SEC Mandates Enhanced Risk Management Standards for Capital Market Operators

The Securities and Exchange Commission (SEC) has mandated that all capital market operators adopt an enterprise risk management framework aligned with internationally recognised standards. This directive, disclosed in a statement on the SEC website, underscores a significant move to enhance risk management within Nigeria’s capital markets.

The SEC specified that these standards include those established by the Committee of Sponsoring Organisations of the Treadway Commission (COSO), the International Organisation for Standardisation (ISO 31000), and the Financial Action Task Force (FATF) Recommendations. The initiative aims to fortify risk management practices, mitigate systemic risks, and safeguard the interests of all stakeholders involved.

“All capital market operators are hereby directed to implement an enterprise risk management framework that conforms to international standards such as COSO, ISO 31000, FATF Recommendations, and any other internationally recognised risk management standards,” the SEC stated. “The adoption of comprehensive risk management practices is imperative for minimising systemic impacts and protecting stakeholder interests.”

The new framework requires capital market operators to consider their operational structure, business activities, client demographics, products, services, and delivery mechanisms. It mandates the establishment of a comprehensive risk governance structure, including a risk management committee with clearly defined roles and responsibilities. To ensure accountability and oversight, operators must define their risk appetite and tolerance statements and consistently report to senior management and the board of directors.

Moreover, the SEC emphasised the need for organisations to implement risk-awareness programmes to cultivate a robust culture of risk management throughout their operations. This directive forms part of the SEC’s broader strategy to strengthen risk-based supervision, encompassing anti-money laundering and counter-terrorism financing measures within the capital market.

The commission has set a deadline for all capital market operators to submit a Board-approved risk management policy in PDF format by September 30, 2024, via email at rbs@sec.gov.ng to obtain a ‘No Objection’. Additionally, operators must submit an annual risk profile by January 31 each year, assessing emerging threats and the measures implemented to mitigate them for the SEC’s review.

“This directive is aimed at enhancing the implementation of risk-based supervision, including anti-money laundering and counter-terrorism financing measures in the capital market,” the SEC noted. “Every capital market operator is required to submit their annual risk profile no later than January 31. Emerging threats and mitigation measures must be assessed and reported to the Commission for review,” the statement concluded.