AN APPRAISAL OF THE LEGAL FRAMEWORK FOR DISPUTE RESOLUTION IN THE NIGERIAN CAPITAL MARKET

CHAPTER ONE GENERAL INTRODUCTION

1.1       Background to the Study

The capital market is the major engine of growth and development for the economy. It is the financial market through which resources in the form of savings are marshal for the purpose of the production of goods and services. Without doubt, a virile and dependable market, reflects the degree of investing public confidence in the mechanism. Therefore, the importance of the capital market as a vital element of national economic development, cannot be over emphasised. It is the barometer for measuring a nation‟s economic development. The Nigerian capital market has provided the financial environment for the marketing of government economic policies from nationalization, indigenisation, privatisation, the national economic and empowerment development strategy, the seven point agenda¹, the transformation and change agenda have all leveraged on the facilities of the capital market for their realization.

Inevitably, in any market, institution, relationship or transaction, disputes arise between parties. In the Nigeria capital market, disputes also arise, which must be resolved in the interest of the sustainability and stability of such transactions and of the market.

Capital markets, all over the world, are regulated by laws, rules, regulations and practices peculiar to each jurisdiction. The provisions of these legislations are usually guided by international best practices and the principles of market regulation as enunciated by the International Organization of Securities Commissions (IOSCO)².Essentially, the thirtyprinciplesof IOSCO are largely driven by the three objectives of securities regulation of the protection of investors, ensuring that market are fair efficient and transparent and the reduction of systemic risks.

In view of the vital role of the capital market and the disastrous consequences of an unregulated market, governments all over the world cannot risk allowing this market operate without some form of control. It is therefore necessary to regulate the market including  provision of a framework for dispute resolution, to ensure that the relevant institutions in the industry are properly established and monitored and that the operators in the market are fit and proper persons to operate in the market. There is also the need to provide rules and regulations that would ensure fairness, efficiency, orderliness, transparency, stability and confidence in the capital market.⁴

The overall objective of the legal framework for the capital market or securities regulation is the protection of the general investing public and the national economy. The corporate collapses experienced in some countries (Enron in the USA, Parmalat in Italy, Oceanic Bank in Nigeria), show that the promoters, officers, directors of companies and market professionals, were not faithful in discharging their fiduciary responsibilities to investors. The need to protect stakeholders against this can never be overemphasized.

There has always been the need for a well-defined and properly articulated legal framework for dispute resolution in the Nigeria capital market. The recognition of the need for an appropriate formal structure or procedure for resolution of violations and malpractices in Nigeria‟s capital market prompted the setting up of different strategies for dispute resolution system under the Lagos Stock Exchange Act⁵, 1961, the Capital Issues Commission Act⁶, 1973, Securities and Exchange Commission Decree ⁷ , 1979, Securities and Exchange Commission Decree⁸, 1988, Investments and Securities Decree⁹, 1999 and the  Investments and Securities  Act ¹⁰ , 2007. These strategies are complemented by the regular courts in the justice administration system. The legal framework has thrown up fresh challenges requiring proactive response. This study is an answer to this challenge.