BY BABAJIDE  KOMOLAFE

Stockbrokers and Registrars are very critical to profitable investment in shares. To invest in shares and not to know about them, or be familiar with them, is very risky. Unfortunately, this is a risk a lot of people that bought shares have been taking.

Stockbrokers are the people licensed to trade in shares in the stock market on behalf of investors. They also act as agents for companies that want to sell shares through public offers or private placement. They are supposed to be professionals or experts, and are expected to advice and guide people that want to buy shares.

You will always need the services of stockbrokers. You may not buy shares through a stockbroker, but you will need one to register your shares with the Central Securities and Clearing System (CSCS). You will also need a stockbroker when you want to sell your shares.

So, there is no way you can do without the services of a stockbroker.  Without a stockbroker, you can’t register your shares with the CSCS, and without registering your shares with the CSCS, it is almost impossible to sell them, and hence you can’t realise the money you invested in shares, especially when you need funds.

That is why you cannot afford not to know about stockbrokers, or carelessly make the choice of who will be your stockbroker. While there are over 100 licensed stockbrokers, not all of them are efficient or trust worthy. Some are very inefficient, while some are quite dubious.

When a dubious stockbroker collects money from people who want to buy shares, he/she may either not buy the shares on time, and instead be trading with the money, or he may buy the shares in his/her name with the money, and then sell them to the investor at a higher price.

On the other hand, when an investor wants to sell his/her shares, the stockbroker may sell the shares to him/herself at a price lower than the market price, or sell it at a higher price, and claim to sell it at a lower price.  By these and so many other malpractices, dubious stockbrokers increase cost of investment in shares, or reduce the profit you can make from your shares, and a lot of investors have fallen victims.

Like one of our readers asked two weeks ago, the question on the mind of many existing or intending investors is, “Please kindly advise me on reliable stockbrokers”.

The reality is that it is difficult to ascertain the reliability of any stockbroker. The key is to be close to, and monitor, whichever stockbroker you choose. Before you choose a stockbroker, ask questions, do some search on the internet, visit their office, know the staff, have the phone number of the company and that of some of the key staff. And after choosing a stockbroker, don’t be far from the office.

If you ask them to do anything, be it buying or selling shares, or verifying your share certificate, do so with specific instructions and deadlines. Don’t leave anything to chance or their discretion. Monitor movement of share prices on the stock exchange. Don’t use cash for any transaction; pay into the company’s bank account. If a stockbroker gives you any advice, seek the opinion of a third party. The point is, a stockbroker is reliable and efficient to the extent that the investor is knowledgeable about the broker, and is able to monitor his/her transactions with the company.

NOTE
Have you had encounter with a dubious stock broker, please share your experience via email   to [email protected]