By Rosemary Onuoha

Stockbroking firms, under the auspices of Association of Stockbroking Houses of Nigeria (ASHON) has called on the Central Securities Clearing System (CSCS) to stop demanding indemnity notes from shareholders who want to transfer their shares account to another stockbroking firm after their original firm ceases to exist.

Mr. Rasheed Yusuf, president of ASHON, who stated this noted that the CSCS should rather indemnify the shareholders because all information about the account is domiciled with the CSCS and not the stockbroking house.

In recent times the CSCS has asked stockbroking houses that want to take over an account from stocbroking firms that are no longer in operation to indemnify these accounts before the shares can be transferred.

However, while speaking to Vanguard, Yusuf who opposed the move noted that the CSCS should be in a better position to give information concerning an account where the stockbroking firms are no longer in operation.

While noting that the standard procedure is that when a stockbroking house is no longer in operation, the customer should not be made to suffer unnecessarily as such the account is transferred to another house, however that does not mean that the new house should indemnify the account because the new house has no information regarding the account, Yusuf stated.

In his words “What we are saying is that if you are indemnifying somebody, you are saying if something happens, then you should be held responsible. Then if these people are moving from another house to my house, how can I now indemnify them? What am I indemnifying? Am I indemnifying that ‘yes I know that he is the one that has that account or am I indemnifying that yes he has transferred that account to me?”

Yusuf wondered who should be in a position to indemnify an account, saying “Even when you are opening your account through a functioning broker, you will send the document to CSCS.

CSCS has all the documents of every client that opens account because they keep all the documents. So if anybody is in a position to know, the CSCS should, because they have the specimen signature, they have the documents relating to that client.

If that client is now moving to another house, they should be the one to say ‘based on the document that we have, this is not the true owner or this is the true owner of the account.’ So why will they now ask the new house to indemnify the account?”

Yusuf stated that it is the CSCS plus the old broker that has been dealing with the client and CSCS is the custodian of all necessary documents, adding, “To now ask somebody else to indemnify the account is the Nigeria way of passing your responsibility to somebody else.”

On the dearth of new issues in the market, Yusuf stated that it is not a good thing if there are no issues in the market, adding that it is a reflection of the health of the market.

He stated “In the past three years our market has not been as healthy as it should be and therefore not having many new issues coming to the market is a reflection of the change in our market.

Efforts should be concentrated on getting our market up and doing because other markets are near back and more active.”

He lamented that stockbrokers are not very active like before because of the burden of margin loans that are still on the neck of most of them as such illiquidity is a factor to contend with in the market, stating “Illiquidity has been affecting the market negatively. You can’t have liquidity if the engine of the market is not buoyant enough.”

He stated that if margin loans are taken off the neck of brokers that is when they will get back to their normal businesses, adding “Until they get back to their business and do what they are supposed to do the liquidity will not be there and as long as the liquidity is not there, then you will not have many people coming to the market.”