By Peter Egwuatu
The Securities and Exchange Commission, SEC has approved the Nigerian Stock Exchange, NSE amended rule 15.34 which relates to Nominal Transfer of shares of listed companies in the capital market.
The NSE, in a circular disclosed that the approved rule becomes effective on 11th August 2019.
According to the rule, “No security listed on the Exchange shall be bought or sold outside the facilities of the Exchange; any securities holder that wishes to transfer his securities by way of a nominal transfer shall apply to the Exchange through his Stockbroker for transfer of the securities. The stockbroker shall carry out the requisite Know-Your-Client (KYC) enquiries on the securities holder and the proposed transferee; the Exchange shall review the application and the supporting documents submitted by the stockbroker to determine whether the relationship between the proposed transferor and the proposed transferee is sufficient for the transaction to be classified as a nominal transfer ; in reaching a decision to classify a transaction as a nominal transfer, the exchange shall: with regard to a nominal transfer between corporate entities, consider whether a party directly or indirectly controls the other party, or both parties are under common control.”
In the new rule, the Exchange stated that a party shall be deemed to control another party if it holds or is beneficially entitled to hold, directly or indirectly, more than fifty per-cent (50%) of the total voting rights in the other party, its total income, or issued share capital.
With regard to nominal transfer between individuals, the rule consider the following connections: whether there is a familiar relationship between transferor and transferee including but not limited to spouse, brother, sister, father, mother, child or step child.
The Rule also stated: “with regard to a nominal transfer between an individual and a corporate entity, consider whether the individual is a beneficial shareholder of the corporate entity. The parties shall comply with such directions as may from time to time be provided by the Exchange with regard to completing the transaction; in order for the Exchange to approve the transfer, the following documents shall be submitted to the Exchange: (1) Application letter by the stockbroker introducing the client and detailing the nature of the transaction; (2) two (2) copies of the client’s CSCS shares statement indicating the current shareholding position, where the shares are dematerialized; (3) two (2) copies of a letter of Authority addressed to the Exchange executed by the proposed transferor; (4) For a corporate entity, a duly executed board resolution and a certified true copy of its most recent Form CAC 7 (Particulars of Directors) and Form CAC 2 (Statement of Share Capital and Return on Allotment of Shares). (5) Original executed securities transfer form(s); (6) Mandate executed by the Transferor in favour of the Stockbroker making the application; (7) Other relevant documents such as means of identification of the transferor, transferee, any signatories or relevant person; in respect of a trust, a certified true copy of the trust deed.”