Michael Eboh
The Nigerian Stock Exchange (NSE) has announced its decision to impose sanctions on stockbroking firms found opening branches in various locations across the country, without getting its approval.

Speaking during a review of the performance of the capital market in 2009 and the outlook for 2010, Director-General/Chief Executive Officer of the NSE, Professor (Mrs) Ndi Okereke-Onyiuke disclosed that it has come to its notice that a number of stockbroking firms have fraudulently opened branches in different locations across the country under the guise of a liaison office with securing the necessary approval from the authorities.

She said, “It came to the attention of the Exchange that some dealing member firms had opened branch offices in different parts of the country without approval, under the guise of using such offices as liaison or business development offices.

“This practice is a violation of Article 144 (a) of the Rules and Regulations governing dealing members. Henceforth, the NSE will not hesitate to impose full regulatory sanctions on any dealing member firm that contravenes the provision of the rules.”

She disclosed that only seven dealing members got its approval to open additional branches in 2009, noting that this was after a series of inspection to determine the suitability of the offices for stock brokerage purposes.

In addition, she noted that the branches met the requirements for cashless transactions, imbibing ‘know-Your-Client (KYC) priniciples, centralised operations and qualified manpower.

Okereke-Onyiuke further hinted of a return of the suspended recapitalisation exercise for capital market operators, as she said that in the course of its routine inspection of stockbroking firms in the year 2009, it discovered that a number of the broking firms have negative shareholders’ funds and reported trading loss.

She said, “A total of 242 (out of 2545) stock brokerage firms were inspected in the year by the compliance Department of the Regulation and Risk Management Directorate. Several Firms reported trading losses and negative shareholders’ funds as a result of the financial crisis that followed the economic downturn. These firms have been advised to inject fresh funds and return their firms to profitability. The remaining 12 firms had their inspections rescheduled.

She further stated that as parts of effort aimed at sanitising the capital market, it has upgraded its systems and software to detect and stem price manipulation and other infractions.She noted that the system will identify any attempt to manipulate prices and ensure that such transaction is not recognised and settled.