#MoneyReport2023: Restoring investor confidence and ensuring market stability – SEC’s strategies in the post-DDEP era

Rev. Daniel Ogbarmey Tetteh, Director-General of the Securities and Exchange Commission (SEC)

In the rapidly changing landscape of Ghana’s domestic capital market characterised by both achievements and challenges, the Securities and Exchange Commission (SEC) stands as a key player in shaping the market’s trajectory. Over the past decade, the collaborative efforts of various stakeholders have propelled the market’s growth, with notable milestones witnessed in the local equity and bonds market throughout 2020, as documented by the Ghana Stock Exchange (GSE).

Despite the headwinds posed by the pandemic, the Ghana Fixed Income Market (GFIM) achieved a groundbreaking milestone by surpassing a trading volume of 100 million for the very first time, concurrently accompanied by the equities market’s second-highest annual share trading volume to date.

In May 2022, before initial contact with the International Monetary Fund (IMF), the Ghana Stock Exchange (GSE) reached a record high by trading shares worth GH¢607.31million boosted by Free-of-Payment Transactions of 614 million shares of MTN Ghana. This heightened market activity resulted in a cumulative year-to-date (YTD) share trading value of GH¢1.02billion by the end of May 2022, marking an impressive 295.12 percent increase compared to the same period in the previous year.

As the SEC navigates the intricacies of the market, recent events such as the commencement of the Domestic Debt Exchange Programme (DDEP) have brought both opportunities and uncertainties to the forefront. The DDEP’s influence prompted shifts in investor sentiment and sparked discussions on risk management strategies.

The equities market, often viewed as a prime indicator of capital market trends, experienced a downward trajectory – following a 43.66 percent return, the Composite Index (GSE-CI) started to decline even at the beginning of 2022 – catalysed by a series of portfolio reversals, as offshore investors sought more favourable returns in stable markets with rising interest rates. This trend ultimately culminated in a 12.38 percent loss for the benchmark Composite Index (GSE-CI) at the close of the year.

The DDEP, unfolding during the latter half of 2022, cast a distinctive shadow on both the equity and fixed-income sectors. However, the fixed-income market bore a more pronounced impact, characterised by liquidity concerns and reduced trading volumes. The uncertainty surrounding the execution of the debt exchange programme prompted caution among investors, particularly foreign entities eyeing government bonds. This air of uncertainty precipitated a liquidity crisis, inducing a significant drop in trading activity and magnifying the challenge of maintaining market fluidity.

The prolonged DDEP process extended from the previous year’s last quarter into the current year, worsening the liquidity crunch. This was particularly evident in the fixed-income market, where trading volumes plummeted. Even collective investment schemes, especially those focusing on fixed income, faced liquidity issues as investors sought to withdraw amid market uncertainties.

Ultimately, the DDEP experience highlighted the inherent risks in investing that must be understood and managed effectively.

Several outcomes arose from the DDEP. Firstly, the notion of risk-free investments was challenged. Many investors had concentrated positions in government paper, which exposed their portfolios to the impact of the debt exchange. The importance of diversification and managing concentration risk became evident.

Secondly, the need for new financial products and options became apparent. The market operators needed to innovate and develop products that could cater for a wider range of investor preferences and risk appetites.

Thirdly, the DDEP highlighted the necessity for improved investor education. Investors had previously believed that fixed-income securities were entirely risk-free, which was not the case. Investment advisors and fund managers should provide a more comprehensive picture of the risks associated with various investments so that the investing public can make more informed decisions.

Lastly, the DDEP had both challenges and created opportunities for the capital market. While it posed liquidity issues and caused confidence concerns, it also spurred market operators to develop new products and prioritise investor education. The capital market could benefit from these challenges by working to create a more diversified product range and fostering a better understanding of risk and returns among investors.

Ultimately, the DDEP experience emphasised that risk is inherent in investing and needs to be understood and managed effectively. The aftermath of the DDEP called for a holistic approach, involving regulators, market participants and investors, to ensure a well-functioning and informed capital market.

The helmsman of the capital market, the Director-General of the Securities and Exchange Commission (SEC), Rev. Daniel Ogbarmey Tetteh, speaks to the B&FT on these and other issues as the capital market stages a comeback.

  1. Navigating the impact of the Domestic Debt Exchange Programme (DDEP)

Q. The DDEP led to risk-off sentiments and reduced bond valuations denominated in GH¢. Could you shed light on the SEC’s strategies to navigate and mitigate the effects of such programmes on investor confidence and market stability in the future?

A. In light of the DDEP’s influence, we recognise the emergence of risk-off sentiments and the subsequent decrease in bond valuations denominated in GH¢. It’s crucial to shed light on the strategies devised by the Securities and Exchange Commission (SEC) to adeptly manage and mitigate the repercussions of such programmes on investor confidence and overall market stability in the future.

We are introducing continuous professional development (CPD) programmes within the capital market.

Regarding our approach, the SEC has placed a strong emphasis on enhancing investor education and outreach. We’ve integrated these efforts within our broader capital market master plan, focusing on the pillar of increasing our investor base. A key aspect of this is providing comprehensive investor education. We firmly believe that a well-informed investor is a well-protected investor. To achieve this, we have developed an extensive investor education plan aimed at empowering individuals with the knowledge they need to make informed decisions.

Drawing an analogy to the response during the COVID-19 pandemic, education played a pivotal role in altering behaviours and reducing the incidence of certain diseases. Similarly, education within the financial market context empowers individuals to comprehend market dynamics, make informed investment decisions, and proactively manage risks. We understand that markets are inherently volatile due to factors beyond our control, such as global events like geopolitical tensions or unexpected crises. Therefore, it is vital to equip investors with the tools and knowledge to navigate such volatility effectively.

To bolster our efforts, we are introducing continuous professional development (CPD) programmes within the capital market. These programmes will be mandatory for market participants, including operators and advisors. This ensures that industry professionals remain up-to-date with the latest trends, risk management strategies, and best practices, ultimately enabling them to provide superior guidance to clients.

In addition, the SEC is actively engaged in developing and refining market rules to address emerging challenges and maintain market integrity. Our participation in global standard-setting body, thus the International Organization of Securities Commissions (IOSCO), keeps us aligned with international best practices and equips us with insights on effectively responding to similar challenges faced by securities markets worldwide.

Furthermore, we are diligently exploring the concept of an investor protection fund, a safety net designed to provide a measure of cushion to investors. However, it’s crucial to emphasise that this fund is not a panacea for all investment risks. Its implementation will be guided by clear rules and limitations. We are committed to ensuring transparency and providing thorough information about the fund’s scope and limitations when it is ready for launch.

Our strategies revolve around strengthening investor education, promoting market professionalism, refining regulatory oversight, and exploring safety nets within a transparent framework. The goal is to empower investors to make well-informed decisions, manage risks, and build resilient investment portfolios. Ultimately, our efforts are geared toward instilling confidence in the market and fostering a culture of informed decision-making.

2. Effective communication and public engagement

Q. Given the vast and complex information that surrounds the financial sector, especially in times of macroeconomic challenges, how does the SEC plan to enhance its communication strategies to effectively engage the public? How can the SEC ensure that its communications are accessible without being overwhelming or detached?

A. SEC has recognised the significance of effective communication, especially during periods of macroeconomic challenges. We’ve established a dedicated communications unit to ensure clear and accessible information dissemination. Initially, the communication tasks were managed by the Policy Research Team, which had its focus on multiple areas. We’ve since formed a dedicated Communications Team that has effectively conveyed information about application exercises, clean-ups, and more.

Acknowledging the need for local language communication, we’ve made improvements in that aspect as well. The communications team has developed an extensive investor education programme using various channels, including local languages, to counter misinformation. We’ve initiated ‘Time with the SEC’ events across regions, which have garnered high participation, demonstrating the public’s eagerness for accurate information. This initiative has also been extended to specific interest groups, including the media and law enforcement agencies.

To address challenges related to fraudulent schemes, the SEC is actively reaching out to, relevant stakeholders, including the National Media Commission and National Communication Authority, to collaborate on controlling misinformation and promoting financial literacy. This involves using diverse communication channels, from social media to traditional outlets, to ensure broad coverage.

Recognising the need for sustained communication efforts, the SEC has expanded its focus to more sustainable engagements with its stakeholders facilitated by the Communications and External Affairs Unit beyond occasional events. We’re committed to resourcing and empowering this unit to ensure consistent and accessible communication. In doing so, we aim to ensure that information is effectively conveyed without overwhelming or detaching the public.

Leveraging the existing concept of investment within traditional practices, such as saving for future needs, is also a part of our strategy. We believe that people have a basic understanding of saving and investing, and we aim to build upon this foundation. By using relatable examples, including anecdotes from everyday life, we intend to simplify the complexities of the capital market and investment, making it more approachable to a wider audience.

Overall, the SEC’s strategy involves a comprehensive approach to communication, encompassing various channels, local languages, targeted events, and partnerships to ensure that the public is well-informed and engaged. Through consistent efforts and collaboration, we aim to instil a culture of saving and investing in society.

SEC is actively developing regulatory frameworks for asset-backed securities, securities lending and borrowing, market making, and margin trading.

3. Addressing market volatility and product expansion

Q. In light of the recent challenges – such as macroeconomic conditions, inflation and fiscal risks – how does the SEC perceive the potential introduction of more diverse financial products, including calls for the establishment of forwards/derivatives markets? Considering the recent risk-off sentiments, are the domestic markets equipped to manage the potential volatility associated with such products?

A. In the context of addressing market volatility and expanding financial products, the SEC acknowledges the challenges posed by macroeconomic conditions, inflation and fiscal risks. These factors have led to discussions about introducing a broader range of financial products, including the establishment of forwards/derivatives markets. I can confirm that discussions and consultations are ongoing toward the establishment of a forwards/derivatives market in the securities industry.

The SEC would take the necessary steps to ensure the deepening of capacity of its staff to ensure effective oversight when such new products are rolled out. To illustrate, the SEC has recently embarked on capacity-building for its staff to support the operationalisation of the issued Guidelines on Real Estate Investment Trusts (REITs) and Private Funds.

The aftermath of the financial sector clean-up may have momentarily slowed the roll-out of these new products. However, the SEC remains committed to facilitating their introduction. Two guidelines, which we have recently reviewed and should be issued in short order to support the roll-out of new products, are Commercial Paper Guidelines and Crowdfunding Guidelines. The SEC is also actively developing regulatory frameworks for Asset-Backed Securities, Securities Lending and Borrowing, Market Making, and Margin Trading. These frameworks are designed to maintain market integrity, support innovation, and ensure investor protection.

Addressing volatility, the SEC underscores the importance of diversification within the investment universe. The Capital Market Master Plan’s vision of an efficient, diversified and well-regulated market aligns with this objective. Regulatory frameworks are crafted to mitigate potential risks and guide market behaviour. Balancing regulation with innovation is essential, ensuring protection while encouraging growth. The SEC prioritises education, striving to educate market participants about new products and their associated risks. This helps manage expectations, minimise misinformation, and prevent undue market turbulence.

While the complete elimination of volatility is unrealistic, the SEC aims to equip market participants with the necessary tools to navigate it. Strengthening market players’ knowledge, capitalisation and compliance is pivotal. Entry barriers are raised to ensure qualified and capable entrants, while transparent and enforceable rules offer the needed guidance. Embracing new products and innovations requires understanding rather than fear. The SEC’s collaborative efforts with the market will facilitate the development and education needed to promote a well-functioning, resilient financial landscape.

4. Enhancing information efficiency in the capital market

Q. The financial sector faces information asymmetry, hindering optimal decision-making. What measures does the SEC envisage to make the domestic capital market more information-efficient? How can market participants access accurate and timely information to make informed investment decisions?

A. Enhancing information efficiency in the capital market is a priority for us at the SEC. We have already taken steps and are planning further measures to ensure that market participants have access to accurate and timely information for making informed investment decisions.

We are developing a comprehensive solution – a Financial Data Centre”.

To address information asymmetry, we have enforced and continue to enforce disclosure requirements for companies that issue securities that are listed on the stock exchange. Our colour-coded framework, introduced a few years ago, categorises companies on our website with specific colours for easy identification of those with regulatory issues and those without regulatory issues.

We are actively enhancing this framework. Our team has worked on a more detailed and comprehensive colour-coding system that would close the information gap on the licensed market operators. When the new framework is finalised, we would embark on market sensitisation to educate the investing public about the meaning and interpretation of the colour-coding system to foster effective use by investors of the information it seeks to convey in the investing process. For instance, we expect that the colour-coding framework would empower investors to ask relevant questions and seek clarification from companies or financial advisors.

In line with our commitment to transparency and access to information, we have plans to develop a comprehensive solution – a Financial Data Centre. This centre will serve as a one-stop repository of crucial information for investors. Recognising that information drives the capital market, the Financial Data Centre will provide investors with the data they need to make well-informed investment decisions. By offering a centralised platform, we intend to streamline the information-gathering process for both local and foreign investors.

Our strategy involves multiple layers of improvement access to information by investors: from enforcing disclosure requirements and refining the colour-coded framework to educating the public and launching the Financial Data Centre, we are dedicated to enhancing information efficiency in the capital market. This comprehensive approach aims to empower investors with the necessary tools to navigate the market and make investment choices that align with their financial goals.

  1. Regulatory agility and crisis preparedness

Q. In an ever-changing financial environment marked by uncertainty, how does the SEC ensure regulatory agility and preparedness to address unforeseen challenges that might arise in the future, safeguarding the integrity of Ghana’s financial sector?

A. In an ever-changing financial environment marked by uncertainty, the Securities and Exchange Commission (SEC) ensures regulatory agility and crisis preparedness by striking the right balance between oversight and market dynamics. While not all regulatory actions are public, the SEC engages with entities undergoing issues and conducts on-site inspections, addressing concerns without unintended consequences.

Furthermore, to facilitate the effective implementation of its mandate, the SEC has improved its engagement with various publics by establishing a dedicated Communications and External Affairs Unit to help bridge critical communication gaps between the regulator and its stakeholders, and ensure improved engagement with the various publics of the SEC.

Regarding crisis preparedness, the SEC collaborates with other regulators under the Financial Stability Council (FSC). This cooperation recognises the interconnectedness of the financial sector in Ghana. There are working groups under the FSC that focus, among other things, on crisis preparedness and identifying emerging risks in the financial sector. This approach aims to create a resilient, responsive and stable financial sector.

The SEC’s nimbleness is exemplified by its swift response to correct misreporting and misinformation by a section of the media on the activities of one of its licensed custodians earlier this year. The SEC promptly corrected the information, demonstrating our commitment to accurate communication and efficient crisis management. The SEC is actively striving to maintain this agility and preparedness, ensuring the integrity and stability of Ghana’s securities industry.

6. Advantages of the DDEP to interest rates on the market

Q. How do we take advantage of the DDEP to reset interest rates on the market?

A. When considering the opportunity presented by the DDEP, it’s apparent that resetting interest rates within the market could be advantageous. Conversations within the industry emphasise the importance of rate adjustments, aiming to instil confidence and attract capital to the capital markets. However, it’s not as simple as the government merely lowering its borrowing costs. The intricacies lie in the market’s response and available options for deployment.

Taking advantage of the current situation to implement a reset holds merit, yet the challenge revolves around the context of inflation and its impact on real interest rates. Decisions require a thorough examination of potential outcomes, considering short-term shifts and long-term trajectories. The question remains: should we wait for inflation to subside, and if so, for how long? Alternatively, should a more drastic approach be considered, and what implications might arise?

Ultimately, a deliberate evaluation is necessary. Lowering interest rates could stimulate market activity, aiding economic recovery. Amid disruptions like the DDEP, such moments offer opportunities for introspection and recalibration. By carefully assessing the implications of rate adjustments, we can better ascertain the potential benefits to the nation’s broader economic landscape.

7. Sub-Fund introduced by fund managers after the DDEP

Q. What do you make of the new Sub-Fund introduced by fund managers post the DDEP?

A. n response to the question about the new Sub-Fund introduced by fund managers post the DDEP, my perspective revolves around the concept of tailored product offerings to address specific investor needs. With the Sub-Fund, the aim is to diversify the range of products available to investors. Previously, fixed income funds encompassed a broad spectrum, including short-term money market instruments and long-term capital market instruments such as bonds.

Following the yield curve correction toward a more normal distribution, the interest rates for long-dated instruments like bonds became attractive. Consequently, many fixed income funds allocated significant assets into bonds. The Sub-Fund approach emerged as a way to segregate the product offerings. For instance, a Sub-Fund can focus solely on the money market, providing an option for investors seeking less volatility and favouring short-term investments. On the other hand, traditional fixed income funds continue to cater for those comfortable with the risk-return trade-offs associated with long-term capital market instruments.

This move toward Sub-Funds aligns with the regulatory directive to employ mark-to-market valuation, a practice that increases the significance of interest rate fluctuations on bond prices. The importance of offering diverse options becomes evident here. By segregating the money market and fixed income segments into distinct Sub-Funds, investors can better match their risk tolerance with the appropriate investment vehicle.

Notably, last year witnessed unusual volatility in bond prices due to a sudden uptick in inflation and interest rates, which hasn’t been as prominent in recent years. The introduction of Sub-Funds is indicative of a maturing market that seeks to cater for the varied risk appetites and investment preferences of its participants. The role of the regulator in nurturing this growth is crucial, ensuring that appropriate guidance and support are provided to the evolving landscape. As the market responds to changing dynamics, such innovative product developments ensure that investors have the means to navigate through different market conditions while achieving their financial objectives.

8. Updates on the bail-out following the fund management sector clean-up

Q. What are the updates on the bail-out following the fund management sector clean-up?

A. The fund management sector clean-up has been largely successful, with a few hiccups on the roll-out of the government bail-out. While there have been some delays in some payments under the bail-out, the notable challenge has been the delay in securing the liquidation order from the court on the former Gold Coast Fund Management Company, now Blackshield Capital.

The implication is that the customers of Blackshield who have balances in excess of the amount paid under the partial bail-out have to wait till the liquidation order is granted before they can access the full bail-out. Of course, such customers will understandably be unhappy and frustrated, especially when funds are required for urgent needs.


The recent dynamics within Ghana’s domestic capital market reflect a complex interplay of economic challenges and innovation-driven opportunities. The SEC’s strategies and actions play a pivotal role in shaping the market’s trajectory.

From tackling the repercussions of the DDEP to enhancing communication strategies and promoting diversified financial products, the SEC is committed to fostering a resilient and informed capital market. As market participants navigate changing conditions, the SEC’s proactive approach aims to balance regulatory oversight with flexibility, ultimately contributing to the growth and stability of the Ghanaian financial sector.

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