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Hammer Fall On 24 CMOs

Following the recapitalisation of Capital Market Operators (CMOs) that was concluded on September 30, 2015, activities at the stock market began the year on January 4, 2016 with regulatory hammer falling on some operators for non-compliance.

The Securities and Exchange Commission (SEC) disqualified 24 CMOs for non-compliance or inability to substantiate claims of compliance by the audit firms. The list uploaded to the SEC website after capital verification has been conducted showed that 429 CMOs adhered to the minimum requirements while 24 others were disqualified.

Efforts by this newspaper to obtain the names of the CMOs disqualified were not successful, as a source at SEC, who pleaded anonymity, said the regulator would not release the list due to the sensitive nature.

The apex regulator in a circular said: “In exercise of the powers conferred on it by the Investment and Securities Act (ISA) 2007, the Securities and Exchange Commission hereby releases the list of capital market operators that complied with new minimum capital requirement after capital verification exercise.

“This list was based on the consideration of the reports on capital verification and the responses received from the affected CMOs. In all, 24 CMOs were disqualified for non-compliance and/or inability to substantiate claim of compliance based on queries raised by the audit firms. In addition, 16 new CMOs were added to the list, 10 of which were newly registered companies and six filed evidence of compliance after the release of provisional list which were verified and accepted.”

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In a bid to further enlighten investors about the e-dividend Platform launched last year and to address the issue of unclaimed dividend currently estimated at about N90 billion, the SEC during the first quarter began a nationwide enlightenment programme.

The Commission in collaboration with the Central Bank of Nigeria (CBN) launched the e-dividend management system late last year and Nigeria Interbank Settlement System (NIBSS) to enable investors have direct access to their dividends.

The Commission embarked on a campaign to sensitise members of the investing public on the on-going e-dividend registration and other initiatives that had commenced as a result of implementation of the 10-year Capital Market Master Plan.

The aim was to eradicate the difficulty encountered by retail investors in claiming their dividends.

The campaign train, which began in Abuja last January, was taken to Lagos in February and moved to Kano on March. Speaking in Abuja to begin the nationwide campaign, the Director General, SEC, Mounir Gwarzo, described the e-dividend platform as a game changer in the market that would ensure that infractions are reduced to the barest minimum level.

NSE’s New Rules On Shares

As part of efforts by the Exchange to reinforce-protection mechanism and also to ensure that operating rules are effective to serve as deterrents to market abuse, it also during the quarter started the implementation of new rules to guard against unethical practices by stock brokers.

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A notice at the NSE’s website explained that the newly amended rules were aimed at tightening the noose on unauthorised sale and transfer of shares by unscrupulous stockbroking firms and traders. It added that the NSE could withdraw the dealing licence of any erring stockbroking firm and trader as well as impose fines not less than N1 million on any offender.

According to the rule, no dealing member shall sell or transfer any securities without the authorisation of the owner.

“A dealing member that has sold or transferred any securities without the authorisation of the owner shall not be permitted to keep any benefits accruing from such transaction, including but not limited to bonuses, rights, commissions, cash dividends, capital appreciation, and any profit accruing therefrom whatsoever,” the rule stated.

Besides, it said that any dealing member that sells or transfers securities without the authorisation of the owner shall be required to buy back the securities along with any accrued benefits within 14 business days, among other penalties.

Experts’ Opinion

Reviewing the state of the market, some operators blamed the downturn on the state of political, economic and financial situations in the country. Managing Director/CEO of Highcap Securities Limited, Mr. David Adonri, said: “The decline of the Nigerian stock market is due to several factors. First is the increase of political risks due to infighting within the ruling party at federal level. Next is the declining price of crude oil.

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Others are Chinese stock market crisis, resurgence of Boko Haram, protracted energy crisis and macroeconomic liquidity squeeze. He said that absence of clear policy direction by the present administration contributed in no small measure in depressing equities prices.

He affirmed that the crumbling share prices in global markets would not have had much impact on the local bourse if “Nigeria had a clear policy direction and if our economy is self-regenerative”.

The Managing Director/CEO, Capital Bancorp Plc, Mr. Aigboje Higo, said the economic situation affected the stock market, adding that the foreign exchange market also affected the market.

“The weak naira is affecting investors in the market coupled with rising inflation. We also have the insurgency in the country. Investors are weary of the insecurity and are waiting for the government to assure them of drastic measures aimed at addressing the situation. But it is my hope that all these will soon be addressed given the fact that President Muhammadu Buhuri has started on a clean note by appointing credible people to handle the security sector of the economy”.

The Nigerian stock market is in need of a clear-cut policy direction and stability. A lot of foreign investors appear to have taken to their heels leaving only the local investors, who also have no clue of the impact of future monetary policy on their investments in the country.