A Legal analysis of Ghana's securities laws in light of the international organization of securities commission's principles of securities regulation

Abstract

The protection of investors; a transparent, efficient and fair market; and a reduction of systemic risks are the market objectives of a prudent securities regulator. The implementation of a sound legal framework can achieve the aforementioned objectives and will put a country’s stock exchange in the prime position to function at its optimum. A well functioning stock exchange provides governments and industry with the opportunity to raise long term capital and finance new projects. The Ghanaian government, recognizing the benefits to be derived from a well functioning stock exchange, established the Ghana Stock Exchange, and promulgated legislation to govern the securities industry. In 2011 the International Monetary Fund performed an assessment of Ghana’s financial markets and identified the securities industry legislation as archaic and required amendment. The International Monetary Fund endorsed the IOSCO objectives and principles of securities regulation, by suggesting that Ghana align its securities industry laws with the IOSCO objectives and principles. IOSCO principles have been identified as one of the key standards and codes for a sound financial system and their implementation should be prioritised. Following the report by the International Monetary Fund, the Ghanaian Securities Exchange Commission announced a comprehensive review of the legislation regulating the securities industry. A draft Securities Industry Act, 2013 was prepared, and is yet to accepted by parliament and promulgated by the president. This mini-dissertation performs an assessment of the current securities industry laws against the IOSCO principles and finds that the current legal framework is not aligned with the IOSCO principles. An assessment of the proposed Securities Industry Act, 2013 against the IOSCO principles is performed and it is found that the draft bill when promulgated and implemented will bring Ghana’s securities industry laws in line with the IOSCO principles. An analysis of the securities industry laws of Nigeria and South Africa is conducted, with the aim of identifying lessons, which Ghana can learn from the aforesaid jurisdictions, whose securities industry laws are aligned with the IOSCO objectives and principles. This mini-dissertation concludes by recommending the adoption of the proposed Securities Industry Laws, 2013 by the Ghanaian parliament. It recommends that the Securities Exchange Commission adopts: Nigeria and South Africa’s methodology to enhance its financial independence and operational independence; South Africa’s risk-based system to ensure the prevention of systemic risk; aspects of South Africa and Nigeria’s methodology for the enforcement of regulations to enhance its enforcement powers; and Nigeria’s domestic remedies which have been implemented to enhance its cooperation with foreign regulators.