REGULATORY
AND LEGAL FRAMEWORK
OF FINANCIAL INSTITUTIONS II
LECTURER: DIAMOND ADDO

COURSE OUTLINE
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LEGISLATIONS
REGULATION OF BANK AND NON-BANK FINANCIAL INSTITUTIONS
THE SECURITIES INDUSTRY IN GHANA
INTERNATIONAL LAW AND INVESTMENT IN GHANA
Electronic Funds Transfer
International dimensions of financial transactions
Forms Settlement
Foreign Exchange
Expropriation and Foreign Investment
Resolution of Investment Disputes
LECTURER: DIAMOND ADDO

LEGISLATIONS
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The 1992 Constitution
Banking Act, 2004 (Act673)
The Bank of Ghana Act, …….(Act 612)
Financial Institutions (Non-Banking) Law (P.N.D.C.L 328)
Securities Industry Law, 1993 (P.N.D.C.L. 333)
Foreign Exchange Act, 2006 ( Act 723)
Banking Amendment Act, 2007 (Act 738)
Ghana Investment Promotion Centre Act
Exchange Control Act, 1961 (Act 71)
The Free Zones Act, 1995 (Act 504)
LECTURER: DIAMOND ADDO

REGULATORY AND LEGAL FRAMEWORK OF
FINANCIAL INSTITUTIONS II
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This course provides detailed and specific provisions of
Ghanaian law regarding securities and dealings in securities. The course will cover the following topics:
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How banks and non-bank financial institutions are regulated
Insider trading
Market rigging and stock market manipulation
Electronic funds transfer system
The international dimension of financial transactions forms settlement
Foreign exchange
Foreign investment
LECTURER: DIAMOND ADDO

BANKING AND FINANCE
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In Ghana, financial institutions can be broadly categorized into:
Banking services which is governed by the Banking Act, 2004 (Act 673)
Non-Bank Financial Institutions regulated by the Non-Bank Financial
Institutions 2008 (Act 774) which repealed PNDC Law 328
Informal Credit bodies
Take note of the following banks:
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Commercial Banks: - Ghana Commercial Bank Ltd., SG-SSB Bank Ltd.,
Standard Chartered Bank (Ghana), Barclays Bank, FNB Bank,
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Development Banks:- Agricultural Development Bank, National
Investment Bank Ltd. and Prudential Bank Ltd.
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Merchant Bank:- Universal Merchant Bank Ltd,. UT Bank Ltd., CAL Bank
Ltd., Ecobank (Ghana) Ltd,
LECTURER: DIAMOND ADDO

Cont.
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However, Rural and Community Banks operate under the direct supervision and Regulation of the
Bank of Ghana.
LECTURER: DIAMOND ADDO

Regulation of banks and non-bank financial institutions
What is a bank?
According to section 90 of the Banking Act, 2004 (Act 673) bank means a body corporate which is issued with license in accordance with the Act to carry on banking business.
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What then is banking business?
According to Act 673 banking business means
Accepting deposits of money from the public, repayable on demand or otherwise and withdrawable by cheque, draft, orders or by any other means,
Financing, whether in whole or in part or by way of short, medium or long term loans or advances, of trade, industry, commerce or agriculture, and
Any other business activities that the Bank of Ghana may prescribe or recognize as being part of banking business.
LECTURER: DIAMOND ADDO

What is a Non-Bank financial Institution?
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The Non-Bank Financial Institutions Act 2008 (Act 774) has not defined financial institutions as its predecessor the
Financial institutions (Non-Banking) Act, 1993 (PNDCL 328) did. However, Act 774 defines non-bank financial services to mean non-deposit taking financial institutions which provides a service specified in the first schedule.
LECTURER: DIAMOND ADDO

Cont.
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These services include, leasing operations, money lending operations, money transfer services, mortgage finance operations, non-deposit taking microfinance services, credit union operations, and any other services or operations as the Bank of Ghana may from time to time by notice designate as such.
LECTURER: DIAMOND ADDO

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Under the first schedule of Act 774 the following are listed as non-bank financial services:
Leasing operations
Money transfer services
Money lending operations
Mortgage finance operations
Non-deposit taking microfinance services
Credit union operations
Any other services or operations as the Bank of Ghana may from time to time by notice designate as such.
LECTURER: DIAMOND ADDO

Cont.
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As indicated earlier, these services are regulated by the
Non-Bank Financial Institutions Act. The Authority responsible for the regulation of institutions providing these services is the Bank of Ghana. These non-bank institutions are specialized institutions that supplement the services of the traditional banking institutions.
LECTURER: DIAMOND ADDO

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In Ghana, the law is that a person wishing to carry on the business of banking must first incorporate the proposed bank and obtain a license from the Bank of
Ghana.
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It is required that the application for license must be in writing and directed at the Bank of Ghana. the application must be accompanied by the following:
A certified true copy of the Regulations or other instruments relating to the proposed business of banking.
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Cont.
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Particulars of directors or persons concerned with the management of the proposed banking business which should include the background, certified financial position, business interest and performance of the business interest under their control.
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A feasibility report which includes a business plan and projection for the first five years.
Maintain a minimum paid-up capital prescribed by the Bank of Ghana.
Any other particulars that the Central Bank may require.
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Cont.
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The Bank of Ghana may interview the promoter, director and the proposed senior management personnel in its attempt to appraise and inspect their books and record so as to satisfy itself about the information furnished it by the applicant.
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It is advisable to find out from the Bank of Ghana to ascertain what the exact required minimum paid-up capital for a bank should be. This is so because the respective minimum paid-up capital requirements are dependent on whether the proposed bank is a foreign bank. Ghanaian bank, or whether it is a development bank or rural bank.
LECTURER: DIAMOND ADDO

Requirement for setting up and operating a nonbank financial institution
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Section 2 of the Non-Bank Financial institution Act provides that no person shall provide the services of a non-bank financial institution unless such institution is issued with a license by the Bank of Ghana to provide such services as provided for in the First Schedule of the
Act and the license shall indicate among other things whether the licensee may engage in all or some of the services specified in the First Schedule. It is required that such an institution is incorporated in Ghana under the
Companies Act.
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Before a non-bank financial institution is set up it must meet the following conditions:
LECTURER: DIAMOND ADDO

Cont.
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It is provided in section 3 that a non-bank financial institution shall not be licensed unless it maintains a minimum paid-up capital of GH¢1million which is prescribed in the fourth schedule.
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It is also provided in section 9 that a non-bank financial institution shall notify the Bank of Ghana where it is to open, close or change the location of its principal place of business, branch, office, sub-office, booth, agency, or mobile unit in the country. It shall, seek written approval from the Bank of Ghana at least thirty(30) days before the date of opening, closing, or change.
LECTURER: DIAMOND ADDO

Cont.
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A non-bank financial institution shall display its name and license or copies of license and a statement of the fact it is licensed to carry on business under Act 774 at the entrance of its principal place of business and shall not change its name as licensed, use or refer to itself by any other name or by an abbreviation unless with Bank of Ghana approval.
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Section 8 states that after the issuance of the requisite license to the non-bank financial institution, the institution shall furnish the Bank of Ghana with a notice of a change of director of the business, an alteration in its regulations, or alteration in the nature of its business within twentyeight (28) days of it being licensed or of the change.
LECTURER: DIAMOND ADDO

Cont.
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A non-bank financial institution is prohibited under the law from granting advances, credit, financial guarantee or indemnity, investing in the equity of another company carrying out any transaction for another person or group of persons the value of which would amount in total to more than twenty-five percent of the net worth on the financial institution and in the case of an unsecured advance, credit etc amounting to more than ten percent of the net worth of the institution. A non-bank financial institution is also prohibited from granting an unsecured advance, credit, or issue any guarantee or indemnity amounting in total to more than 10% of the net worth of the institution.
LECTURER: DIAMOND ADDO

Cont.
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Under the law, a non-bank financial institution is required to submit to the Bank of Ghana a statement showing the institution’s assets, liabilities, income, and expenditure in a specified form, at intervals and within the times that the
Bank of Ghana may stipulate.
LECTURER: DIAMOND ADDO

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No bank is allowed to open a new branch or agency nor close down or change the location of any of its branches or agencies without first obtaining the consent of the central bank,
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The Bank of Ghana shall be notified of any alteration of a bank
Regulations or the instrument under which it was established as well as any change of directorship of the bank within three (3) months of such change.
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The notification must be accompanied by a statutory declaration and sworn to by the managing director or chief executive of the bank or any other authorized persons.
LECTURER: DIAMOND ADDO

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While in operation, a bank is required to maintain a minimum capital adequacy ratio of 10%.
However, this figure is subject to alteration by the
Bank of Ghana. The capital adequacy ratio is calculated as a percentage of the capital base of the bank to its adjusted asset base.
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Every bank is required to maintain a reserve fund.
LECTURER: DIAMOND ADDO

Cont.
Under the section 6 a provisional approval may be granted the applicant pending the issuance of a license.
A proposed bank is prohibited from inviting the public to subscribe to shares for the purpose of the proposed banking business unless the provisional approval is given.
The capital base comprises PRIMARY CAPITAL- issued and fully paid ordinary shares, disclosed reserves, surplus profits.
SECONDARY CAPITAL- includes debt/equity capital instruments that are unsecured etc. Adjusted assets are made up of total assets after specific balance sheet items have been added.
LECTURER: DIAMOND ADDO

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Section 12 provides restrictions on commercial, agricultural or industrial activities and immovable property. As a general rule, a bank is prohibited from directly engaging in commercial, agricultural or industrial activities. If a bank so wishes to undertake any of the above activities it can only do so through a subsidiary company of the bank that has been registered in
Ghana for that purpose and whose equity does not exceed twenty-five percent of the net worth of the bank.
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The aggregate loan or credit facility and equity capital which a bank may invest in such a subsidiary shall not exceed twentyfive percent of the net worth of the bank where the bank owns one subsidiary company and not more than thirty-five percent where more than one subsidiary is owned.
LECTURER: DIAMOND ADDO

Cont.
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It is also provided in section 12 that a bank shall not build, purchase or take a lease of immovable property unless it is for the purposes of housing their business, staff or for the provision of amenities for its staff. However, any property acquired for the above purposes but which is in excess of the bank’s immediate needs can be let or sublet.
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Where a bank acquires an interest in an immovable property in satisfaction of a debt due it, the said immovable property shall be disposed of by the bank within one year of acquisition or within a longer period that the Bank of Ghana may determine.
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Under section 62, the Bank of Ghana is empowered to revoke the license of a bank whose entire capital base is eroded and liabilities exceed its assets unless shareholders of the bank are to inject new capital into the bank to restore it to normalcy within six months from the time of the erosion of the capital.
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LECTURER: DIAMOND ADDO

THE SECURITIES MARKETS
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A security is a financial claim evidenced by a piece of paper(document) entitling the holder to cash payments from the issuer. Investors who buy securities are also interested in selling a security for more than they paid for it. The investor hopes to achieve a higher reward than would be possible by simply placing the same amount of money in a bank savings account. However, every investor must be mindful of risk surrounding the return that will be realized. Risk here means uncertainties that surround the realization of those returns. Examples of securities are shares, bond, debentures, etc.
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The importance of investing in securities cannot be over emphasized. If the economic environment is ripe and corporate managers have confidence about the future, they would expand their businesses and this will lead to increased sales and the acquisition of more modern and powerful equipments. As a result firms will grow, jobs created, families will prosper and above all the economy will grow.
LECTURER: DIAMOND ADDO

Regulatory Bodies
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Financial markets in Ghana are regulated by the Bank of Ghana and the Securities and Exchange Commission. The Bank of Ghana is responsible for currency issue and management, credit and enactment of monetary policy. It also oversees the financial solvency and integrity of the financial system. The Bank of
Ghana also has direct supervisory responsibility for all bank and non-bank financial institutions (excluding insurance and securities). The Securities and Exchange Commission (SEC) is the regulatory agency for the securities industry and approves all publicly traded securities.
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The confidence that investors have in a securities market is based on the ability of regulators to monitor market operations to ensure that adequate measures are in place to protect the investor.
LECTURER: DIAMOND ADDO

Why Security Firms are regulated
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Financial institutions are among the most regulated institutions in the economy. This is because of the nature of the services they provide in the economy. The failure of a security firm may destroy individual savings and at the same time make it more difficult for firms to raise capital. Failure may also create doubts in investors’ mind about the stability and solvency of financial institutions in general and cause panics.
LECTURER: DIAMOND ADDO

Cont.
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Various types of regulations are in place to enhance the services of securities firms and to protect investors. Within the securities markets of
Ghana, the following laws are the major ones:
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The Securities Industry Act, 1993 (P.N.D.C.L. 333) as amended by the
Securities Industry (Amendment) Act, 2000 (Act 590)
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The Companies Act, 1963 (Act 179)
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The Banking Act, 2004 (Act 673)
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The Financial Institutions (Non-Banking) Act, 1993 (P.N.D.C.L. 328)
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The Exchange Control Act, 1961 (Act 71)
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Cont.
In addition, there are two Regulations that regulate membership of and transactions on the Ghana Stock Exchange. They are:
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Stock Exchange (Ghana Stock Exchange) Listing Regulations,
1990, L.I. 1509
Stock Exchange (Ghana Stock Exchange) Membership
Regulations, 1991, L.I, 1510
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The most important legislation relevant to the operations of the securities industry is the Security Industry Act.
LECTURER: DIAMOND ADDO

Securities Industry Act (SIA)
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The SIA defines securities at section 142 to mean:
Shares or debentures within the meaning of the Companies Act,
1963 (Act 179),
Bonds or other loan instruments of the Government or the government of any other country, ( a bond is a certificate evidencing a debt on which the issuer promises to pay the holder a specific amount of interest for a specified length of time and to repay the loan on its maturity).
Bonds or other loan instruments of a corporation established under an enactment.
Rights or interest whether described as units or otherwise under a unit trust.
Any other instruments that the minister may by notice in the
Gazette prescribe.
LECTURER: DIAMOND ADDO

Cont.
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The SIA provides for the establishment of a Securities and
Exchange Commission (SEC) to serve as a watchdog over the industry. Its main function includes;
Maintaining surveillance over the securities market to ensure orderly, fair, and equitable dealings in securities, and
Licensing and authorizing stock exchanges, unit trusts, mutual funds, securities dealers and investment advisors (unit trust is a portfolio of holdings in various companies divided into units and managed by professionals)
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The SEC is charged under the SIA with the responsibility of protecting the securities market against any abuses arising from the practice of insider trading. Takeovers, mergers, acquisitions and all forms of business combinations are subject to review, approval and regulation of the SEC.
LECTURER: DIAMOND ADDO

Enforcement of the Law
The SEC has been given powers to require agencies under its regulatory authority to produce records. It also has investigative and disciplinary powers. The methods available to the commission for enforcing the law are:
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Withdrawal of approval for a stock exchange
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Prohibition of trading in a particular security
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Approval of changes to the rules of a stock exchange or amendment of the rules of the exchange.
LECTURER: DIAMOND ADDO

Cont.
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Expulsion of a member of the exchange.
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Compelling observance or enforcement of the rules of a stock exchange.
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Issuance of directives to a stock exchange in respect of the manner in which a stock exchange carries on its business.
LECTURER: DIAMOND ADDO

False trading and market rigging transactions are prohibited by part 8 of SIA.
The SIA specifically prohibits the following trading practices;
1. False trading and rigging practices: Section 122 prohibits false trading. False trading occurs when transactions are designed to create a false or misleading appearance of active trading in a security. Such artificial market activity is usually designed to attract the public to a particular security. For example, a rising volume or price readily attracts the public which might rush to buy the stock. An example of false trading might be the placement of identical order with two different brokers, one to buy 100,000 shares at GHc 20.00 and the other to sell 100,000 shares at GHc 20.00
LECTURER: DIAMOND ADDO

Cont.
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. Under the SIA, purchases or sales of securities that do not involve a change in beneficial ownership of the securities, or fictitious transactions that cause fluctuations in the market price of any securities is an offence.
LECTURER: DIAMOND ADDO

Cont.
2. Stock markets manipulations: Manipulation is artificial control of prices. Market manipulation is a series of transactions that are likely to have the effect of raising, lowering, maintaining or stabilizing the price of a security, with intent to induce other persons to sell or buy the security.
The manipulator hopes to make a profit or avoid a loss by creating fictitious prices that might be at the expense of the trading public.
LECTURER: DIAMOND ADDO

Cont.
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For example in 1991, Salomon Bro. Inc. admitted to breaking U.S. Treasury Department rules by acquiring a large percentage of newly issued
Treasury securities, forcing other dealers to bid higher prices for the securities from Salomon Bro. to fill their already contracted orders. Salomon
Bro. was fined millions of dollars and several of their highest-ranking officers lost their jobs and were subjected to numerous lawsuits.
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Cont.
3. Dealings in securities by insiders: Section 128 of the SIA prohibits dealing in securities by insiders and defines an insider as “ a person who is, or has at any time in the six months immediately prior to dealing in the securities of a corporate body been connected with the body corporate”.
In practice, an insider is usually a director, an executive officer or a large shareholder.
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Cont.
Insiders are prohibited from dealing in the securities of their firm if they are in possession of information that is not generally available to the public but if it were, might materially affect the price of those securities. In addition to direct dealing, insiders are prohibited from passing on price-sensitive information to any other person if they have reason to believe that the other person will make use of the information for the purpose of dealing or causing another person to deal in the security.
LECTURER: DIAMOND ADDO

Cont.
Also, the law prohibits a person who owing to his connection with a body corporate has information on another body corporate that is generally not available to deal in the securities of the second body corporate.
Where a person is not precluded by law not to deal with the securities of a body corporate but obtained the information on the securities of a body corporate from another person and is aware or ought to be aware of facts or circumstances by virtue of which that other person is precluded from dealing in those securities or when the information was obtained, that person was associated with or has an arrangement for the communication of the information by the other person is precluded from dealing in the securities of the body corporate.
LECTURER: DIAMOND ADDO

Cont.
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Where a person has been precluded form dealing in securities, that person shall not:
Cause or procure any other person to deal in those securities or communicate that information to any other person if that security is permitted on the stock exchange in Ghana or outside Ghana.
This is particularly so where the person precluded knows or ought reasonably to know that the other party will make use of the information to deal or cause or procure another person to deal in those securities.
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A body corporate shall not deal in securities where an officer of that body corporate is precluded from dealing in those securities.
LECTURER: DIAMOND ADDO

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Where a prosecution has commenced against a person who contravenes the provisions on insider dealings, it is a defence if that person satisfy the court that the other party to the transaction knew or ought reasonably to have known, of the information before entering into the transaction.
LECTURER: DIAMOND ADDO

Cont.
4. False or misleading statements:- this is the willful dissemination of information calculated to induce the sale or purchase of securities by other persons or that is likely to have the effect of raising, lowering, maintaining or stabilizing the market price of securities.
5. Fraudulently inducing others to deal in securities:- the publishing of statements that are false or deceptive and the dishonest concealment of material facts.
6. Dissemination of information about illegal transactions.
LECTURER: DIAMOND ADDO

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Any person found contravening a provision of part 8 of SIA when convicted shall suffer the following penalties:
Where the person is a natural person he shall suffer a fine not exceeding five hundred penalty units or a term of imprisonment not exceeding two years.
Where the person is a body corporate it shall suffer a fine not exceeding five hundred penalty units.
LECTURER: DIAMOND ADDO

THE GHANA STOCK EXCHANGE
The Ghana Stock Exchange was set up and given recognition as a stock exchange by Executive Instrument in October 1990 under the Stock
Exchange Act 1971 (Act 384).
The Ghana Stock Exchange is a public company limited by guarantee and regulated by the Securities and Exchange Commission. It operates under the provisions of the SIA. Part two of the SIA is devoted to the stock exchange. Nonetheless, it has a self regulatory mechanism because of the extensive rules it enforces on its members and listed companies.
The regulations of the Exchange include, the Stock Exchange(Ghana
Stock Exchange), Membership Regulations, 1991 (L.I. 1510), and the
Stock Exchange (Ghana Stock Exchange) Listing Regulations 1991 (L.I.
1509) as well as those rules contained in the Exchange’s Trading and
Settlement Rules.
Under the SIA, it is provided in section 25 (2) that, an approval shall not be granted to a person to operate a stock exchange other than a body corporate.
LECTURER: DIAMOND ADDO

Definitions of the Stock Exchange
A stock exchange is a market place where buyers and sellers of securities meet to trade with each other. Modern stock exchanges can be real or virtual. Traditional stock exchanges had a trading floor on which members would gather to buy and sell securities. Today, a stock exchange could be an address on the internet with traders linked by a computer network. Trading is conducted under a broad set of rules by licensed dealing members of the exchange.
The Stock Exchange is an organized market on which financial instruments such as shares, stocks and bonds can be traded to facilitate the mobilization of funds for investments. The Exchange provides a link between the saving public with funds to invest and individual companies that need capital in excess of their profits or private sources for expansion. The Government may also resort to the Stock Exchange to mobilize funds to fund major capital expenditure.
LECTURER: DIAMOND ADDO

Cont.
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Companies intending to issue shares are required to prepare a prospectus which is filed with the
Ghana Stock Exchange and the Securities and
Exchange Commission. The prospectus is a detailed business plan which spells out how the company intends to use the proceeds of the share issue. No new security can be sold unless the prospectus is approved.
LECTURER: DIAMOND ADDO

In order to trade on the Ghana Stock Exchange, an individual firm must be a member of the stock exchange. There are two classes of membership on the Ghana Stock Exchange. Licensed Dealing
Members are brokerage firms which can trade on the floor of the exchange. Only LDMs are permitted to make transactions on the floor of the exchange.
Associate members pay annual membership fee and receive concessionary listing fees when their securities are listed. LDMs arte represented on the floor of the Exchange by their Authorized Dealing
Officers (ADOs).
LECTURER: DIAMOND ADDO

Ghana Stock Exchange Membership Regulation,
1991 (L.I. 1510)
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The Membership Regulation deals with the eligibility and conditions for membership of the Exchange, the ongoing obligations of the members and the consequences of failure to comply with these requirements. All in all, the Regulations deal with the issues of
Qualification for membership including capital adequacy;
Admission and termination procedures;
The filing of periodic returns; and
Code of conduct or ethics.
LECTURER: DIAMOND ADDO

Ghana Stock Exchange Listing Regulations, 1991
(L.I. 1509)
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The Listing Regulations deals with the criteria for all types of listing, the contents of a prospectus, and the continuing obligations of the listed companies as well as the policy for disclosure of information. In brief form, these prescribe:
Criteria for listing securities;
Application procedure;
Contents of application;
Contents of prospectus;
Listing fees;
Continuing obligation of the listed companies, including financial disclosures.
LECTURER: DIAMOND ADDO

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These have been fashioned out by the Exchange to govern its floor trading procedure as well as settlement. The aspects of trading covered by the rules include:
Order of trading;
Offer and bidding procedure;
Responsibilities of Authorized Dealing Officers;
Designation of orders;
Prohibition of fraudulent transactions;
Buying-in and selling-out procedure;
Code of conduct for dealers
A scale of dealers’ commissions, and
Delivery and settlements
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Legal Status of capital issuers- the capital issuer must be either the Government of Ghana or
Companies formed under the Companies Act,
1963 (Act 179), that is public limited liability companies, or private limited liability companies that want to go public, or state-owned enterprises ready for “privatization” through public floatation of securities.
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The GSE trades in shares, stocks and bonds.
Shares (stocks) issued by companies and debt instruments such as Stocks (bonds) issued by
Companies or by the Government.
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Section 25 of the Securities Industry Act, provides for how a stock exchange could be established.
The conditions that must be met are as follows:
A person shall not be granted approval by the
Securities and Exchange Commission to operate as a stock exchange other that a body corporate.
A stock exchange shall receive approval to operate as such only upon an application made to the Securities and Exchange Commission.
LECTURER: DIAMOND ADDO

Cont.
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Where at least three members of the body corporate is prepared to carry on the business of dealing in securities independently of and in competition with each other.
That the public interest will be served by granting the approval
Where the rules of the body corporate make satisfactory provision; see section 25(3)b.
LECTURER: DIAMOND ADDO

Cont.
(i) for the exclusion of persons who are not of good character and high business integrity;
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(ii) for the expulsion, suspension or disciplining of members for conduct inconsistent with just and equitable business principles including failure to comply with the rules of the stock exchange or the Securities Industry Act;
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(iii) for the making of a report to the Commission by the body corporate in cases where it has rejected applications for membership or where it suspends or expels a member.
LECTURER: DIAMOND ADDO

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Section 142 of SIA defines a dealer to include a person who carries on a business of dealing in securities whether that person carries on any other business or not and;
A stock broker
A share transfer agent
A trustee of a collective investment scheme
A person who provides custodian services with regard to securities
A person who performs the functions of central securities depository or provides securities clearing and settlement facilities.
A registrar to a public issue of securities
LECTURER: DIAMOND ADDO

Cont.
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An underwriter, (A lead firm from an underwriting syndicate of other securities firm to share responsibility for marketing the issue.
A person including a bank as defined in the Banking
Act, 2004 (Act 673), or a merchant bank approved by the Bank of Ghana that undertakes or performs the services of an issuing house or a manager to a public issue of securities, and
Any other persons performing securities or capital market related functions as the Minister by notice in the Gazette may prescribe.
LECTURER: DIAMOND ADDO

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What is investment?- Investment means the use of money to make more money, to gain income or increase capital or both.
Who is an investor?- an investor is one whose principal concern is the minimization of risk, in contrast to the speculator, who is prepared to accept calculated risk in the hope of making better-thanaverage profits, or the gambler, who is prepared to take even greater risks.
Section 142 defines an investment advisor to mean a person who;
LECTURER: DIAMOND ADDO

Cont.
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Carries on a business of advising others concerning securities;
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As part of a regular business issues or publishes analysis or reports concerning securities;
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Pursuant to a contract or arrangement with a client, undertakes on behalf of the client, whether on a discretionary authority granted by the client or otherwise.
LECTURER: DIAMOND ADDO

Cont.
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However, the phrase investment adviser does not include the following;
A bank as defined in the Banking Act,
A company registered under the Insurance Act,
A lawyer or accountant who gives advice on investments as only been incidental to the practice of his profession.
A dealer’s employee or a dealer’s representative
A person who is a newspaper proprietor.
LECTURER: DIAMOND ADDO

Is defined to include a person in the direct employment of or acting for or by arrangement with the investment adviser, who performs for that dealer a function of the dealer other than work ordinarily performed by accountants, clerks or cashiers and where the dealer is a body corporate, includes a director or an officer of the body corporate who performs for the body corporate that function of an investment dealer.
LECTURER: DIAMOND ADDO

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Is defined to mean a person, in the direct employment of or acting for, or by arrangement with a dealer, who performs for that dealer a function of the dealer other than work ordinarily performed by accountants, clerks or cashiers, whether the remuneration is by way of salaries, wages, commission or otherwise; and where the dealer is a body corporate, includes a director or an officer of the body corporate who performs for the body corporate a function of the body corporate
LECTURER: DIAMOND ADDO

The Ghana Stock Exchange rules on takeovers and mergers provide that a public announcement of a takeover offer shall be made by the offeror company to the offeree company when;
1. Any person in his own name or in the name of any other person acquires, whether by a series of transactions over a period of time or otherwise, securities which, when aggregated with securities already held or acquired by that person, shall carry
25% or more of the total outstanding shares of the company.
LECTURER: DIAMOND ADDO

Cont.
2. Any person secures the control of management of a company, acquiring or agreeing to acquire, irrespective of the percentage of the voting capital, the securities of the directors or other members, who by virtue of their holdings of securities together with the holdings of their relatives, or nominees control or manage the company.
LECTURER: DIAMOND ADDO

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The offeror company shall, either before or immediately after communicating its offer to the offeree company, make an offer to the remaining members of the offeree company to purchase their shares at a price not lower than the average of highest weekly prices during the immediately preceding 26 weeks from the public announcement of the takeover offer or the negotiated price, whichever is higher. This price shall be paid by cash only.
LECTURER: DIAMOND ADDO

Cont.
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It is obvious that the above rules are designed to create a level playing field so that all investors will have an equal chance of tendering their shares in a takeover. However, the difficulty in this consummation bid is that many takeovers are settled through an exchange of shares with the acquisition of shares issued by the acquiring company in exchange for the shares of the acquired company.
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Financial economists believe that takeovers are an effective mechanism for promoting the efficiency of companies because they allow underperforming companies to be acquired by stronger ones, thus increasing the overall economic well being of society. Rules on takeovers should facilitate a smooth change of control while providing for equal treatment of all investors
LECTURER: DIAMOND ADDO