The Nation Newspaper

Tag: stockbroking

  • Stockbroking firms, Mauritius firm mull partnership on ICT

    The Association of Stockbroking Houses of Nigeria (ASHON) and a leading Mauritius-based Information and Communications Technology (ICT) company,  Acoyvis Limited, have started discussions on a partnership that will enhance technology governance in the Nigerian stockbroking industry.

    Acoyvis Limited has proposed an international workshop for ASHON to address global best practices in technology governance and the need to enhance oversight functions of board members of stockbroking firms and bring them closer to the staff in the back office for harmonious operations.

    Specifically, Acovyis, adjudged as one of the leading companies in ICT training has proposed a comprehensive training programme for board members of stockbroking firms and back office staff in line with the global best practices in technology governance and oversight functions. If endorsed by ASHON, the proposed series of joint workshops will address a wide range of issues that will strengthen international competitiveness of its members.

    Addressing ASHON’s Executive members, Acoyvi’s Chief Executive Officer, Susanne Alfs, stressed the essence of continuous training of board members and back office staff to upscale their skills in view of frequent challenges in ICT architecture.

    She explained that disruptive trends in the ICT world have brought into fore the imperative of acquisition of latest skills in technology.

    “With technology invading even the remotest corner of our organizations, it is also moving up a few notches on a typical board agenda. But in the past, technology knowhow was not typically sought after in board members. That is why many boards today struggle to keep up,”  Alfs said.

    Responding, ASHON’s Chairman, Chief Patrick Ezeagu, described her presentation as a management change that every board must embrace.

    Ezeagu noted that the presentation has re-opened the on-going discussion on the fourth revolution and the need for every professional to be prepared for a change.

    “You have talked about the fourth revolution which is going to disrupt a lot of things in terms of how to do business. People are going to have fewer margins while many may lose jobs except they upscale their skills. Therefore, I believe that there would always be a place of collaboration for like minds, and I can tell you that the Council members shall deliberate on what have been said and arrive at a consensus on the areas to collaborate with Acoyvis,” Ezeagu said.

    He explained that stockbrokers in Nigeria were resilient as they operate in an environment characterized by market volatility, frequent changes in technology and high cost of its acquisition, unstable government policies and uncertainty in the economy following unguarded utterances of the political class, causing panic among investors.

  • Stock Exchange, stockbroking chiefs to meet over

    Stock Exchange, stockbroking chiefs to meet over

    The management of the Nigerian Stock Exchange (NSE) and chief executives of stockbroking firms are expected to discuss the way to jump-start the demutualisation after the National Council of the NSE backed down from proposed resolutions on demutualisation at the annual general meeting of the Exchange.

    Demutualisation is the conversion of the Exchange from its current status of members-owned limited by guarantee entity to a private public limited liability company based on shareholdings.

    Stockbrokers are the largest group of the current member-owners of the Exchange and are expected to influence crucial decisions in the demutualisation process.

    At the annual general meeting on Thursday, the council of the NSE stepped down proposed resolutions on demutualisation after feelers indicated that stockbrokers were largely against the resolutions.

    Sources in the know said the Exchange has made overtures to stockbroking chiefs and sought for common platform to discuss and resolve their concerns. One of the major issues for resolution is the determination of the number of ordinary members of the Exchange. The membership of the Exchange consists of dealing members, mostly stockbroking firms, and ordinary members, that included influential private sector personalities.

    The NSE had included two special resolutions on demutualisation in the agenda for the annual general meeting; firstly to authorise the council and management of the Exchange to commence the demutualisation process and secondly, to empower the council and management to take all necessary steps to realise the demutualisation agenda.

    President, Nigerian Stock Exchange (NSE), Mr. Aigboje Aig-Imoukhuede, said the resolutions on demutualisation were stepped down because of the need for further consultation.

    Stockbrokers, who form the majority of member-owners of the NSE, said the decision to further engage in consultation was in the best interest of the market noting that while they wholeheartedly support the demutualisation, there are issues that require further engagement with key stakeholders.

    President, Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, said stockbrokers were fully in support of the demutualisation but there is the need to fine-tune some aspects of the process.

    “We need to have more engagement on the demutualisation to ensure that by the time we are taking off, we are taking off properly,” president, Association of Stockbroking Houses of Nigeria (ASHON), Mr. Emeka Madubuike said.

    Madubuike, who noted that stockbrokers want to accelerate the process of demutualisation, said an extra ordinary general meeting could be convened at the shortest possible time to jump-start the demutualisation process.

    The demutualisation process will involve allocation of ordinary shares to existing member-owners of the NSE, possible sale of shares to a strategic core investor, listing of the NSE on its own floor and secondary disposal of shares to the general investing public.

    After valuation of the Exchange, determination of members who are qualified for shareholdings and the appropriate number of shares receivable by each member, the primary allotment of shares would be done to current members of the Exchange, thus converting the Exchange from its current members-owned status to shareholders-owned status.

    Both the Securities and Exchange Commission (SEC) and the NSE had designated demutualisation of the NSE as one of the top agenda for the capital market this year.  At the meeting were immediate past president of the council, Alhaji Aliko Dangote, President Dangote Group; Dr. Oba Otudeko, Chairman, Honeywell Flourmills Plc; Dr. Raymond Obieri, Mallam Balama Mahu, Mr. Goddy Ibru, and Alhaji Aliko Mohammed, and the incumbent president, Mr. Aigboje Aig-Imoukhuede.

    The NSE had last October appointed a consortium of Rand Merchant Bank (RMB) and Chapel Hill Denham (CHD) as financial advisers on the proposed demutualisation of the Exchange. RMB is the corporate and investment banking arm of FirstRand, one of Africa’s largest listed financial services groups while Chapel Hill Denham is a leading Nigerian investment bank.

    Securities and Exchange Commission’s (SEC) rules on demutualisation allow the Exchange to give equity interest to a strategic investor subject to establishment of the facts that the strategic investor has technical expertise through previous experience in managing other Exchanges and the aggregate number of shares to be offered to the strategic investors shall not be more than 30 per cent of issued and fully paid up capital of the securities exchange.

    However, if the Exchange is in dire need of funds, it could issue a higher number of shares subject to approval of the Commission.

    The rules indicate that stockbrokers, who constitute the largest members of the NSE, may have to sell down their shareholdings within a period of five year in the demutualised Exchange.

    The rules indicated that the aggregate equity interests of members of any specific stakeholder group such as stockbrokers and broker-dealer in the demutualised securities exchange should not exceed 20 per cent.

    The rules also retained the provision that no individual or entity must directly or in directly own more than five per cent of the issued shares or voting rights in a demutualised securities exchange.

    The rules, made pursuant to section 313 of the Investments and Securities Act (ISA) 2007, describe “related entities and persons” as a person or entity that is related to the entity or person that owns the equity or the voting rights.

    The rules stipulate that the securities exchange should initiate a process for determining the accurate list of members of the Exchange prior to the commencement of demutualisation.

  • SEC probes stockbroking firm over shares fraud

    SEC probes stockbroking firm over shares fraud

    Securities and Exchange Commission (SEC) has launched investigation into alleged multi-million Naira shares fraud involving a stockbroking firm, WT Securities Limited, in another high-profile case after the apex capital market regulator indicted and banned two BGL companies from the capital market.

    In a preliminary indictment charge, SEC, at the weekend, alleged that its preliminary investigation indicated that WT Securities Limited engaged in fraudulent sale and mismanagement of clients’ shares, valued at about N254 million.

    According to the apex capital market regulator, WT Securities Limited was alleged to have mismanaged the investment portfolio of Chief Opral Mason Benson valued at N185.20 million and also sold 500,000 shares of Nigerian Breweries belonging to one Ngozi Oyekwere Nwachuku without the authorisation of the client. The Nigerian Breweries’ shares are currently valued at about N68.5 million.

    “A preliminary investigation carried out by the Commission revealed that WT Securities Ltd sold the complainants shares without authority and management of the Commission has directed that the firm, its directors and sponsored individuals be invited to a meeting to explain their roles in the transaction,” SEC stated in the preliminary indictment charge.

    With the preliminary indictment, the directors and officials of WT Securities Ltd are expected to appear before the internal disciplinary panel of the apex capital market regulator tomorrow to “show cause why they should not be sanctioned for violating the provisions of Rules 43 and 182A (1), (3) and (5) of the SEC Rules and Regulations”.

    SEC, two weeks ago, withdrew and cancelled the registration of BGL Securities Limited and BGL Asset Management Limited after the Administrative Proceedings Committee (APC) found the firms and their operators guilty in a N2.2 billion asset management case.

    The APC, the adjudicatory arm of SEC, also banned key executives and management staff of BGL from the capital market for various numbers of years. However, BGL could appeal the decisions to the Investment and Securities Tribunal (IST).

    The APC found the two firms and their executives guilty of failure to honour N2.2 billion investment agreements in breach of extant capital market rules. The group managing director of BGL Group, Mr. Albert Okumagba and his deputy Mr. Chibundu Edozie were fined N100, 000 each and were banned for 20 years.

    The APC stated that the firms and their executives “engaged in acts capable of adversely affecting the investing public’s image of, and confidence in the capital market”.

    Besides, the indictment also referred the firms and the officials to the law enforcement agencies noting that “pursuant to Section 304 of the Investments and Securities Act 2007 all information on possible criminality in this matter be and is hereby referred to the appropriate law enforcement agencies and the Enforcement Department of the Commission shall follow up and ensure that the matter is brought to a logical conclusion”.

    Besides the cancellation of their registrations, BGL Securities was slammed with total fine of N22 million while BGL Asset Management was slammed with N5 million. Also, Mr. Peter Adebola was banned for five years, Joseph Ashley-Osuzoka was banned for four years with a fine of N100,000, Victor Obire was banned for three years with a fine of N100,000; Joshua Sesan Adetiloye was banned for one year; Nkechi Azubuike, Adekule Alli, Mohan Lalchandani, Anthony Nwozor and Oluwo Oluwale were all banned for one year and fined N100,000 each while Ande Ewubare, Victor Inyang, Hilary Eludu, Ehime Alofoje and Ofem Mbui Omni were slammed with two-year ban with a fine of N100,000 each.

  • Eight days to deadline: Recapitalisation threatens 200 stockbroking firms, others

    The Nigerian capital market is holding its breath amidst wrinkled faces created by steep depreciation in shares’ values and raised brows on the impending deadline for recapitalisation of capital market operators.

    With eight days, four working days, to the December 31, 2014 deadline for the recapitalisation of capital market operators, The Nation’s check has indicated that not less than 200 stockbroking firms might be affected by the recapitalisation deadline. Stockbrokers are the largest and primary trade group in the capital market and are regarded as the face and core of the market’s operations. They are also the hardest hit in the increase in capital base.

    Reliable industry sources and available data indicated that some 100 stockbroking firms have already met or in tow to meet the recapitalisation deadline, out of some 320 stockbroking firms listed as members of the Nigerian Stock Exchange (NSE).

    While it has faced a groundswell of opposition from trade groups and largely small capital market operators, SEC has so far insisted on the implementation of the new capital requirements arguing that the new capital structure was arrived at after extensive consultation with all stakeholders.

    A reliable source at SEC confirmed that no decision has been taken on either a review of the capital requirements or extension of the deadline as at press time. SEC ostensibly has the backing of the large and medium capital market operators, which view the consolidation as a right step to deepen the market. SEC had also argued that small and poorly capitalised operators are mostly responsible for infractions in the market, which the apex capital market regulator blamed on lack of adequate material and governance structures. The NSE has also cited similar data and argument.

    Besides, the trading data at the stock market show that a handful of stockbroking firms contribute the largest chunk of activities at the market. Latest weekly trading summary by the NSE for the week ended December 19, 2014 showed that 10 stockbroking firms accounted for 84.09 per cent and 89.50 per cent of the total volume and value for the week. Total turnover at the NSE last week stood at 5.41 billion shares worth N46.47 billion in 22,986 deals.

    The Nation had recently reported that the NSE had already determined 81 out of the 322 stockbroking firms on its dealing members’ list as inactive, a classification that represents state of poor capitalisation and complete shutdown of operations.

    Investigation by The Nation yesterday showed that 77 stockbroking firms still remained on the list of inactive/deactivated stockbroking firms. Number of listed stockbroking firms now stands at 320.

    However, opposing view on the recapitalisation had argued that stockbrokers, as investors’ trade agent, require no huge capital to perform their roles. Beyond the fidelity assurance, stockbrokers typically carry no risk in the stock market transaction as their role is to match investors on both buying and selling sides.

    Many operators have also argued that removing a large chunk of small but active market operators will have a retrogressive effect on the capital market inclusion programme. Less than five per cent of Nigerian population participate in the capital market. They argued that small and active stockbroking firms are the foot soldiers of the market engaging the retail investors. However, a new rule by the NSE will allow stockbrokers to act as sub-brokers and agents to other large stockbroking firms.

    A market operator in the know told The Nation that the downturn in the capital market is adversely affecting mergers and acquisitions by operators. According to the source, with the depreciation in portfolio value, the underlining assets of several operators have been significantly undervalued, which make them to be hesitating on consummation of mergers and acquisitions.

    The nation had earlier reported that an emergency meeting by stockbrokers, under the auspices of Association of Stockbroking Firms of Nigeria (ASHON), had concluded that stockbrokers should devise alternative plan in the event that SEC stick to the increase in capital base. The alternative plan, according to the sources at the meeting, will include mergers, acquisitions and raising of new funds through any of debt and equity means.

    SEC had announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that is expected to take off by January 1, 2015. Minimum capital base for broker/dealer was increased by 329 per cent from the existing N70 million to N300 million. Broker, which currently operates with capital base of N40 million, will now be required to have N200 million, representing an increase of 400 per cent. Minimum capital base for dealer increased by 233 per cent from N30 million to N100 million.

    Also, issuing houses, which facilitate new issues in the primary market, will now be required to have minimum capital base of N200 million as against the current capital base of N150 million. The capital requirement for underwriter also doubled from N100 million to N200 million. Trustees, rating agencies and portfolio and fund managers had their minimum capital base increased by 650 per cent each from N40 million, N20 million and N20 million to N300 million, N150 million and N150 million respectively. A  Registrar will now have a minimum capital base of N150 million as against the current requirement of N50 million. While the minimum capital base for corporate investment adviser remained unchanged at N5 million, individual investment advisers will have to increase their capital base by 300 per cent from N500,000 to N2 million.

    Stockbrokers earn barely 4.0 per cent as total brokerage on complete buy and sale stockbroking transaction. Although several stockbrokers are registered for other functions such as corporate finance and investment advisory, they face strong competition from banks, insurance and other financial services companies who provide similar functions.