

Undoubtedly, other sector-specific legislations have a certain degree of relevance to the capital market. Arguably, the most important of such legislation are those relating to banks9 (Banks and Other Financial Institutions Act, 1991 (BOFIA)), pension fund administrators10 (Pension Reform Act, 2014) and the Central Bank of Nigeria (CBN)11 (Central Bank of Nigeria (Establishment) Act, 2007).

iv Regulation of foreign investment

There is no difference in the regulatory treatment of foreign investment in the capital market in relation to the regulation of local investment in the market. Dealings in foreign exchange are regulated by both statute and the CBN through regulations, circulars and directives. A key piece of legislation is the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act12 (FEMM Act).13

There are no regulatory restrictions on foreign investment in the market. Pursuant to Section 26 of the FEMM Act:

A person, whether – (a) resident in or outside Nigeria; or (b) a citizen of Nigeria or not, may deal in, invest in, acquire or dispose of, create or transfer any interest in securities and other money market instruments whether denominated in foreign currencies in Nigeria or not. A person may invest in securities traded on the Nigerian capital market or by private placement in Nigeria.

8 The CAC is established by the CAMA, Section 1. It is Nigeria’s equivalent of the UK Companies House.

9 Banks are significant issuers of securities traded in the Nigerian capital market.10 Pension fund administrators are influential investors in the market. Regulations made

pursuant to the Pension Reform Act on assets that qualify for investments by pension fund administrators invariably dictate products that make their way to the capital market.

11 The CBN regulates banks and dealings in foreign exchange in the Nigerian economy.12 The Foreign Exchange (Monitoring and Miscellaneous Provisions) Act, Cap F34, LFN 2004.13 The Foreign Exchange Manual issued by the CBN is in furtherance of the regulatory duty

imposed by the FEMM Act. The CBN also regularly issues circulars on the regulation of the use of foreign exchange in the economy. For example, the CBN, by a Circular on the ‘Inclusion of some Imported Goods and Services on the List of Items not valid for Foreign Exchange in the Nigerian Foreign Exchange Markets’ dated 23 June 2015, barred access to the foreign exchange market for the purchase of foreign exchange for investment in Eurobonds, foreign currency bonds and shares.

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Nevertheless, a foreign investor seeking to invest in the market must ensure that any foreign currency to be invested in the market is imported into Nigeria through an authorised dealer.14 In so doing, the authorised dealer issues a certificate of capital importation (CCI) to the investor. The CCI guarantees ‘unconditional transferability of funds, through an authorised dealer in freely convertible currency, relating to dividends or profits (net of taxes) attributable to the investment’.15 Similarly, foreign exchange purchased from the Nigerian Autonomous Foreign Exchange Market16 can be freely repatriated from Nigeria without any further approval.

The SEC Rules also require portfolio investors to appoint a custodian and to file a copy of the letter of appointment of the custodian with the SEC within 10 working days of making such an appointment.17

Nigerian law requires foreign companies seeking to operate in the Nigerian capital market to first incorporate and register a Nigerian company with the CAC.18 Subsequently, such companies must register with and obtain the relevant licences or authorisations from the SEC before they can commence operations as capital market operators in the market.19 Similarly, foreign companies can only apply and be registered as dealing members of the Nigerian Stock Exchange (NSE) upon registering and incorporating a separate Nigerian entity with the CAC.

v Cross-border securities transactions

Much like foreign investments, foreign issuers can issue, sell or offer for sale or subscription securities to the public through the Nigerian capital market. Such securities may be denominated in naira or any convertible foreign currency.20 The SEC Rules require foreign issuers to file an application for the registration of their securities with the SEC, and such application must be accompanied by a draft prospectus.21 Importantly, under new NSE Rules, foreign issuers may apply for the listing of their sukuk and debt securities on the NSE.

14 An authorised dealer is a bank licensed under BOFIA, and such other specialised bank issued with a licence to deal in foreign exchange. FEMM Act, Section 41.

15 FEMM Act, Section 15(4).16 Defined in the FEMM Act as ‘a market which the authorised dealers, authorised buyers,

foreign exchange end-users and the Central Bank are participants and may include other participants that the Government of the Federation may, from time to time, recognise’.

17 SEC Rules, Rule 409.18 CAMA, Section 54 makes it a general requirement for all foreign companies intent on

carrying on business in any sector of the Nigerian economy to obtain incorporation as a separate Nigerian entity before commencing business. The CAC certificate of incorporation issued to a foreign company pursuant to this provision is one of the documents required for registration with the SEC as a market operator.

19 SEC Rules, Rule 407. Other registration requirements include a certified true copy of the certificate of incorporation in the company’s country of domicile; proof of registration with the securities regulator or any other regulatory authority in the foreign entity’s country of domicile; and the shareholding structure of the foreign company.

20 SEC Rules, Rule 414.21 Extensive provisions are made for the content of the draft prospectus in Rule 419 of the SEC

Rules. The registration obligations placed on foreign issuers are the same as those placed on

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Foreign issuers may, at the discretion of the SEC, be exempted from certain securities registration obligations under the SEC Rules if it is ‘in the public interest and where reciprocal agreement exists between Nigeria and the country of the issuer, or the issuer’s country is a member of the International Organization of Securities Commissions (I.O.S.C.O.)’.22

vi The court system

Nigeria operates a common law system, but with a federal written Constitution23 as the basic law. The Supreme Court of Nigeria sits atop the hierarchy of courts, with the Court of Appeal on the next rung. The high courts and National Industrial Court are on the next rung. These courts are referred to as superior courts of record. Of importance to the Nigerian capital market is the FHC, which has 36 divisions spread across the country.

The FHC has exclusive jurisdiction over matters:a ‘arising from the operation of the Companies and Allied Matters Act or any other

enactment replacing that Act or regulating the operation of companies incorporated under the Companies and Allied Matters Act’;

b ‘the administration or the management and control of the federal government or any of its agencies’; and

c ‘any action or proceeding for a declaration or injunction affecting the validity of any executive or administrative action or decision by the federal government or any of its agencies’.24

Most operators in the capital market are limited liability companies incorporated under and regulated by the CAMA. It is arguable that the FHC has jurisdiction over matters that touch on the operation of these ‘CAMA companies’, even if such matters occur in the capital market. Points (b) and (c) above are also relevant to capital market disputes because the SEC, the apex regulatory body of the capital market, is an agency of the federal government.25

Nigerian public companies, trust companies, collective investment schemes, governments and government agencies, and supranational bodies.

22 SEC Rules, Rule 416.23 The Constitution of the Federal Republic of Nigeria, 1999 (as amended).24 Section 251 of the Constitution.25 There is often an overlap of jurisdiction between the FHC and IST over capital market

disputes, and there have been no definitive pronouncements or general guiding principles laid down by the Supreme Court on this issue. Cases have therefore been determined on a case-by-case basis, creating inconsistency, uncertainty and the opportunity to forum shop.

For example, in Ajayi v. SEC [2009] 13 NWLR Pt 1157, the decision of the FHC declining jurisdiction was upheld by the Court of Appeal. The case was for judicial review of a decision of the SEC through its APC. The FHC in declining jurisdiction stated that the ISA: ‘rested the adjudication arising from the operation of the ISA within the purview of the IST’. That jurisdiction of the IST is not of a concurrent application with the FHC.’ (Per Peter-Odili, JCA at p. 26). Another panel of the Court of Appeal in Christopher Okeke v. SEC (2013) LPELR-20355 (CA), however, refused to follow Ajayi v. SEC, and decided that the FHC had jurisdiction instead. The Court in its ruling stated that the jurisdiction of the

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vii The NSE

A very significant player in the Nigerian capital market is the NSE.26 Established in the wake of Nigeria’s independence from British colonial rule, the NSE operates an automated trading system and is, in conjunction with the Central Securities Clearing System Plc (CSCS), capable of offering electronic clearing, settlements, delivery and custodial services. Headquartered in Nigeria’s commercial capital of Lagos, the NSE has 13 other branches around Nigeria where trading occurs simultaneously.

The NSE currently operates the Main Board, the Alternative Securities Market (ASeM), and the Premium Board, which was introduced in August 2015.27 The ASeM Board is targeted at small and medium-sized enterprises, and requires less stringent listing requirements and relatively lower capital-raising costs. Significantly, companies seeking to be listed on the ASeM must appoint a ‘designated adviser’ whose role is to navigate the company through the listing process and requirements, especially its continuing obligations once listed on the ASeM. Conversely, the Premium Board is for gold standard companies that successfully meet the most stringent standards of the NSE. Importantly, all trading and listing on the NSE occurs through dealing members, which are stock broking firms so licensed by the NSE. Investors are required to open securities accounts with the CSCS.

As mandated by the ISA,28 the NSE maintains an Investors Protection Fund (IPF). The IPF is administered by a board of trustees subject to the regulatory supervision of the SEC. The IPF is for the compensation of investors’ losses arising from:

[…] the insolvency, bankruptcy or negligence of a dealing member firm of a securities exchange or capital point; and defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received or deemed received by the dealing member firm in the course of its business as a capital market operator.29

Claims can be made against a dealing member, and the current maximum amount an investor can receive as compensation in a claim against a dealing member is 400,000 naira.30

FHC granted by the Constitution ‘cannot be whittled down or taken away by an ordinary Act of the National Assembly in the absence of any amendment to the provision [of the Constitution] in question’. (Per Saulawa, JCA at p. 28).

26 The NSE is currently a non-profit making CAMA company limited by guarantee. However, there are plans for the demutualisation of the NSE. Relatedly, the SEC released the ‘Rules on Demutualisation of Securities Exchanges in Nigeria’ in the first quarter of 2015.

27 The Premium Board was officially launched by the NSE on 25 August 2015 with the three pioneer companies that successfully met the stringent listing requirements. The companies are Zenith Bank Plc, FBH Holdings Plc and Dangote Cement Plc. These three companies remain the only companies listed on the Premium Board as at August 2016.

28 ISA, Section 197.29 ISA, Section 198.30 This amount might be inadequate to compensate a high net worth investor. In relative terms,

however, it is a decent sum to the average small-time investor who is more susceptible to volatility in the market and misconduct on the part of market operators.

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viii Other securities exchanges

The FMDQ OTC Securities ExchangeThe FMDQ operates as a hybrid somewhat of a traditional securities exchange and over-the-counter (OTC) platform. Equity securities are currently not admitted for listing on the FMDQ. The FMDQ’s listing requirements are similar to those of the NSE but dissimilar in its admission of commercial papers for listing. Also unlike the NSE, the FMDQ operates only one quotation list.

The NASD OTCThe NASD provides a formal OTC trading platform for unlisted securities of public companies. Unlike the FMDQ, equity securities can be traded on the NASD platform. Securities traded on the NASD are categorised as either ‘blue tier’ (higher disclosure requirements) or ‘pink tier’.31

II THE YEAR IN REVIEW

i Efforts aimed at reducing unclaimed dividends

E-dividendsThe SEC, in collaboration with the CBN and the Nigerian InterBank Settlement Systems, launched an E-Dividend Management Mandate System in July 2015. The platform allows for the direct payment of dividends into registered investors’ bank accounts, thereby jettisoning paper dividend warrants. To encourage investors to register on the e-dividend platform, the SEC has undertaken to bear the cost of registration of investors completed by December 2016. Moreover, the SEC proposes to introduce a total ban on the issuance of paper dividend warrants by year-end.

Deposit of warrants in saving accountsThe CBN has also, by a Circular dated 28 July 2016, directed that savings account holders with a bank verification number (the CBN biometric identification system) should be allowed to deposit cheques not exceeding 2 million naira per customer per day into their savings account. This complements the SEC’s agenda to combat the problem of unclaimed dividends in the Nigerian capital market, as investors that operate only saving accounts are now allowed to deposit their dividend warrants directly into such savings accounts.

ii The Nigerian Capital Market Development Fund (NCMDF)

In August 2016, the SEC proposed a new rule that mandates registrars and companies in possession of stale dividends32 to transfer such funds to the NCMDF, which shall be established under the proposed rule. While the specific details of the NCMDF are as-yet not public, the SEC has stated that the Fund would be targeted at infrastructural development

31 Additional information on the activities of both the FMDQ and the NASD can be obtained from their websites at www.nasdng.com; and www.fmdqotc.com respectively.

32 Under CAMA, Section 385, an investor can claim a declared dividend for a period of up to 12 years after the date on which the dividend was approved by the shareholders of the company. Dividends unclaimed after the 12-year period become stale and incapable of recovery.

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of the capital market. This would be a marked departure from the existing laws,33 under which unclaimed dividends are retained by companies. Under CAMA, where dividends are unclaimed, the company is required to publish the list of shareholders entitled to such dividends with the notice of its next annual general meeting. If the dividends remain unclaimed after three months of such notice, the company may invest the funds for its own benefit in an investment outside the company, and the company will not be liable to account for any interest, but only the dividend during the 12-year window within which investors may claim declared dividends.

iii Rules Governing the Listing of Sukuk and Debt Securities (NSE Bonds Rules)

Issued in March 2016, the NSE Bonds Rules apply to issuers seeking to list sukuk or other debt securities on the official list of the NSE. The Bonds Rules are particularly significant for their provisions on the admittance of sukuk or other debt securities of foreign issuers on the NSE. Extant laws do not have provisions on foreign issuers. To be clear, the Bonds Rules define a ‘foreign issuer’ as a ‘government, national or corporate entity incorporated outside Nigeria, listed or otherwise on any other exchange other than the [NSE], whose sukuk or debt securities are also listed or proposed to be listed on the [NSE]’. The requirements laid down for foreign issuers are that:a the foreign issuer must appoint a Nigerian agent or representative in Nigeria to be

responsible for communications with the NSE; b the foreign issuer must maintain a paying agent who is registered with the SEC as a

Registrar; c all information and documents presented, submitted, disclosed or announced by the

foreign issuer must be in the English language; and d the financial statements of the issuer must be prepared in accordance with the

International Financial Reporting Standards with certified English translations provided to investors.

iv Revision of NSE listing and trading fees

To boost market efficiency by reducing the cost of listing for issuers, the NSE in August 2016 revised its listing fees for fixed income securities. Consequently:a trading fees will no longer be charged on fixed income securities traded on the NSE; b the previously fixed brokerage commission of 0.0005 per cent has been replaced with

a negotiable rate capped at 1 per cent; and c the previously fixed listing application fee of 0.15 per cent has been replaced with a

variable regime as follows: • 0.01 per cent for corporate bonds (exclusively listed on the NSE) with existing

equity listing on the NSE; • 0.0375 per cent for corporate bonds (dual listing) with existing equity listing on

the NSE; • 0.375 per cent for all other corporate bonds; and • 0.05 per cent for state and supranational bonds.

33 To avoid legal uncertainty and inconsistency, the CAMA may have to be amended to align with the proposed rule.

Nigeria

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III OUTLOOK AND CONCLUSIONS

The Nigerian capital market can best be described as emerging, robust and dynamic. Current economic challenges have no doubt had an effect on the Nigerian capital market. However, tailor-made regulations and products introduced by the SEC make the market attractive to both local and foreign investors.

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Appendix 1

ABOUT THE AUTHORS

FRED ONUOBIAG Elias & CoFred Onuobia is the managing partner of G Elias & Co. He holds a master’s of law degree from University College London. His areas of practice include securities, banking and project finance law. He’s recognised as a leading lawyer by IFLR1000, Chambers Global and The Legal 500. Fred Onuobia advised Ecobank Transnational Incorporated, a pioneer bank holding company, on its then-pioneering US$2.5 billion equity offering listed simultaneously on stock exchanges in three countries. He also advised Federal Mortgage Bank of Nigeria on its residential mortgage-backed securitisation transactions, and acted for Asset Management Corporation of Nigeria, Nigeria’s debt resolution company, on its 3 trillion naira bond programme (the largest bond programme in Nigeria).

BIBITAYO MIMIKOG Elias & CoBibitayo Mimiko is an associate at G Elias & Co. She holds a master’s of law degree from the London School of Economics. She is a member of the firm’s corporate practice group. Ms Mimiko’s experience covers bond and equity offerings, and commercial paper issuances.

G ELIAS & CO6 Broad StreetLagosNigeriaTel: +234 1 4607890 2806970Fax: +234 1 2806972fred.onuobia@gelias.combibitayo.mimiko@gelias.comwww.gelias.com