Legal Framework For Complaints Management In Nigeria’s Capital Market

By Michael Dugeri

Introduction

“Complaint” is an expression of dissatisfaction made to an organisation, related to its product or service. Complaints management is, therefore, the aggregate of ways, tools and processes an organisation uses to collect, analyse, and act on customer dissatisfaction. In practice, customer complaints may take one or more of the following categories:

1. complaints alleging financial losses,
2. complaints alleging failure of service delivery, and
3. complaints with potential legal/regulatory implications.

The complaints may arise from issues such as delay in execution; poor customer service; failure to carry out lawful instructions; negligence; mistakes in the computation of charges/fees; and system errors or technological failures.

It has been noted that complaints are a critical element of consumer contact management. Customers are rarely as motivated to speak to organisations as they are when something has gone wrong. While no one likes to hear what they have done wrong, knowing how to receive, manage and resolve customer complaints can yield significant insights that can help organisations meet the current and future needs of their customers.

Beyond making individual customers happy by addressing their problems, complaints can also be leveraged upon by an organisation to enhance product development, mitigate risk, and find opportunities for growth and innovation. Hence, while customer complaints are often seen as negative events that successful organisations should avoid, forward-looking organizations see them as vital inputs for enhancing customer satisfaction and experience.

Complaints Management Framework of the Nigerian Capital Market

Complaints and associated issues of product and service reliability are often focused on by regulators because of their potential impact on a market’s dynamism, fairness, transparency and efficiency. The Investments and Securities Act (ISA) gives the Securities and Exchange Commission (SEC) the responsibility to maintain efficient, transparent and effective capital markets in Nigeria. This includes the responsibility of ensuring that investments are not violated, misused or mismanaged in any way. As a result, the SEC has issued Rules relating to the complaints management framework of the Nigerian Capital Market for all entities operating in the capital market, including the SEC. This means that the SEC Complaints Management Framework Rules are applicable to Self-Regulatory Organisations (SROs), recognized Capital Market trade groups, Capital Market Operators (CMOs) and listed public companies.

The overreaching aim of the Rules is to implement a framework for customer (investor) complaint management in the capital market to entertain complaints arising out of issues that are covered under the following:

1. the Investments and Securities Act, 2007 (ISA),
2. the SEC Rules and Regulations made pursuant to the ISA,
3. the rules and regulations of Securities Exchanges; and
4. the guidelines of recognised trade associations.

Organisations can only solve the problems they know about, so organisations that don’t provide opportunities and incentives for customers to provide feedback are missing a vital component in their quest for constant improvement and enhanced customer experience. The SEC Rules therefore require all entities in the Capital Market to establish complaints management policies that are fair, impartial and objective for the handling of complaints made in respect of all forms of complaints against operators by client, between operators, against regulators and SROs, and trade manipulation, accounting frauds, Ponzi schemes.

Responsibility for implementation and monitoring compliance of such policy is vested in individual company’s/firm’s senior management. The ‘relevant Competent Authority’ is to ensure that Companies/firms have a complaints management function which enables complaints to be investigated fairly and possible conflicts of interest to be identified and mitigated, and properly documented. The term ‘Competent Authority’ in relation to these rules means SROs and recognized Capital Market trade associations.

It is pertinent to note that not all complaints are qualifying of treatment under the Framework. For instance, complaints against unlisted, delisted, wound up, liquidated or ailing companies fall outside the purview of this Framework. Also not to be treated under the Framework are complaints that are sub-judice or under the purview of other regulatory bodies.

It is also pertinent to note that a complaint must qualify as such in order for it to be entertained. This is important in order to better manage resources in the complaint management process. Hence, the following ‘complaints’ are not considered as deserving of attention or resolution:

1. Complaints that are incomplete or not specific.
2. Allegations without supporting documents.
3. Offering suggestions or seeking guidance or explanation.
4. Seeking explanation for non-trading of shares or illiquidity of shares.
5. Not satisfied with trading price of the shares of the companies.
6. Non-listing of shares of private offers of securities by private companies.
7. Disputes arising out of private agreement with companies or intermediaries.
8. Any other matters as may be determined by the SEC from time to time.

There is, however, no yardstick for determining when a complaint is frivolous. In the absence of guidance on acceptable forms of a complaint, companies/firms have discretion on what they consider to be incomplete or frivolous complaints. There is the possibility that such discretion may be abused in cases where the affected firm is more concerned with reputational damage control than customer satisfaction.

The SEC complaint resolution framework is multi-layered, such that complaints by clients are to be resolved by individual companies/firms within 10 days; complaints between CMOs are to be resolved by the relevant Competent Authorities within 20 days; while the following complaints are to be referred to the SEC for further investigation, and ultimately to the Administrative Proceedings Committee (APC) of the SEC:

1. complaints against Competent Authorities;
2. complaints against operators by SROs/Regulator;
3. Trade manipulation, accounting frauds, Ponzi schemes and such other complaints as may be determined by the SEC from time to time.

Complainants not satisfied with resolutions /decisions reached by SEC reserve the right to appeal to the Investments and Securities Tribunal (IST) provided there is full compliance with the ISA.

Finally, the Rules require every SROs, recognized Trade Associations, CMO and public company to maintain an electronic Complaints Register, which shall contain details such as name of the complainant, date and nature of the complaint, and remarks/comments. The Register is to be updated regularly, and status reports of the complaints are to be forwarded to the SEC quarterly. The importance of a Complaints Register lies in the fact that a successful resolution of complaints is almost as important as ensuring that the reason for the complaint does not recur. With customers lodging complaints across a wide variety of communication channels (such as email, customer response surveys, and social media), many organisations have difficulty keeping track of all the information. It is not unusual to find these complaints piling up in the personal email accounts of frontline workers or customer experience representatives. Without the opportunity to engage in rigorous analyses of customer complaints, organisations lose the opportunity to mine the deep insights that complaints can provide about the customer experience.

Appraisal of the Complaints Management Framework

It appears that the SEC Complaints Management Framework of the Nigerian Capital Market is more concerned with complaints about breach of a regulatory rule as against complaints that are on internal policies or practices of individual capital market operators. But while SEC, the regulator, may be more concerned with the overall health of the market, individual capital market operators should leverage on the Framework for customer service performance improvement.

Prior to the Complaints Management Framework of the Nigerian Capital Market, it was not uncommon for aggrieved customers/investors to engage law enforcement agencies like the Nigerian Police or the Economic and Financial Crimes Commission (EFCC) to resolve disputes with capital market operators, especially where the dispute involved criminal allegations, such as embezzlement or misappropriation of funds of an investor. It is to be noted that in involving the Police or EFCC, complainants are often motivated by the perceived potential for quick results/resolution. The Complaints Management Framework of the Nigerian Capital Market is intended to discourage such tendencies, for obvious reasons. The new Framework is therefore expected to prevent complaints from becoming disputes that might take a long time to resolve.

It is suggested that the prevention of complaints from becoming disputes should have formed the basis of the Capital Market Complaints Management Framework, rather than the resolution of active disputes in the capital market, which is already well provided for under extant provisions of the ISA. Otherwise, the Complaints Management Framework will only add to already existing dispute resolution channels, such as the SEC Administrative Proceedings Committee (APC), Investment and Securities Tribunal (IST) and even the courts. Apart from potential jurisdictional conflicts, the current system will only prolong the timeframe for resolving disputes, exhaustively. As a result, the Framework should have been more focused on complaint management as it relates to internal processes and practices of individual capital market operators, as opposed to complaints on the laws, rules and regulations governing the market.

Appreciating the difference between a ‘complaint’ and a ‘dispute’ is important in delineating appropriate resolution channels in the capital market. The ISA appreciates this difference, as it uses ‘complaint’ for matters that are to be referred to the APC for determination; and ‘dispute’ for matters that the IST is to handle. Where a party files a complaint at SEC against an operator for any securities transaction, the complaint is referred to the Administrative Proceedings Committee for determination. The decision of the Committee is appealable to the Investment and Securities Tribunal (IST). The Investment and Securities Act 2007 prescribes that all actions must be concluded within 90 days at the IST. The decisions of the IST are appealable to the Court of Appeal and subsequently to the Supreme Court. It is unclear why the Complaints Management Framework is considered by the SEC a necessary appendage to this statutory dispute resolution framework.

Conclusion

It is suggested that the Complaints Management Framework should be redesigned to focus more on prevention of complaints from becoming disputes in the capital market. This means an increased focus on the internal policies of organisations on complaint management as against regulatory breaches. It is not realistic to expect CMOs to develop and implement policies on all forms of complaints in the Capital Market. One way to do this is to be clear on what qualifies as a complaint to be treated at the individual company’s level and also make clear that the complaint management policies of companies/firms should be tailored towards addressing complaints about the individual internal processes of the companies/firms.

There is also the issue of awareness on the existence of the Framework and of individual companies/firms of the customer complaint policies. The SEC Rules should contain a provision that mandates companies/firms to notify their customers and stakeholders of their customer complaint policies.