The Association of Securities Dealing Houses of Nigeria (ASHON) and the Chartered Institute of Stockbrokers (CIS) have called on the Financial Reporting Council of Nigeria (FRC) to formally involve capital market professionals in the ongoing review of valuation guidelines for financial assets.
The two professional bodies said the valuation of capital market instruments requires specialised expertise that goes beyond accounting measurement and financial reporting, stressing that stockbrokers and securities dealing firms possess critical market knowledge that should inform any regulatory framework governing the valuation of financial assets.
The FRC issued the Exposure Draft of the proposed Regulations in November 2024 as part of efforts to establish a comprehensive framework for regulating valuation services used in financial reporting and improve the quality, consistency, transparency and credibility of valuations.
In a joint position paper on the FRC’s review of the Valuation Regulations for Financial Reporting, 2024, ASHON and CIS argued that professionals with direct experience in securities pricing, trading, investment analysis and portfolio management should have formal representation in the development of valuation guidance for financial instruments.
The position paper was signed by Sehinde Adenagbe, chairman of ASHON, and Fiona Ahimie, 14th president and chairman of council of CIS.
ASHON and CIS said the specialised nature of financial assets makes it necessary for the valuation framework to reflect the realities of the capital market.
According to them, the valuation of financial assets involves a range of technical considerations, including market microstructure, price discovery, liquidity, yield curves, risk pricing, corporate actions, valuation models, trading behaviour and securities-market regulation.
They maintained that while accountants play an indispensable role in financial reporting and the application of International Financial Reporting Standards (IFRS), accounting professionals should not be regarded as the sole custodians of valuation expertise for capital market instruments.
“Just as property valuation standards are informed by qualified estate surveyors and valuers, valuation standards for financial assets should equally be informed by professionals whose principal practice is the valuation, analysis, trading and management of those assets,” the bodies stated.
The organisations specifically urged the FRC to formally engage ASHON and CIS in all deliberations relating to the valuation of capital market financial assets.
They further called for their representation on any technical working groups, review committees or advisory panels established to develop valuation guidance applicable to financial instruments.
ASHON, which represents SEC-licensed securities dealing firms, said its members participate daily in the origination, trading, pricing, valuation and distribution of financial instruments in Nigeria’s capital market.
The CIS, on its part, is the statutory professional body responsible for regulating the practice of stockbroking in Nigeria. The Institute’s professional training, examinations, ethical standards and continuing professional development programmes cover areas including investment analysis, securities valuation, portfolio management and capital market practice.
The two bodies therefore argued that they collectively represent a significant pool of practical and professional expertise that can strengthen the proposed valuation framework.
They said their inclusion would help ensure that valuation methodologies reflect prevailing market conventions and investment practices, while also improving the technical robustness and practical applicability of the Regulations.
The bodies also contended that broader stakeholder participation would strengthen confidence in financial asset valuations reported in financial statements and promote greater consistency between accounting requirements and actual market practice.
“Formal involvement of ASHON and CIS will ensure that valuation guidance accurately reflects the realities of Nigeria’s capital market and enhance stakeholder confidence and industry acceptance of the final Regulations,” they said.
They further stressed that their demand was consistent with the broader regulatory architecture governing Nigeria’s financial system, noting that the FRC is responsible for promoting high-quality financial reporting while the Securities and Exchange Commission (SEC) serves as the apex regulator of the capital market.
According to ASHON and CIS, the respective mandates of the accounting and capital market regulatory institutions make collaboration between accounting professionals and capital market practitioners essential in developing effective valuation standards.
The organisations said the FRC’s initiative to strengthen valuation practice in Nigeria was “timely and commendable,” but cautioned that the credibility and effectiveness of the final framework would depend substantially on the breadth and quality of expertise brought into the process.
They therefore urged the Council to adopt a multidisciplinary approach in the finalisation of the Regulations, arguing that specialist asset classes should be governed by standards enriched by the professionals who understand their valuation and market dynamics.
The bodies said the ultimate objective should be a valuation framework that combines accounting rigour with practical market expertise and delivers transparent, reliable and high-quality financial reporting for investors and other stakeholders.
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