By PETER EGWUATU & NKIRUKA NNOROM

The conditions for accessing the N22.9 billion forbearance package amount to criminalizing stockbrokers, said Victor Ogiemwonyi, Managing Director, Partnership Investment Plc.

Presenting a paper on, ‘Market Reforms: The Journey So Far’ at the Capital Market Correspondents forum in Lagos, Ogiemwonyi said there is need to do a proper re-evaluation of the N22.9 billion forbearance package recently granted 82 stockbrokers involved in margin trading to differentiate between genuine and fraudulent margin loans.

He stated that some firms were reluctant to take the package because it could signal admission of guilt to what was clearly a normal business transaction, even as he said that it was improper to group all the categories of margin loans together.

Ogiemwonyi observed that forbearance could be made to have more impact if the loans were categorised properly.

“Forbearance should not have been up to N22. 9 billion if all manner of margin loans were not lumped into it. For example, banks that gave loans to their clients to buy their own shares should not have gone into that.

There is need to do a proper reevaluation to know those loans that were genuinely margin loans and those that were fraudulent and to apply the appropriate sanctions,” he said.

According to him, “Since the intention of government is to resuscitate the market, criminalising stockbrokers is not such a good way to go about it. The notion of criminalising the debts is something that should have been looked in finer details,” adding that margin loans were part of the normal stock market business except that some of the banks did not do the proper thing for which the stockbroking firms were being punished.

“A margin loan is supposed to be a securitized loan tied to the stocks which were purchased for the purpose. Banks, as the custodian of the assets ought to notify the firms once the price of the underlying equities drops below the threshold. The firms have the option of funding the account, or the banks can sell off the stocks to cover the deficit.

Now, if the banks, either out of negligence or lack of a proper understanding of how the loan works, are not able to exercise their mandate, why must the stockbroking firms now be made to bear the brunt,” he queried. Though he said it was commendable that many of the firms have accepted the bailout along with the conditions attached but it was necessary to put the issues in proper perspective.

Meanwhile, he said that the rate of compliance to post listing requirement by listed company has seen some improvement with over 90 percent of the companies filing their various financial statements on time.