Sunday Michael Ogwu
A new directive from the Securities and Exchange Commission (SEC) has triggered anxiety across Nigeria’s capital markets, as operators scramble to understand the scope and implications of newly imposed tenure limits for directors of Capital Market Operators (CMOs).
In a circular released last Friday, the SEC announced that directors of CMOs classified as “significant public interest entities” will now be subject to stricter term limits.
Under the new rules, directors can serve no more than 10 consecutive years in one company and 12 years across a corporate group. For Chief Executive Officers (CEOs) and Executive Directors.
There’s an additional three-year “cool-off” period before they can be appointed as chairmen, with such appointments limited to four years.
The rule takes immediate effect and has left many in the industry confused and concerned, particularly over the vague definition of “significant public interest entities.”
“This could spell the end for many top executives in major investment banks, brokerage firms, and fund managers,” one market source said. “We need clarity on who exactly is affected.”
Another operator added that the rule could reach beyond listed companies to include large private firms and Financial Market Infrastructure (FMI) companies, such as FMDQ Group, CSCS, NGX Group, and NG Clearing, due to their public-facing roles and systemic relevance.
Questions Over Implementation and Scope
Although the SEC didn’t name specific companies, it stated that the designation of “significant public interest” would be determined at its discretion—further fueling speculation.
However, sources familiar with the circular said it does not apply to banks, financial holding companies, or regular private companies. The rule is instead aimed at FMIs and similarly influential entities within the capital market ecosystem.
READ ALSO: Naira Stability: Analysts Project External Reserves to Hit $45bn by Year-end
The SEC’s directive comes despite its existing oversight of board appointments, raising questions about whether previous approvals may have allowed over-extended tenures. The move appears to be both a course correction and a warning of stricter corporate governance enforcement going forward.
Ban on INED-to-Executive Transitions
In a related move, the SEC also banned the practice of converting independent non-executive directors (INEDs) into executive roles—such as CEOs—within the same company or group. The commission warned that such conversions compromise board independence and violate corporate governance principles.
“The transmutation of INEDs to executive roles erodes neutrality and weakens oversight,” the circular stated.
The National Code of Corporate Governance (NCCG) already limits INEDs to three terms of three years each and prohibits their reclassification as executive directors. While the NCCG offers a framework for evaluating independence, legal uncertainties remain—especially after a Federal High Court ruling in Eko Hotels v. FRCN, which held that some governance codes may not apply to unregulated private companies.
Industry Response: Mixed Signals
The Association of Securities Dealing Houses of Nigeria (ASHON) sought to ease tensions, stating that its members are not affected by the SEC’s new rules.
“We have received assurances from the SEC that our members are not included in the category covered by the circular,” ASHON said in a statement, urging members to remain calm and maintain professionalism.
What Comes Next?
While the SEC is expected to issue clarifying guidelines in the coming days, the new rule is being interpreted as a move to strengthen corporate governance, reduce boardroom entrenchment, and increase market transparency. However, its rollout has exposed gaps in communication and legal ambiguity that may need to be addressed before full enforcement.
Until further clarification is provided, uncertainty remains high, and long-serving executives in key market roles are left wondering whether their days are numbered.
Sunday Michael Ogwu is a Nigerian journalist and editor of Pinnacle Daily. He is known for his work in business and economic reporting. He has held editorial roles in prominent Nigerian media outlets, where he has focused on economic policy, financial markets, and developmental issues affecting Nigeria and Africa more broadly.
