Capital Market Operators (CMOs) are intermediaries who facilitate the mechanism of mobilizing funds for long term investment. They transact various businesses in the stock market and cannot operate in the capacity of operators unless they have been duly compulsorily registered with the Securities and Exchange Commission (SEC).
The relevant provisions of the Investment & Securities Act (ISA) as well as the SEC Rules mention legal practitioners/solicitors as one of the classes of professionals subject to registration with the SEC in so far as their professional opinions impact directly on capital market transactions.
This article will be looking at the various roles of solicitors within the Capital Market .
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What is the general duty of a solicitor in the Nigerian Capital Market?
It is the duty of the solicitor to ensure that there is no deliberate concealment of material facts or misstatements in offer documents relating to a capital market transaction for which otherwise the solicitor would be liable as a result of a failure to exercise reasonable professional diligence.
What is the role of a solicitor to an issuing party in a capital market transaction?
– The solicitor ensures that the issuer is in good legal and regulatory stand with regards to the issue.
– The solicitor ensures that the company’s memorandum and articles of association as well as its certificate of incorporation reflect the status of the issuer as a public company.
– The solicitor drafts the underwriting and other agreements.
– The solicitor ensures that contracts (if any) in which any director has an interest are disclosed ,e.g. contracts of service of long durations as well as contracts involving substantial properties belonging to the company.
– The solicitor must ensure that a power of attorney and/or consent documents are duly executed by the chairman and all other directors.
– He must, in conjunction with the company secretary, verify all historical and present facts about the company, with the aim of, ensuring that decisions and minutes of the board and general meeting for the various corporate decisions and approvals are in place.
– The solicitor ensures that the issuer company as well as its principal officers are in good legal standing .
– The solicitor must confirm to the issuing house that the issuer has been properly advised by him and that the directors have collectively and individually accepted full responsibility for the accuracy of the information given in the prospectus and the application forms. He must avoid contravention or breaches of the practice and procedures of Securities and Exchange Commission,the Corporate Affairs Commission (CAC) & the Nigerian Stock Exchange especially their listing requirements.
What is the role of solicitors to the offer?
– Acting as independent professional observers acting on behalf of the general investing public and the issuing house.
– Requesting from the company all substantial contracts and critically examining and determining material contracts for disclosure.
– Verifying the accuracy and authenticity of the company and offer documentation asvwell ascertaining that the condition precedents contained therein have been satisfied.
– Reviewing pending claims and litigations of the issuer and rendering professional opinions on the likely effect of litigations on the issues.
– Working in conjunction with solicitors to the issuers by examining all documents, contracts and correspondences made available to him and advising the issuing house accordingly on the same.
What is the role of solicitors to the trustee?
Corporate trustees are entities licensed by the SEC to engage in the business of preserving assets such as debentures & bond/security issues handed over to them via the legal instrumentality of a trust deed.
The roles of solicitors to trustees in capital market operations include :-
– Rendering legal advice to the trustees and advising them in selecting viable investments.
– Ensuring that the trustees comply with the laws, regulations and guidelines of the ISA and other laws regarding trustee investments in Nigeria.
– Drafting the trust deed and rendering professional advice to the trustees on all aspects of the trust deed.