Interview: Rona Fairhead
What regulatory changes are being made to strengthen market activity and processes?
RONA TETTEH: Since the current board of the SEC was constituted in 2017, our focus has been to increase the level of capital market activity and, most importantly, fill the regulatory gaps. Without an effective framework in place, the private sector cannot be expected to perform optimally. As part of the regulatory process the SEC releases guidelines for comments from the market operators and other relevant stakeholders. This iterative process has helped us make great progress on several guidelines, including the Corporate Governance Code (CGC) for listed companies, the commodities exchange, private funds, the credit rating agency and real estate investment trusts.
Another priority has been education. Together, the SEC, the Ghana Stock Exchange (GSE) and the Ghana Securities Industry Association have established the Ghana Investment and Securities Institute (GISI) to take over the running of securities courses currently being handled by the GSE. The GISI will restructure courses with the aim of deepening the capacity of the market operators to effectively serve their clients and extend product options with the introduction of new products to the market. We are also working on deepening the capacity here at the SEC by implementing training programmes, as well as strategic new hires, so that the commission will be ahead of the curve.
How are low barriers to entry being addressed?
TETTEH: We are looking to strengthen licensing requirements, as in the past licensing was fairly loose. For example, it was possible to find an institution that failed to meet the requirement of a microfinance licence from the BoG resorting to the SEC for a fund management licence, since the minimum capital required was GHS100,000 ($21,600). We are therefore raising the minimum capital requirement to GHS2m ($432,000). In the case of asset management companies whose assets under management (AUM) exceed GHS1bn ($216.1m), the minimum will be a percentage of the AUM. Existing firms will be given until the end of December 2019 to be fully compliant. For new entrants, however, the minimum threshold is now GHS2m ($432,000). We do expect some market consolidation to occur before the 2019 deadline.
Additionally, there are new requisites for obtaining or maintaining a licence. The changes were based on the liquidity, technology and security requirements necessary to ensure a stable market. We are also streamlining the structure around fund managers, who have tended to promise returns on investment, a trend that must stop. We need stronger operators, with the required human, financial and technological capacity to serve the market. Corporate governance is another core aspect of this, and we expect that the listed companies and our licensed market operators will work with the CGC and the Conduct of Business guidelines. The composition of boards, especially issues with independence directors and the effectiveness of board committees, among others, are areas in which we expect to see major improvement.
In what ways will the SEC continue to increase awareness of advanced financial products?
TETTEH: Increasing market activity further is a matter of awareness, education and access. We are seeing young, middle-income consumers being more inclined towards investment, but the numbers are still very low – in the realm of 500,000 clients, even when including collective investment schemes. The emergence of financial technology and mobile money has exponentially increased the reach of financial services, and is undoubtedly the path to increased participation. The SEC has developed a strategy to introduce young people to the capital markets and has created investment clubs in tertiary institutions. Nevertheless, the private sector must also work to increase awareness and knowledge.
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