The lack of clarity on the directive from the Securities and Exchange Commission (SEC) barring the Independent Non-Executive Directors (INEDs) from taking up executive roles within the same company or group structure, including that of chief executive officer has continued to unsettle the markets.
The bone of contemtion, according to the operators, who spoke with metrobusinessnews.com (MBN) in confidence is with regards to the definition and application of Public Interest Entities (PIEs) in the context of Capital Market Operations as well as the financial market generally.
SEC, had in the memo stated strict tenure limits for directors of CMOs designated as “significant public interest entities”, the phrase that they are yet to come to terms with, paticularly as it affects governance and operations.
More concerning, they further observe, is the fact that SEC currently plays a central role in approving board appointments for all capital market operators, including directors, CEOs, and INEDs.
“So, where lies the limits and operational details of the directive,?’ queries an operator.
Checks by metrobusinessnews.com (MBN) reveal that PIEs are organizations that have a significant impact on the public due to their business nature, size, or number of employees, which are subject to increased regulatory scrutiny to ensure transparency and accountability.
An operaror gave examples of PIEs to include, companies with transferable securities listed on a regulated market, credit institutions, such as banks and other financial institutions that provide credit to the public.
“Even Insurance Companies and some big private companies with public exposures and sizable number of employees and turnover that deal directly with the public could be regarded as public interest entities. So, we need clarification on the categories of people and organisations, and when the implementation of the directive would commence. As it is, one can prematurely end his or her career, particularly for long-serving executives who, may not be prepared for the exercise now, on the alter of this circular” he added.
While acknowledging the Commission’s desire to improve stakeholders’ confidence through transparency and credibility in operations, they advised the management to be wary of actions that could stranguate these entities which are currently under stricter reporting requirements and regulatory scrutiny.
“The lack of clarity from the SEC regarding the definition and application of PIEs in the context of Capital Market Operators may indeed cause confusion in the market. The SEC’s announcement of strict tenure limits for directors of CMOs designated as “significant public interest entities” may lead to concerns about the impact on these entities’ governance and operations. Besides, ‘with immediate effect’ as stated in the circular is still ambiguous to some us,” says another operaror.
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According to the rule, directors may serve a maximum of 10 consecutive years in the same company and 12 consecutive years across the same group structure.
However, the fact that SEC did not publish the list of affected institutions, and also the circular specifying designation as a significant public interest CMO is “as determined by the Commission,” may have heightened their anxiety, giving room for more speculations, they said.
“I think the best thing is for the Commission to come out clean from the beginning. Creating a situation where some asociations and individuals are approaching it for some clarifications does not augur well for rhe markets. Eventhough some of us know that the rule is more likely to affect mostly the Financial Market Infrastructure companies, the appropriate thing is to simplify the circular or a follow-up circular showing the details, ” says an operator.
But, the Commission would rather prefer not to be dragged into the ensuing discourse, possibly, preparing to come out with a more explicit circular on the issue.
Efe Ebelo, SEC’s spokesperson, responsible for external relarions was yet to respond to inquiries from MBN.
