The Capital Market, The Legal Practitioner And The Investor: A Career As A Capital Market Solicitor By: Anthony I. Idigbe San.

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)

Issuer (Company)RegistrarStockbroker/Issuing HouseReporting AccountantInvestorAuditor

Capital Market Operators

Capital Market Operators Cont’d

TrusteesSolicitor

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 publicsecondary 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. CMSAEnsures discipline and good corporate governanceTransparency 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 capacitiesSolicitor 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 issueensure that the company’s MEMART and certificate of incorporation reflects its status as a public companydraft the vending, underwriting and other agreementsconduct due diligence on the claims and litigations of the issuer and give opinion on their materialityvet the trust deed to ensure conformity with regulatory requirementsFile 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 ConductSets 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 lawregister 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!