BY MICHAEL EBOH, FAVOUR AGBI & OLABISI MOSHOBA
The Nigerian Stock Exchange, NSE, has reviewed the rules and regulations governing the conduct of dealing members, churning out a number of sanctions for various forms of infractions by operators in the capital market.

The NSE, in a statement posted on its website, yesterday, said the new rules will become effective from November 1, 2011.

According to the NSE, the sanctions covered infractions involving the unauthorized sale of client’s securities by dealing members, verification of shares in connivance with another, misappropriation of funds, third party transaction, improper maintenance of client’s account, failure to appoint a compliance officer and non-rendition of quarterly returns.

In the case of unauthorised sale of securities, the NSE said the dealing member will be made to return the benefits gained from the sale, buy back the securities, pay a fine of N100,000 and N5,000 every day from the day of the unauthorized sale until the day the shares are bought back and a possible withdrawal of license.

According to the NSE, in no circumstances shall a dealing member that sells securities without the authorization of the owner be permitted to keep any benefits accruing from such sales, including but not limited to bonuses, rights, cash dividends, capital appreciation, and any profit whatsoever.

“A dealing member that sells securities without the authorization of the owner shall: be required to buy back the securities; and where the sale transaction is N5 million and below in value, be liable to pay a fine of N100,000 and N5,000 for every day from the day of the unauthorized sale until the day the dealing Member completes buying back the shares for the owner; or where the sale transaction is above N5 million in value or the dealing member had engaged in such unauthorized sale of securities on a previous occasion, shall have its dealing license withdrawn by the Council of The Exchange and shall in addition pay a fine of N100,000 and N5,000 for every day from the day of the unauthorized sale until the day the dealing member completes buying back the shares for the owner,” the NSE said.

In the case of misappropriation of a client’s fund in excess of N5 million, the defaulting dealing member will be forced to return the misappropriated funds with interest at two per cent above the Monetary Policy Rate, MPR, and face a possible withdrawal of trading license.

According to the NSE, the provisions of Section 3(b) shall apply whether the funds misappropriated were client’s funds kept with the dealing member for use for some other purposes, proceeds of sales of the dealing member’s client’s shares, conversion of the client’s dividend warrants, or funds in the possession of the dealing member as a result of invoicing the client at a wrong price, or any client’s funds how so ever.

The NSE further stated that any dealing member that fails to appoint a compliance officer shall be liable to a fine of N500,000 and immediate suspension from trading on the Exchange.

The NSE said, “Failure of a dealing member to have at all times in its employment, at least one Compliance Officer: who shall be competent to advise the dealing member and its employees on the applications of the rules; whose role shall be separate and distinct from the Internal Auditor or any other similar roles; and who shall be identified to the Exchange shall attract a penalty of a fine of N500,000 and immediate suspension from trading until such appointment is made and such Officer is duly introduced to the NSE.

The NSE further stated that non-payment of the stipulated fine shall be a ground for not lifting the suspension placed on the dealing member notwithstanding that the dealing member has appointed the said Compliance Officer and introduced the Compliance Officer to the Exchange.

The NSE said further, “Where eight weeks have expired since a dealing member has been suspended pursuant to sub-article (a), the Exchange shall make a recommendation to Council for the withdrawal of the Dealing Member’s License and Council shall in its sole discretion determine whether the suspension should be continued or the dealing Member’s license withdrawn, provided always that such suspension pursuant to sub-article (a) shall continue pending Council’s decision.”