By BABAJIDE KOMOLAFE

The opportunity to buy shares through private placement or public offering as we learnt last week is not always available. This is because it is not all the time that companies raise money by selling shares.

Buying existing Shares
But you can buy existing shares, that is, those in the possession of shareholders of the company. This is because there are always shareholders who want to sell all or part of their shares in a company.  In the first part of this series, we explained that stock brokers are licensed to act as middlemen between sellers and buyers of shares in the stock market. So if you want to buy shares from those who want to sell, you will have to go through a stock broking firm.

The first thing is to locate a stocking firm. There are about 156 of such firms licensed to trade on the Nigeria Stock Exchange (NSE). But to avoid falling into the hands of fake stock broking firms or stock brokers, visit the website of NSE (i.e http://www.nse.com.ng/Regulation/ForBrokers/Pages/Dealing-Members.aspx) for the list of licensed stock broking  firms. The next challenge is, which of the licensed firms should you go to or patronise. You can ask friends, colleagues, and your bank, to recommend one to you. But whichever they recommend, make sure it is on the list published by NSE and SEC.

Also when you visit the stock broking firm, study the environment to observe how organised it is and the attitude of staff to investors or its customers. This will help you assess the efficiency and trustworthiness of the firm and its staff.  In   other words not all the licensed stock broking firms and brokers are trustworthy and efficient. Some of them are dubious.

You can give them money to buy shares for you, and instead of buying the shares they will use your money to trade and claim that the shares you want to buy is not yet available. They may also buy shares for you at N10 per share and claim that they bought it at N15 per share. Some may also sell your shares without your knowledge or approval. An example is  Sir Kingsley Ikpe jailed in in 2005 for stealing money paid by an investor to his company for share purchase. So you have to be watchful and careful

When you get to the stock broking firm and tell them you want to buy shares, you would be asked which company you want to buy. If you don’t have any particularly one in mind, you can request for their advice.  A good stock broker would educate and advice you on the companies to buy. The issue of which company to buy will be discussed at some other time.

After you have decided on which company to buy, you will be given an ORDER FORM, where you will indicate your personal data, the shares of the company you want to buy, the quantity you want to buy, and the price at which you want to buy. You can indicate a price range or limit, you can also indicate time limit i.e. buy within one week. The law requires stockbrokers to carry out clients order within five days.

The next thing is to pay. As a rule don’t pay cash, or give cash to any stockbroker or the staff of the firm. It might end up in their personal pocket. Request for the bank account of the firm, pay into the bank account, photocopy the teller and take it to the stock broking firm as evidence of payment, and you would be issued a receipt. You must open a file where you keep such documents. Now after payment, check the newspapers to monitor the movement in the price of that share, in case the broker wants to lie about the price of the shares.

The CSCS
Secondly, when you are informed or told that the shares have been bought, request for a CSCS (Central Securities Clearing System) account. The CSCS is the bank for shares in the stock market. It contains all the shares of quoted companies, and has a account for every shareholder. Hence, when shares are sold or bought, the CSCS transfer the amount of shares involved in the transaction from the share account of the seller to the share account of the buyer. If the buyer does not have an account with CSCS, the company will create one for him/her. So it is the CSCS statement, obtained from the stock broking firm or from CSCS itself, that confirms that the shares have indeed been bought and also bought in your name.