New capital market rules coming

THE Council of the Nigerian Stock Exchange (NSE) yesterday rolled out penalties for breach of the rules governing dealing members.

The recommendations are to be effected after input from brokers and final approval by the Council.

The Council said these infractions include unauthorised sale of securities, verification of shares in connivance with another, misappropriation of funds and third party transactions, among others.

Part of the draft recommendations contained in the document obtained by The Nation, states that if a dealing member sells “securities without the authorisation of the owner, the dealer shall be required to buy back the securities, and where the sale transaction is N5 million and below in value, he would be liable to pay a fine of N100,000 and N5,000 for every day from the day of the unauthorised sale until the day the dealing member completes buying back the shares for the owner.

But where it is above N5 million in value or the dealing member had engaged in such unauthorised sale of securities on a previous occasion, the upcoming penalty says, “the member shall have its dealing licence withdrawn by the Council of the exchange,” and as well face other sanctions.

For equity and fairness, the new rules say, “No dealing member shall have its licence withdrawn, unless the Disciplinary Committee of Council has made a finding that the Dealing Member engaged in the unauthorised sale of securities within the ambit of Article 1(b)(iii) and has made a recommendation to Council that the licence should be so withdrawn, provided always that during the pendency of any investigative or disciplinary proceedings, the Dealing Member shall be suspended from trading.”

Determined to enthrone confidence in the market and bring sanity to the exchange, the Council recommends that “any dealing member that in connivance with another verifies shares owned by any other person, shall be liable to pay a fine of N50,000.”

Furthermore, the draft states that under no circumstances “shall a dealing member that misappropriates its clients funds be permitted to keep any benefits accruing from such misappropriation, including but not limited to bonuses, rights, cash dividends, capital appreciation and any profit whatsoever.” It added: “where the funds are N5 million and below in value, member will be liable to return the funds with interest at two per cent above the Monetary Policy Rates, or where he was found guilty before and it is above N5 million, the member’s licence will be withdrawn by the council of the exchange and in addition return the money with interest at two per cent above the Monetary Policy Rate.”

Source : The Nation