SEC Tenure Rule Triggers Market Anxiety as Capital Operators Scramble for Clarity
The Securities and Exchange Commission (SEC) of Nigeria has introduced a new rule imposing tenure limits on directors of Capital Market Operators (CMOs), sparking uncertainty across the financial market. According to a circular released on Friday, directors in entities deemed of “significant public interest” may now serve no more than 10 consecutive years in the same company and no more than 12 years across a group. The rule took immediate effect, leaving many operators worried about its scope and implications.
The SEC further mandated a three-year cooling-off period for CEOs and Executive Directors who reach their tenure limits before they can assume the role of Chairman, with that chairmanship limited to four years. This abrupt policy shift has unsettled several top executives in Nigeria’s major investment banks and brokerage firms, as many are unsure whether they fall under the “significant public interest” classification. Some operators warned that even private firms with major market roles may be affected, despite not being listed on the stock exchange.
The directive appears to serve as both a course correction and a signal for stricter enforcement of corporate governance. Although the SEC did not provide a list of affected institutions, sources indicate that publicly quoted banks and holding companies are excluded. Instead, entities like the FMDQ Group, Central Securities Clearing System (CSCS), and NGX Group may be more directly impacted. Market watchers expect the SEC to issue more detailed guidance soon to reduce the prevailing uncertainty.
Another notable aspect of the circular is the ban on converting Independent Non-Executive Directors (INEDs) into Executive Directors within the same organization or group. The SEC criticized this practice as a violation of governance principles, arguing that it compromises the neutrality and objectivity required of INEDs. This aligns with the National Code of Corporate Governance (NCCG), which already limits INED terms and outlines strict criteria for independence, though its enforceability on private firms remains legally murky.
In reaction, the Association of Securities Dealing Houses of Nigeria (ASHON) sought and received reassurances from the SEC that its members are likely not affected by the circular. Urging calm, ASHON advised its members to maintain professional operations while awaiting official clarification. Despite the panic, analysts believe the SEC’s move reflects an intention to strengthen board independence and tighten oversight in Nigeria’s capital markets to improve long-term credibility and investor confidence.
Source: Nairametrics