As the Chartered Institute of Stockbrokers (CIS) celebrates its 25th anniversary, the Executive Vice Chairman, Capital Assets Limited and former President and Chairman of Governing Council of the CIS, Mr. Ariyo Olushekun, speaks on stockbroking in the context of the activities of the Institute and opportunities in the capital market
On the roles of the CIS in capital market development
The Chartered Institute of Stockbrokers (CIS) has come a long way. Over 25 years, we have been able to standardise certification of operators in the capital market. Generally, when you hear people talk about stockbrokers, stockbrokers are not only those who do securities dealings-those who trade in the market, stockbrokers do more than that-they offer financial advisory services, they do asset management, funds management, custodianship, and you know they operate in all areas of the market. Now, what CIS has done is that it has been able to eliminate quacks from the capital market, everybody that is operating now has obtained one certification or the other and this has helped the market. People who operate in the market now know that they have something to lose if they misbehave and therefore are very careful. When you have worked several years to obtain a professional licence, you don’t want to lose because you are going to lose it forever. And like the Director-General of Securities and Exchange Commission (SEC) mentioned earlier, because of CIS activities in collaboration with SEC and the Nigerian Stock Exchange (NSE), we now have less complaint from the investors. I am the chairman of the Nigerian Stock Exchange Investigation Panel and I know the cases are very limited now; we have very few cases and complaints. I have been in CIS conflict resolution at different levels and I am still on the Disciplinary Tribunal; there are very few cases because people have certification, the institute is watching them. In fact, there is no reason for them to do anything negative because they are professionals now. So, over the years, we have been able to train several people, there are also people at various levels for the examinations, several students, about 10,000 students under the watch of the institute. We strategised certification and the practice in the market and we are grateful for that. Going forward, we hope we will be able to work with others to take the market to the next level.
The relationship of the Debt Management Office (DMO) with banks and stockbrokers
They don’t really deal with the banks per se but I understand where you are coming from, those institutions appointed as Primary Dealer-Market Makers (PDMMs) are mostly banks really. That is a wrong thing to do in the sense that it is not a problem to appoint market makers, the banks are in a better position to play that role because they have the liquidity but the problem is they should not be dealing directly with the retail investors. Market makers are supposed to sell, to buy in bulk and sell in lumps to brokers who will then sell to retail investors, it is not practiced anywhere in the world. It is an imbalance in the market, something the market needs to control very fast otherwise it is going to create some kind of problem. So, it is not the right thing to do, it is something DMO should correct immediately. Brokers in particular, Capital Market Master Plan Implementation Committee (CAMMIC) as a body, a larger body of the market, are engaging DMO and others so that this can be corrected.
Need to boost liquidity in the stock market by granting stockbrokers access to discount window of the Central Bank of Nigeria
Well, I think it is the right thing to do; the discount window of the Central Bank of Nigeria (CBN) is opened and accessible to a number of sectors within the financial industry. If brokers have access to that window a lot of things that are not really happening will be happening. For instance, securities lending can be more effectively done, market making can be effective-then you will see price moderation because when a stock is tending to being overpriced, there are things that need to be done by certain operators in the market to bring the price to the correct level; that is not being done effectively now; you need liquidity for that to be done. If we have access to the discount window, brokers will be empowered, not just brokers; operators in the capital market will be empowered. The CBN needs not be afraid they can actually put some certain measures in place to ensure that the liquidity is not misused. It is something that is needed by the market.
How the emergence of Chartered Institute of Securities and Investment (CISI) will impact on stockbrokers and the capital market
I spoke earlier about stockbrokers being professionals who are knowledgeable and practising different areas of the market. To become a broker today or to become a member of CIS, you need to pass all the examinations but the reality is that you may not be interested in practising in all areas of the market. Perhaps you just want to do fund management alone, so why don’t you write the certification for only that, you become a certified fund manager and you become a member of the institute, you can start practising, you don’t have to write all the examinations. You want to play financial advisory role in several aspects, I mean there are several things financial advisers do, all you have to do is write a certification for that area and become a member. Therefore, as operators, people can specialise and need not spend their time obtaining certification in the areas they really don’t want to practise. So, it will boost the membership of the institute, it will also bring into the bracket so many operators who are currently in different areas who are not currently certified, it will standardise education in those specified areas and then you will see much more professionalism.
On the outlook for the capital
market in 2018
Well, the market has done well this year. With regards to the outlook for the next year, you have to take into consideration that election starts basically in full swing at the end of first half of next year. In fact, some will say from the point of Anambra election, we have already moved into the election season because we are going to do Ekiti and Osun states in the early part of next year. So, all those elections and electioneering will have impact on the market. However, it also means funds will come into the system, these funds will find their way into the pockets of individuals, coupled with the fact that interest rate is likely to go down next year, all these portend well for the market. So, if people now have more access to funds or their savings go up, they can come to the market because the market has better returns than what the money market can do.