Tag: NSE

• Stockbrokers to submit report on capacity

The Nigerian Stock Exchange (NSE) has directed stockbroking firms to submit a status verification report on the functions that their resources may cope effectively with, in an indirect reclassification that may lead to withdrawal and issuance of new licences.

In a circular to  stockbroking firms, a copy of which was obtained by The Nation,  the NSE directed the  firms to submit notification reports that should state the capacity that each firm desires to operate in the market on or before July 31, 2015.

Stockbroking firms are expected to choose from the four categories of operations including broker-dealer, the highest level; broker, the second level; dealer, the intermediate level and sub-broker, the lowest level similar to investment agent to without any trading privileges.

According to the circular, the reclassification is in furtherance of the implementation of the Minimum Operating Standards (MOS) of the Exchange, which became effective on January 1, this year.

The minimum operating standard (MOS) requirements were introduced last year by the management of the Exchange. The MOS requirements relate to all the dealing members of the Exchange and they address the five broad areas of manpower and equipment; organisational structure and governance; effective processes; global competitiveness; and technology.

The NSE has insisted that the main objective of the MOS programme is to enhance investors’ protection and the integrity of the secondary market by ensuring that operators have adequate resources for professional and globally competitive operations.

NSE had explained that investors will be given an extra degree of protection because the operators will become more robust and stronger, with good controls and globally acceptable processes.

However, several operators saw the MOS as another way of wielding out small-sised brokers and dealers, describing the MOS as a back-door approach to enforcing consolidation in the industry. There are 220 active broker-dealers on the NSE but less than 15 per cent of the operators account for more than three-quarters of trading turnover at the market.

On the rationales for the MOS standards, head, legal and regulation division, Nigerian Stock Exchange, Ms Tinuade Awe, had said the new minimum operating standards were meant to complement the tremendous transformation that the market had undergone in recent years and to extend these forward-moving traits to the dealing members.

According to her, the objective of the minimum operating standards is to transform the operators into more competitive and compliant operators.

“We intend to ensure that the broker dealers, brokers and dealers have very robust controls, strong governance framework and sustainable operations that will enable them compete on a global scale for the benefit of the investors and the Nigerian capital market,” Awe said.

She noted that the capital market is very dynamic with a diverse mix of local and foreign investors who can only invest with the confidence that the dealing members operate pursuant to clearly defined standards that are comparable to those to which broker dealers in other markets operate with.

“We simply cannot afford to be inferior to anyone in terms of size, skill, technology or organisational governance of our market participants,” Awe added.

The NSE had recently launched efforts to streamline stockbroking firms according to the level of activities at the stock market. The Nation reported exclusively that the NSE could likely revoke the licences of some 88 stockbroking firms, which are deemed inactive or non-operational.

The Nation reported last week that the the disciplinary committee, the adjudicatory arm of the National Council of the NSE, has already invited the first batch of stockbroking firms to appear before it next Monday, July 27. The first batch of stockbroking firms included 15 companies, which have failed to activate their dealing licences.

The 15 firms included Al-Pina Investment & Trust Co. Limited, BBL Asset Management Limited, Integrated & Allied Securities Limited, Standard Chartered Securities Limited, Translux Services Limited, Afro-Arab Investment Limited, Barakat Investment Limited, Bosson Capital Assets Limited, Dealers Assets Management Limited, Enabell Capital & Investment Limited, First Express Limited, KFF Worldwide Solutions Limited, Kingdom Securities Limited, Silver & Gold Securities Limited and Williamson Capital Management Limited.

In a summon sent to the promoters of the firms and signed by secretary to the National Council, Tinuade Awe, the Council indicated that the dealing members would be required to give reasons why disciplinary action should not be taken against them for failing to activate their dealing licences.

A reliable source at the Exchange said the hearing was part of the expulsion process to ensure that the Exchange complies with extant rules that provide for fair hearing to dealing members.

The source said the 15 firms are the first batch of what may be a long-running expulsion process.

A new rule on the revocation of dealing licences and expulsion of inactive stockbroking firms came into effect on June 29, 2015. The new rule and amendments on revocation of dealing licences was earlier approved by the Securities and Exchange Commission (SEC) in February 2015 but the NSE delayed the implementation.

The Nation had then reported exclusively that the NSE might commence the process of revocation of dealing licences and expulsion of not less than 88 stockbroking firms, about one-third of the total number of registered stockbroking firms on Nigeria’s only stock exchange.

This re-examination process of dealership might be the largest-ever cleansing of the Augean stable at the stock market. The total number of previously revoked licences stood at 13.

The Nation’s check indicated that the NSE had already determined 88 out of the 308 stockbroking firms on its dealing members’ list as inactive. A status report on dealing members indicated that out of 308 existing stockbroking licences, 220 were active while 88 were inactive.

A breakdown of the inactive licences included 50 operationally inactive firms, 20 inactive dealing firms deregistered by SEC and 18 licences that had been dormant and were not activated since issuance. All these fall within the purview of revocation and expulsion due to inactivity. The third category formed the first batch invited for the disciplinary hearing next Monday.

The Nigerian Stock Exchange (NSE) has delisted Nigeria Wire & Cable, Nigerian Sewing Machine Manufacturing and Stokvis Nigeria Plc, over the failure of the directors of the three ailing companies to restructure their operations and enhance corporate governance as required by listing requirements at the Exchange.

The compulsory delisting automatically removed the three companies, which had about 1.81 billion ordinary shares of 50 kobo each outstanding, from the trading engine and other trading cycles, processes and documents.

However, the companies can still be traded on the NASD Plc, the over-the-counter market for unlisted public limited liability companies, where most delisted companies had migrated to.

Stokvis was last traded at 14 kobo, 72 per cent below its nominal value of 50 kobo. Nigerian Sewing Machine Manufacturing’s last trading price was 15 kobo, 70 per cent below its nominal value of 50 kobo while Nigeria Wire & Cable has been flat at its nominal value of 50 kobo.

The Ibadan, Oyo State-based Nigeria Wire & Cable is ironically being delisted shortly after the 20th anniversary of its listing on the Exchange. Incorporated in 1974, the electrical and telecommunications cables company was listed on the NSE in July 1995.

Nigerian Sewing Machine Manufacturing was incorporated in 1960 and listed on the Exchange in 1978. It engaged in the manufacturing and marketing of the popular Singer sewing machine, which earned it the widely recognised Singer Bus Stop on the Sango Ota axis of the Lagos-Abeokuta expressway, where its factory was located.

The Surulere, Lagos-based Stokvis Nigeria was also listed on the NSE in 1978, 21 years after it was incorporated in 1957. It initially engaged in distribution of technical equipment but later veered into commercial production of ice blocks and ice cubes.

The NSE said the companies “failed to take any steps to regularise their listing status”, referring to the long-drawn absence of corporate results and information about the operations of the companies. The three companies had remained stagnant over the years.

The NSE had in November 2014, gave Stokvis, Nigerian Sewing Machine Manufacturing  and Nigerian Wire and Cable and 15 other companies 12 months grace period to enable restructure their operations and comply with the listing requirements at the Exchange.

During the 12-month period, the companies are required to file quarterly progress reports updating the Exchange about their activities and various steps they are taking towards fulfilling their post listing obligations.

The management of the Exchange stated that it would continue to engage the remaining 15 companies that have taken steps towards regularising their listing statuses with a view to bringing them into compliance with their post listing obligations.

The other 15 companies under watch included Investment and Allied Insurance Plc, Jos International Breweries Plc, Goldlink Insurance, Adswitch, Daar Communication, FTN Cocoa Processing, UTC Nigeria, Capital Oil and Golden Guinea.

Amidst worries that corporate executives and capital market operators might be taking undue advantage of price-sensitive information, the Nigerian Stock Exchange (NSE) is seeking to block potential loopholes and widen the scope of enforcement against insider trading in the Nigerian capital market.

Corporate executives, capital market operators and other professional parties will not only be held liable for using price-sensitive information to buy or sell stocks, they will, going forward, be held liable for changing orders and sundry share price manipulation.

Insider trading occurs when a person or group of persons who being in possession of some confidential and price sensitive information not generally available to the public, utilises such information to buy or sell securities for the benefit of himself, itself or any person.

An insider can be any individual who is or has been, in a period no longer than six months, a director, officer or an employee of a company such that he holds or has access to material, price sensitive and non-public information of the company; or has been involved with a company in a professional or business relationship, including auditors, accountants, printing contractors, lawyers, and regulatory personnel. Such a person must hold or have access to material, price sensitive and non-public information.

Under a new code of conduct for capital market executives and officials,  non-action may be considered insider trading, if that non-action is as a result of the knowledge of information, hitherto unknown, obtained by or from an insider and has led to a decision to change a prior course of action, not selling or buying securities of a company.

Besides, stockbrokers are under obligation to report substantial orders from clients in companies in which such clients are directors or employees of the firm, or have business relationship with the firm, including auditors, reporting accountants and lawyers.

According to the code, which is currently undergoing rule-making process, all orders which are out of tune with established trading pattern should be investigated.

“Approved persons are strictly prohibited from participating in or causing another person to participate in insider dealing,” the code stated.

Directors, officers, and employees are also prohibited from disclosing non-public price-sensitive information to a third party for the purpose of trading while no directors, officers, and employees must trade in restricted list of securities during the closed period.

The Securities and Exchange Commission (SEC) had earlier amended its rules on insider trading as a major step to tighten the noose on insiders’ trading and exploitation of sensitive share price information by directors, management and their relatives.

The apex regulator had blocked insider trading through nominee accounts, described by the Commission as a discreet way directors of companies and their relatives and other insiders could bypass regulatory rules that require them to declare transactions on their accounts.

Insider trading through nominee account is now expected to be reported to the Commission within 48 hours by the director and the fund manager of the account.

According to the amendment, “where the purchase of shares on behalf of a nominee is related to an insider, it should be disclosed to the Commission within 48 hours by the director so involved and the nominee account manager”.

Some insiders were bypassing reporting requirements through the usage of nominees’ share accounts to trade on their shares, thus circumventing the effective ability of the apex capital market regulator to monitor and determine inappropriate exploitation of price-sensitive information.

Before the new amendment, SEC had suspected that several transactions that took place on behalf of nominees that are for insiders were usually not reported as such as specific names that could have alerted the Commission to the insider dealings were not mentioned with the disguise of the transactions under the nominee accounts.