Matters arising from investors’ complaints

By Babajide Komolafe

Since it debuted February this year, Investors Forum has been receiving complaints from investors on a weekly basis. The subjects of these complaints are very revealing in terms of the plight of investors, in the Nigerian capital market, especially the retail investors.

While these complaints reveal that there is huge interest to invest in the capital market among retail investors, they are however usually the victims of fraudulent operators, and weak regulation in the market. It is easy to attribute their plight to the problem of ignorance, it is also obvious that these investors wish to know and learn, but the market seems not interested in educating or enlightening them.

Why? The focus is on the wholesale and institutional investors. Why spend time and commit resources to educate people with shallow pockets when you can make all your money by clinching the patronage of one or two institutional investors. That is why retail investors are treated with contempt,  not only by operators but also by regulators.

This attitude is however due to the ignorance of the fact that it is these retail investors that provide stability to the market. Unlike the big investors, they are usually long term investors; they are not traders but investors. They don’t pull out of the market at ever
y sign of crisis. They stay because they are there for the long haul.

It is quite understandable if stockbrokers, registrars ignore and treat retail investors with contempt. Stockbrokers make money from buying and selling hence they are more interested in trader investors. Those who want to buy today and sell tomorrow, which is what the wholesale and institutional investors do. The regulators however are supposed to protect investors, especially the small ones. To make sure that operators don’t take advantage of their ignorance, and vulnerability to defraud them. The regulators of the Nigerian capital market would claim they are doing this, but the several complaints received by Investors Forum reveal the opposite.

For example, it is so glaring that 70 per cent of retail investors don’t even know about the regulators in the market, or any of the institutional framework where they can get redress. Be it the Securities and Exchange Commission (the apex regulatory body), the Nigeria Stock Exchange, or the Institute of Capital Market Registrars (ICMR), very few retail investors know about them.

This is so because the regulators are making little or no efforts to enlighten these investors about their existence, and the help they render to them.  The regulators may argue that it is not so, but that is the reality on the ground. Compare this to what is happening in the banking industry. Some time ago, the Nigeria Deposit Insurance Corporation (NDIC), the organisation established to protect depositors’ money in banks, realised that there is low public awareness about it, and its role.

This was because depositors of liquidated banks were not coming to collect their money. To address this, the corporation among other things, introduce a week long, annual awareness programme. It was tagged, Deposit Protection Awareness Week, which involves visitation to major markets across the country, traditional rulers, press conference, fliers/sticker and billboard advertisements. All just to make sure that bank customers know that there is an organisation protecting their bank deposit. This kind of effort is glaring lacking and urgently required from capital market regulators. But that is if and only if, they are indeed sensitive to the plight of investors.

(To be continued next week)