Beruflich Dokumente
Kultur Dokumente
SUPERVISION OF
SECURITIES MARKETS
PRESENTED BY:
Lawyer Eshun
1. An Overview of Securities
Regulation
2. The Structure of the Regulatory
System in Ghana
3. The Ghana Stock Exchange as Self-
Regulatory Organization
4. Regulation of Collective Investment
Schemes
2
CHAPTER 1
AN OVERVIEW OF
SECURITIES REGULATION
3
Legal Definition of a Security
6
Investor Protection (Contd)
Elements of Investor Protection (Financial
Services and Markets Act, 2000,U.K):
1. A system of full and timely disclosure of all
material information
2. Registration of participants (Issuers,
underwriters, distributors, Investment
Advisory firms, etc)
3. Capital Requirements (e.g. One Billion
Cedis Requirement for Investment
Advisors)
4. Segregation of customer account from
firms account
5. Guarantee funds or bonding should be
established to protect against employee
error, malfeasance, or payment failure).
See section 99 of P.N.D.C.L. 333 as
amended 7
Elements of Investor Protection (Contd)
10
4. Promote Safety and Soundness
12
Fiduciary Responsibilities of Financial
Institutions (contd)
A fiduciary must NOT:
Make secret profit at the expense of
his client
Compete with his client without his
consent
Act unfairly towards his client
Making a full disclosure of all facts
when dealing with him>
Delegate performance of his fiduciary
duties to a third person without the
clients consent.
A fiduciary MUST:
Make full disclosure of all facts when13
6. Development of the Capital Market
Optimal level of regulation may
bolster investor demand for
securities and hence result in
development of the capital market
14
7. Increase Competition
Provides quality service at lower
prices
15
Regulation Of Market Institutions
1. Securities Issuers
2. Organized Exchanges and Over-
the-Counter Markets
3. Institutional Investors
16
REGULATION OF MARKET INSTITUTIONS (contd)
Securities Issuers
Regulated to ensure compliance with
guidelines, registration, and disclosure
requirements
E.g. (1) Securities issuers are required to
prepare prospectus (2) Listed companies are
required to prepare quarterly financial
statements
See Section 9(j) of P.N.D.C.L. 333 as
amended and Sections 265 to 291 of the
Companies Act, 1963 (Act 179) as
amended.
17
REGULATION OF MARKET INSTITUTIONS (contd)
Institutional Investors
Require attention in national
securities laws
May play multiple roles such as
securities issuer as in mutual fund,
underwrite issues, purchase or invest
in an offering, offer investment
advice, or manage fund on behalf of
clients, etc.
Some institutional investors act only
as passive investors, and only
19
assume substantial equity positions
REGULATORY AGENCIES
20
REGULATORY AGENCIES (contd)
Market Regulation
Involves supervision of the operations of
the securities markets and professionals
within the markets.
Extends to registration of securities
(both listed and OTC), registration of
broker/dealers, and setting of capital
requirements for securities firms,
exchanges, and clearing companies, and
depositories. See section 9(c) of
P.N.D.C.L. 333 as amended.
22
REGULATORY AGENCIES (contd)
25
DISADVANTAGES OF SROs
Lack of direct accountability.
SROs may arrogate more powers to
themselves than intended by
Parliament.
Customers could easily be exploited
by the professionals in the market
without being aware (unsophisticated
investors).
Complex institutional structures
26
CHAPTER 2
27
THE STRUCTURE OF THE REGULATORY SYSTEM IN
GHANA
29
THE COMPANIES CODE
Types of Companies
Act 179 defines a company as a body
corporate formed and registered under the
Code or an existing company. See
section 2 and the first Schedule of
Act 179 as amended
Under the Companies Code, only public
companies can invite the public to
subscribe to its securities. See section
265 of Act 179
Under Sections 9(3) of Act 179, a
private company is defined as a company
which by its Regulations does the
following: 30
Restricts the rights to transfer its shares,
Companies Code
Prohibits the company from making any
invitation to the public to acquire any shares or
debentures of the company ; and
Prohibits the company from making any
invitation to the public to deposit money for
fixed periods or payable at call, whether or not
bearing interest.
Act 179 provides that any other company
shall be a public company. In other words,
a public company is a company that in its
regulations has no restriction on the right
to transfer its shares, has no upper limit on
the number of its shareholders or
debenture holders and is not restricted in
making invitations to the public. 31
Issues of Securities
Control of Public Issues
First of all, only public companies may make
invitations to the public subject to rigorous
regulatory procedures.
Meaning of invitation to the Public: -
See section 266(1) For the purposes of this
Code, an invitation shall be deemed to be
made to the public if an offer or invitation to
make the offer is,
a.published, advertised or disseminated in
Ghana by newspaper, broadcasting,
cinematograph, or any other means
whatsoever, 32
Issues of Securities
b.made to or circulated among any persons
whether selected as members of
debenture holders of the company
concerned as clients of the person making
or circulating the invitation or in any other
manner,
c made to any one or more persons upon
the terms that the person to whom it is
made may renounce or assign the benefit
thereof or of any shares or debentures to
be obtained thereunder in favour of any
other person, 33
Issues of Securities
d.made to any one or more persons to
acquire any shares or debentures dealt in
upon any stock exchange or in respect of
which the invitation states that application
has been or will be made for permission to
deal in those shares or debentures upon
any stock exchange.
34
Issues of Securities
Provided That
nothing herein contained shall be taken as
requiring any invitation to be treated as made to
the public if it can properly be regarded in all
the circumstances as being a domestic concern
of the persons making and receiving it;
36
Public Issues
37
Public Issues
General information regarding the issuer name,
address, legal form, authorized businesses, and
names, addresses and occupation of directors and
auditors.
information regarding the issue amount of offer,
purpose of issue, denominations of issue,
minimum amounts, offer period, maturity and
redemption datesetc
information regarding experts and advisers to the
issue.
financial information regarding the issuer existing
indebtedness, audited financial statements
38
Public Issues
prospects and risk factors affecting issuer
- economic factors affecting the issuer or
the project to be financed with the issue,
principal risk factors of the issuer or
project to be financed with proceeds of the
issue.
Additional information material
contracts for the 2 years preceding the
issue, any litigation or legal proceedings
likely to affect the issuers financial
position, tax implication on interests,
capital gains and transfer of securities, 39
Corporate Governance
Mechanisms
Corporate governance is the system by which
companies are directed and controlled. It covers
topics such as:
40
HISTORY IN THE UK AND NEED FOR
CORPORATE GOVERNANCE
A little bit of the History of Corporate Governance in the UK and the need
for Corporate Governance
41
Board of Directors
Role of Board Under section 179 of Act 179,
directors are defined as those persons who are appointed
to direct and administer the business of the company.
Election of Directors Normally directors are chosen at
an annual general meeting because of their background,
experience or specialised knowledge in the particular
field of activity. In any case the Act disqualifies the
following persons:
a minor below the age of 21
A lunatic
A bankrupt
A person who has been convicted on indictment of an
offence involving fraud or dishonesty or has been guilty
of any criminal offence in relation to any body corporate.
An undischarged bankrupt. See section 182 0f Act 179
42
Board of Directors
Duties and Responsibilities of the Board
Normally the duties and responsibilities accepted
and performed by the Board include the following:
To formulate policies for the company aimed at
improving the companys profit performance and
ensuring fulfilment of the companys plan;
To be loyal to the company which duty includes
disclosing to the company any personal interests
in the transaction contemplated by the company.
Not to usurp company opportunities for their own
interests or act in a manner that is contrary to the
best interest of the company;
Not to engage in business that competes with the
company;
43
Board of Directors
Not to accept compensation for effecting
decision-making by the companys
governing bodies;
Perform their official duties in good faith
and in the best interest of the company;
and
Be responsible to the company for any
damage they may have caused the
company as a result of their failure to
perform, or negligence in performing the
functions required of them by law.
44
Shareholders
Rights of Shareholders
As part of the principles of good practice
of corporate governance, the Companies
Code gives shareholder the following
rights in regard to his investment in a
company.
The right to participate in the companies
profits by way of dividends;
The right to attend general meetings of
the company and to speak and vote on
any resolution before the meeting.
45
Shareholders
The right to sell shares;
Right to buy additionally issued shares
(in the case of a rights issue);
Right to participate in the distribution of
the companys property in the event of
its liquidation
Right to appoint and remove directors.
Right to inspect the register of members.
Requisition resolutions
46
Shareholders
Duties of shareholders
Apart from paying the full price of shares
issued to him/her in accordance with
deadlines in allotment instrument,
shareholders are required to do the
following:
Participate in shareholder meetings
Not to act against the interest of the
company;
Not to disclose certain confidential
information of the company; and
To act in accordance with the companys 47
Corporate Governance
Employees
Audit control and reporting
Books and records
48
THE SECURITIES INDUSTRY LAW (SIL) & SECURITIES
AND EXCHANGE COMMISSION REGULATIONS LI 1728
(SEC REGULATIONS)
49
FUNCTIONS OF SEC
52
(x) hedge funds,
(xi) private equity funds,
(xii) venture capital funds,
(xiii) nominees,
(xiv) underwriters,
(xv) issuing houses,
(xvi) registrars,
(xvii) custodians,
(xviii)trustees,
(xix) primary dealers,
(xx) broker-dealers, and
(xxi) the agents of the persons specified in subparagraphs (i) to (xx);
to control and supervise their activities with a view to maintaining
proper standards or conduct and acceptable practices in the securities
business;
53
(d) formulate principles for the guidance of the industry;
(e) monitor the solvency of licence holders and take
measures to protect the interest of customers where the
solvency of a licence holder is in doubt;
(f) protect the integrity of the securities market against
any abuses arising from dealing in securities including
insider trading;
(g) adopt measures to minimise and resolve any conflict
of interest that may arise for market operators;
(h) review, approve and regulate takeovers, mergers,
acquisitions and all forms of business combinations in
accordance with any law or code of practice requiring it to
do so;
54
(i) create the necessary atmosphere for the orderly
growth and development of the capital market;
(j)perform the functions referred to in section 279 of the
Companies Act 1963 (Act 179);
(k) examine and approve invitations to the public made
by issuers other than the government;
(l)authorise and regulate the issuing of securities in
Ghana by foreign issuers;
(m) perform other functions specified under this Act; and
(n) undertake activities that are necessary or expedient
for giving full effect to the provisions of this Act.
55
ENFORCEMENT OF THE LAW
The SEC Regulations were passed in 2003
The regulations apply to: stock exchanges, investment advisers,
dealers, including broker-dealers, trustees, share transfer agents,
custodians, and central securities depositories, providers of securities
clearing and settlement services, underwriters, issuing houses, dealers,
investment representatives, issuers of securities to the public
SEC has rules as to:
65
CHAPTER 3
66
CHAPTER 3
77
CODE OF CONDUCT FOR LDMs
81
METHODS OF BRINGING SECURITIES ON TO THE
EXCHANGE
1. A Prospectus Issue: Offer by a company of
its own security to the public
2. An Offer For Sale: Offer of securities already
in issue to the public by an issuing house or
brokerage firm that has already subscribed
to the issue.
3. A Placing: Privately dealing in securities by a
broker or its client through the market
4. An Introduction: Where no marketing is
required since security is already widely held
5. A Rights Offer:
6. Vendor Consideration Issue: Issue of
securities in consideration for assets of a
business 82
LISTING CRITERIA LEGAL STATUS OF CAPITAL
ISSUERS
1. Government of Ghana
2. Any of the following forms of
companies formed under the
Companies Code, 1963 (Act 179):
1. Public limited liability company
2. State Owned Enterprises (SOEs)
ready for privatization through
public flotation of securities
3. Unit Trusts or Mutual Funds
4. Other public corporate bodies
recognized under any law of Ghana 83
SECURITIES THAT CAN BE LISTED
84
MINIMUM LISTING REQUIREMENTS
1. All Securities:
1. Issuer must have applied to the
GSE
2. Application must be sponsored by a
Licensed Dealing Member (LDM)
3. There must be a prospectus or
other document approved by the
Exchange
4. Securities should have been fully
paid for
5. Securities should be freely
transferable 85
MINIMUM LISTING REQUIREMENTS (contd)
90
STEPS INVOLVED IN AN INITIAL PUBLIC OFFER
(IPO)
94
DISCLOSURE POLICY OF THE GSE
96
FIDELITY FUND
97
TAXATION
REGULATION OF
COLLECTIVE INVESTMENT
SCHEMES
100
COLLECTIVE INVESTMENT SCHEMES
Capital Requirements
A manager of a unit trust or mutual
fund must at the date of application
have a minimum issued and paid up
capital of 1 billion.
Every trustee of a unit trust and every
custodian of a mutual fund shall at the
date of application have a minimum
issued and paid up capital of 5
billion.
112
REPORTS TO INVESTORS
The manager of a unit trust and the board of
directors of a mutual fund shall prepare a half
yearly and annual investors report to include:
Plan Objectives:
1) Retirement Savings
2) Savings for home ownership and educational
needs
3) Savings for an all purpose plan
4) Lump-sum payment on account of physical or
mental disability
5) Lump-sum payment to dependants in the event of
death, or a contributor to a plan.
119
LONG-TERM SAVINGS PLANS BILL (contd)
120
LONG-TERM SAVINGS PLANS BILL (contd)
1. Administration
121
LONG-TERM SAVINGS PLANS BILL (contd)
122
LONG-TERM SAVINGS PLANS BILL (contd)
123
LONG-TERM SAVINGS PLANS BILL (contd)
7. Offences
127
LONG-TERM SAVINGS PLANS BILL (contd)
128