SEC to amend ‘restrictive’ securities law

The Securities and Exchange Commission (SEC) says it will seek an amendment to the securities industry law to, among other things, remove restrictions on funds’ investments in the real-estate sector.

This, it believes, has become necessary to allow capital-market investors benefit more from the “lucrative” real-estate and construction sector. Growth in construction GDP has averaged 17 percent per annum since the country’s discovery of oil in 2007. The share of construction, including real-estate, in GDP has also risen from 7.2 percent in 2007 to 10.5 percent in 2012.

Speaking to the B&FT in an interview, Emmanuel Mensah-Appiah, Deputy Chief Manager for Audit and Risk Management at the SEC, said the capital market is an integral part of the country’s economic and financial systems and must be adequately mandated to operate actively in the various sectors of the economy.

“The securities industry law is restrictive. For instance, funds can currently invest only up to 10 percent [of their monies] in the real-estate sector -- and this is one area that we all know has become very lucrative,” he said.

“It is in the wake of this and other developments that the Commission is seeking amendments in the current law to, among others, establish a strong financial market that can contribute more strongly to the various economic sectors.” SEC Director-General Adu Anane Antwi told the B&FT last year that the capital markets regulator is also developing rules and regulations for the operation of real-estate investment trusts (REITS) --publicly-traded entities that build or invest in real-estate.

REITS are instruments through which individual investors earn a share of the income generated from commercial real-estate investments -- without actually having to go out and buy the property or asset. Mr. Antwi said the rules will determine how properties are valued, the frequency of property valuations, how to price the properties, and the kind of people who can manage the REITS.

Mr. Mensah-Appiah, who spoke to B&FT on the sidelines of the launch of All-Time Capital’s bond fund in Accra, urged fund managers to educate investors and update them periodically on their investments to increase their confidence and sense of security.

“We are doing everything possible to ensure that information asymmetry is bridged, because we believe that the fund manager -- as a professional who knows more about the fund than the ordinary investor -- must keep the latter informed on developments in their investments,” he said.

“Investors are entitled to such information, but because they are mostly unaware they don’t request for updates -- leaving them with no idea about what is happening to their investments.”

Last month, at the launch of the Ghana Investment Awards in Accra, the SEC Director-General announced a plan to create an Investor Education Fund that will finance initiatives by the SEC to educate the public on securities and capital market investments.

He said SEC will introduce a legislative instrument to Parliament to back creation of the fund.