By Yakubu LAAH InvestAdvocate

Lagos (INVESTADVOCATE)-Nigeria’s Securities and Exchange Commission (SEC) Thursday said it has excluded bank stocks from being used as collateral for margin trading transactions on the Nigerian Bourse.

This is according to a News Release from the Commission signed by Yakubu Olaleye, Head, Media of the SEC and made available to InvestAdvocate.

“It is important to note that the guidelines exclude Bank stocks from being used as collateral for margin trading transactions.” SEC said.

Similarly, the Commission cautioned investors on margin activities affirming that only persons and entities who are knowledgeable about margin activities should engage in such transactions.  “Retail investors who do not have the requisite knowledge should consult a knowledgeable financial expert.” the SEC advised.

“The margin lending rules and guidelines provide for a Margin List.  This Margin List is not an investment recommendation but rather a guide to those who wish to engage in margin activities.  The SEC cautions that only persons and entities who are knowledgeable about margin activities should engage in such transactions.  Retail investors who do not have the requisite knowledge should consult a knowledgeable financial expert” the SEC said.

The Nigeria’s SEC said the guidelines covers the type of securities that qualify as marginable securities as well as the profile of investors that may participate in margin trading.

“They provide the criteria for determining marginable securities and those securities excluded from the list of marginable securities.” the SEC said.

According to the Commission, it has the responsibility to determine and approve the Margin List. The approved list of marginable securities is now available on the SEC website (www.sec.gov.ng).

It also advised investors to check the Margin List before entering into a margin lending arrangement with a broker or a bank.

“The capital market is the best source of cheap medium to long-term finance for enterprises as well as for government. The capital market mobilizes savings to meet their long term financing needs in a manner that benefits the savers, the investors and the economy as a whole and is therefore a critical pillar of the national economy.  As the apex regulator of the capital market, the SEC is committed to building a world class market, notably one that is inclusive, innovative and effective, but is also perceived as fair, transparent and built on integrity.” The Commission said.

According to SEC, the unprecedented Nigerian Stock market decline in 2008 was fuelled among other factors; by excessive speculative activities and unsupervised use of margin loans to fund investment in listed equities, creating a crisis that put the entire economy at risk.

Thus, in its bid to remedy this situation, charted a new course; founded on the principles of risk-based supervision. In furtherance of the above, the SEC and the Central Bank Nigeria (CBN) introduced a set of rules to regulate margin lending.

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