Goddy Egene
30 November 2011
Desperate moves by stockbrokers to remain in operations, pressure to repay margin loans and efforts of banks to recoup outstanding facilities, have been linked to persistent fraudulent practices in the nation’s capital market.
Despite efforts of regulators, the Chartered Institute of Stockbrokers (CIS) and Association of Stockbroking Houses of Nigeria (ASHON) to discourage fraudulent practices, some brokers still engage in fraudulent activities such as authorised sale of shares and failure to remit proceeds of shares sold.
However, the Interim Head of the Nigerian Stock Exchange (NSE), Mallam Ballama Manu, has declared that those fraudulent practices persisted in the market due to illiquidity (lack of finance) suffered by majority of dealing members (stockbrokers).
Manu disclosed this in his report to stockbrokers at the Annual General Meeting (AGM) of the NSE held in Lagos.
He said, “The Exchange observes that complaints of unauthorised sales and failure to remit proceeds of sales continue to persist in the market. This can be attributed to illiquidity suffered by the majority of dealing member firms, the high loan exposure of many dealing member firms and the desperate efforts of the banks to recoup outstanding facilities.”
Manu disclosed that a total of 449 complaints were received by the Exchange, showing an increase of 80 per cent above the 249 received in 2009. He explained that of the complaints received, 360 were against active dealing member firms while 80 were against non-dealing members and nine against inactive houses.
He added that 135 complaints were resolved while 231 were still being investigated pending resolution. He noted that some dealing firms do did not comply with the Know Your Client (KYC) requirements set forth in Article 102 of the Rules and Regulations Governing Dealing on the Exchange.
“As a result, fraudulent sales have occurred based on instructions from persons who are not the true owners of the securities,” he said.
Speaking on violation by listed companies, the NSE boss said that the year under review, 74 dealing firms were suspended for failure to submit Audited Accounts for 2008, 2009 and 2010 accounting years, respectively compared to six during 2009.
Manu hinted that a new reporting format for the rendition of interim reports meant to provide uniform reporting and ease of comparison of members was introduced. The implementation of this format has commenced.
He added that during the current year, the Exchange has been enforcing the following rules against dealing firms: separation of client accounts from that of the dealing member firm; rendition of returns to the Exchange as and when due.
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