by Ledisi Mark Esq.The Nigerian Capital Market is regulated by statutory institutions namely; Central Bank of Nigeria, the Security and Exchange Commission, the National Insurance commission, and the National Pension Commission. These Institutions are empowered by statute to supervise this market and facilitate the exchange of funds between the surplus and deficit units.
The capital market covers trade within the money market, bonds and foreign exchange. The capital market is a trading sector where suppliers trade equities and debt securities. Basic terminologies used within the financial market include; Security debt, Equity, Interest, Auction and Dealer market
Funds are generated in the capital market through two major markets: the Primary or Secondary Market.
Who is a Legal Practitioner In Nigeria?
A Legal Practitioner in Nigeria is a professional, who is trained to practice law as an expert; having undergone a five- year training in law from a recognised and accredited university and then a mandatory one-year (or two years for those who studied in foreign universities) training at the Nigerian Law School. A person can only be qualified to practice in the Nigerian Bar as a Barrister and Solicitor of the Supreme Court of Nigeria upon fulfilling the requirement of the vocational training and called to the bar. Being called to the Nigerian bar grants the applicant the status of a legal practitioner in Nigeria with his name engraved in the Supreme Court of Nigeria on the Roll of legal practitioners.
Legal practitioners are key players in the transactional processes which permeate the world of capital markets, such as advising debt and equity issuers, and the investment banks which distributes and structures the financial instruments.
The role of a legal practitioner in the capital market can be attributed to him based on the needs of his client or the requirement of the firm for which he is employed.
Generally, some of the duties of a lawyer in the financial market includes;
• Advisingon legal and regulatory matters to their client
• Ensuring that statements drafted within the prospectus are properly constructed, and protects the interest of the investor.
• Drafting necessary documents
• Negotiating contracts
• Working with bankers to obtain approval from various external parties such as regulators, listing agencies, and rating agencies.
1. Advising on Legal and Regulatory Matters
In equity offerings, a solicitor is saddled with the responsibility of giving advises on the legal aspect of preparing for listing, its re-registration as a public company to comply with the provisions of the law, share restructuring and other changes needed in respect of the company’s formation documents and sales’contract.
In equity capital markets, an Initial Public Offer is expository to a company. It requires hours of a Legal practitioners’ work to ensure the company is ready to list on an exchange.
The legal practitioner must take the company’s board through every step of the process.
The advisory role of a legal practitioner to a first-time borrower in the debt capital markets requires the meticulous skill of the solicitor in understanding the various regulations governing the market, and liaising with other local lawyers.
Regulatory Roles of a Legal Practitioner ranges from simple listing approvals for frequent bond issuers, to activities like a first listing approval of securitization of loans on the Stock Exchange. The services of a legal practitioner is required by the Ratings agencies to determine a product’s rating.
2. Drafting of Legal Instruments
Capital Market transactions requires documentation on every stage of the transactions from preparation of prospectus, underwriting contracts and other agreements. There are specific clauses that must comply with the provisions of the law which a legal practitioner must ensure their presence within the document when drafting.
The solicitor is required to prepare, advice the client on the possible content of the document, draft and make adjustments where necessary due to the legal implication of each phrase and presence of key clauses.
In drafting, documents used as securities in the capital market such as contractual documents or prospectus can range from 15 to 500 pages. Securitization probably tops the charts for most documentation and therefore demands more hours, the reality tends to be that the longer the pages of the documents, the more likely the solicitor is required to stay up all night to produce an excellent document.
3. Negotiating contracts
Negotiating contracts is a big part of the job. There are a lot of contracts which need to be signed off by a lot of parties and every contract is of great importance to every party. The solicitor is engaged to negotiate the terms and clauses for the parties involved in a transaction.
In capital market transaction, contracts are signed off by different parties, each party requiring the best terms possible, and most acceptable clause in the document. As a result, negotiations can be prolonged. I Issuers want the best terms on negotiation, while Investment banks need acceptable clauses present in an agreement, and negotiate for the safety of their internal credit committees.I Investment banks demand conditions that make their product optimal for sale on the market in form of equity and securities. Thus, the place of the legal practitioner in bridging the gap and fulfilling the desires of their client according to the role they play on the negotiation table.
4. Ensuring the approval from agencies
The legal practitioner in the capital market must ensure that the necessary signatures, approvals and stamps required on an instrument is obtained from various external parties such as regulators, listing agencies, and rating agencies.
CONCLUSION
A legal practitioner is essential in the operations of the market. Within the Primary and the secondary market the Legal practitioner wears different hats in its role – in drafting of agreements, negotiations and advisory roles.
The Legal practitioner must ensure that clauses drafted within the prospectus are properly constructed, and protects the interest of the investor, or their client in general. Also, a Legal Practitioner should obtain the necessary approvals from Agencies and ensure that sales conducted in the market are bound within the laws regulating the transaction.
DISCLAIMER: This article is not intended to serve as legal advice and should not be considered as such. For legal advice, consult a Lawyer.
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