Securities and Exchange Commissions (SEC) – SS3 Financial Accounting Lesson Note (First Term)

Regulation of the capital market means the rules and modalities set to promote just and equitable principles of trade and sound business practices in line with global best practices. In Nigeria, the Securities and Exchange Commission (SEC) is the apex regulatory body of the capital market. The two types of regulation are statutory regulation and self-regulation.

Behavioural objectives

By the end of the lesson, students should be able to:

1. Define regulation.
2. State reasons for regulation of the capital market.
3. List types of regulations.

Instructional techniques

• Identification
• Explanation
• Questions and answers
• Demonstration
• Videos from source

Instructional materials

• Videos
• Loudspeaker
• Textbook
• Pictures

What is regulation of the capital market?

Regulation of the capital market refers to the rules and modalities set by the capital market to promote just and equitable principles of trade and sound business practices in line with global best practices.

The capital market is regulated by the Securities and Exchange Commission (SEC), which is the apex regulatory body of the Nigerian capital market.

Why is the capital market regulated?

The following are reasons for the regulation of the capital market:

1. To protect investors. Investors are key to the growth and expansion of companies.
2. To ensure the markets are fair, efficient and transparent. Transparency in the market boosts the confidence of investors and other players in the market.
3. To ensure financial stability. It helps in the continuity of returns on investment and this also enhances economic growth.
4. To promote economic recovery and development.
5. To reduce systemic risk. This is to ensure that investors are protected and adequately covered.

What are the types of regulation?

There are two types of regulation in the capital market:

1. Statutory regulation
2. Self-regulation

Statutory regulation

This refers to modalities put in place by the government to ensure orderliness in the capital market. These are laws created by a legislative enactment.

Self-regulation

This is also known as non-statutory regulation. It refers to the internal rules and guidelines set in place by the Nigerian Stock Exchange.

Evaluation

1. What is the capital market?
2. Mention two reasons for regulation of the capital market.
3. List the types of regulations.
4. State four functions of the capital market.

Classwork: As in evaluation.

Conclusion: The teacher commends the students positively.

Assignment

1. Define regulation of the capital market.
2. Explain statutory regulation and self-regulation.
3. State three reasons for regulation of the capital market.