At a time when confidence in the nation’s financial sector is at its lowest ebb – as a fallout of the clean-up exercise undertaken by regulators of the space – the transparency and access to information offered by companies listed on the Ghana Stock Exchange (GSE) offers a template for the rebuilding of public trust in the sector.
This is according to the Deputy Chief Executive Officer of the National Pensions Regulatory Authority (NPRA), David Tetteh-Amey Abbey, who argued that while the financial services sector in any jurisdiction thrives on accurate and timely disclosure of information, it is especially true in the nation’s current case – adding that all efforts to court the investing public will not prosper in an information-opaque system.
The GSE as part of its ongoing requirements demands that listed companies regularly furnish the investing public and related stakeholders with relevant information. This is achieved through the publication of financial results and other notices, interacting with stakeholders to explain their results at its ‘Facts behind the figures’ sessions, among other measures.
He offered these thoughts at a workshop that had as its focus ‘Maximising Investment Returns Using the GSE’, where he said: “The Ghana Stock Exchange, with its listing and membership requirements to issuers of securities on the market, is an appropriate avenue for ensuring transparency and accountability on the use of funds so investors can be assured.
The continuous collaboration among regulators and markets will also go a long way to ensure stability of the financial security system in this country at a time when trust in the whole sector is low… these things engender trust, and that is why the stock exchange was established,” he explained at the event which was jointly organised by his outfit, the GSE, and Securities and Exchange Commission (SEC).
On the allocation of assets under management (AUM) by pension funds to listed equities, Mr. Abbey described the current 3.7% (GH¢815million of a possible GH¢22billion as at end of December 2020) as ‘worrying’.
He however expressed optimism that the workshop, and other measures being undertaken by the organisers and related entities, will see most of the GH¢3.6billion available to pension funds to invest in equities make it to the market within the next three years.
Minimum threshold for equities
Touching on recent calls from some quarters for a possible minimum threshold for investment in stocks to be applied to pension funds, the Deputy CEO of the NPRA said the responsibility of allocation must continue to lie with the entity that has a fiduciary obligation to the contributors – the trustee.
He added that the Authority, by increasing the upper limit for pension fund investments in stocks to 20% of AUM, has signalled to the service providers its resolve to encourage their participation in that side of the capital market
“The best we can do is to continue to signal, as the regulator, since we do not make the investment decisions and we do not have fiduciary responsibility toward contributors when they retire. We can only show our hand and the direction we want the market to go.”
He however hinted that adjustments to the imminent reviewed investment guideline will, through the introduction of new asset classes as permissible investments tools, address some of the lingering challenges and ensure more resources from pension funds are channelled to the real economy.