Jul 11, 2010 By Peter Egwuatu

 

Stockbrokers have come under the scrutiny of the investing public and the regulatory authorities in recent time as a result of despicable acts by some of them that worked against the rules of the market.

 

Also the crash of the Nigerian stock market experienced in 2009 which was partly blamed by stockbrokers’ speculative activity as well as insider dealings, among others has resulted to the Nigerian apex capital market regulator, Securities and Exchange Commission (SEC) coming out with rules and strict regulation, a development that shareholders said was in the right direction.

 

The banking sector also had it share of the impact of the global financial meltdown in loans default of about N1trn that resulted in the current banking sector reforms that started on 14th August, 2009 where the boards of six banks were suspended and the Managing Directors sacked and replaced with others.

 

Earlier in the year, some stockbrokers had running battles with their settlement banks over the operations of margin facilities that lead to the use of security agencies and other government anti graft agencies by banks to harass and intimidate stockbrokers.Commenting on why stockbrokers have come under scrutiny by the regulatory authorities, Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Alhaji Rasheed Yussuff, said “It is true that during the past year, stockbrokers came under the scrutiny of the investing public, regulatory authorities, government, and capital market stakeholder groups as a result of unwholesome activity  by some of our members. We were all branded fraudsters and this situation affected both personal lifestyles’ of our members as well as our professional practice of stockbroking.

 

“Nevertheless, we still have many stockbroking firms that follow the rules of the market and the ethics of the profession. ASHON is poised to ensure that its members maintain the rules of the market and we have been contributing positively to the development of the market directly and indirectly.“Having consolidated our existence in the various stakeholder groups and regulatory authorities within the financial services industry, ASHON is now better positioned to create opportunities for stockbrokers in the emerging market structure through integration and collaboration.

 

“In this regard, we are working with the promoters of the NASD Limited to establish an OTC trading platform that will also trade in equities not listed on the Exchange and other derivatives.“We are also working with management and Council of the Abuja Commodities & Securities Exchange to integrate our members to trade on the Commodity Exchange platform with minimum conditions.“ASHON is also working in conjunction with the Exchange to get the Debt Management Office (DMO) to create a retail segment for the bond market where stockbrokers can trade in the national, sub-national and corporate bonds.

 

“Discussions are ongoing with FDHL Consult to formalize Hands-On training programme for stockbrokers on trading in bonds using the existing NSE platform which have all the features to trade on bonds.”Meanwhile, the SEC review of the stock market rules has continued to generate commentaries from stakeholders.The most topical of rules, according to shareholders, was the directive for payment of interest not below the Central Bank of Nigeria (CBN) Monetary Policy Rate (MPR), plus five per cent to unsuccessful investors in public offer whose monies are not dispatched in compliance with the Commission’s rules.

 

The Commission rule on dispatch of returned monies and certificate is that such fund must be sent 15 days after the approval of the offer by the SEC.Mr. Boniface Okezie, the National Coordinator of the Progressive Shareholders Association of Nigeria (PSAN), said it is one thing to make rules another thing is to enforce them. With MPR currently at 6 per cent, it means defaulter would pay 11 per cent interest.

 

“Most of the subscribers who were unsuccessful in the some past offers did not get a refund during the stipulated three months. Even up till now there are still many complaints by investors who have neither received share certificates nor their monies in some offers that took place in 2007.“It is believed that an estimated N5bn investors funds in unsuccessful applications of public offers were trapped in the last four years, even as most issuers claimed that they had returned funds on all unsuccessful offers with seven per cent interest.”In his reaction, Mr. Timothy Olufemi, leader of the Renaissance Shareholders Association of Nigeria (RSAN), said what SEC has done was just to make sure that issuers of offers were not unnecessarily allowed to withhold in unsuccessful applications.

 

According to him, “when many big companies, in the banking and manufacturing sub-sectors of the stock market did not comply in their last offers and went away with it, they threw investors into deep financial crisis which we are yet to recover from.“It is a good thing to happen to the market. As you can remember, the DG of SEC, Ms. Arunma Oteh, promised to ensure total return of investor confidence in the market by ensuring that investors get the right treatment. No investor will be happy to invest if he puts money in the shares of a company and he neither get the shares nor his money back for six months or one year. This is just one of the things that discourages people from investing in our market and the DG is determined to stamp them out.”

 

Recently, the SEC unveiled a new set of rules that would enable it reposition the capital market.The apex regulatory body said that the legislation, comprising 23 new rules and 8 amendments, would also help to ensure transparency and efficiency of the Nigerian capital market.It also said that the move was in pursuance to Section 313 sub-section (1) of the Investment and Securities Act, which empowered the Commission to use regulatory tools such as registration, monitoring, investigation and enforcement mechanism.

 

The Director-General of the Commission, Ms Arunma Oteh, while unveiling the new rules, said the move became imperative due to the crisis that rocked the capital market in the wake of the global financial crisis in 2008.

 

(Source:Vanguard)