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SEC advises stockbrokers on direct cash settlement

By on December 25, 2015

The Securities and Exchange Commission (SEC) has directed dealing firms (stockbroking firms) to send relevant information to the Nigeria Inter-Bank Settlement System (NIBSS) by December 30, 2015 so as to facilitate the commencement of Direct Cash Settlement (DCS) in the nation’s stock market.

The DCS is a process where cash proceeds from trades executed by brokers on the Exchange settles directly into investors’ bank account. DCS is aimed at improving transparency, entrenching investor confidence, reducing market infractions and improving trading velocity.

As part of preparation for the take of the DCS on January 4, 2016, investors are expected to fill  DCS forms and submit to their stockbrokers.

SEC said yesterday that the commencement date remains January 4 and directed stockbroking firms to submit all relevant information to NIBBS.

“Based on an agreement reached with the Nigerian Stock Exchange (NSE), Central Securities Clearing System (CSCS) Plc, Association of Stockbroking Houses of Nigeria (ASHON) and NIBSS, dealing firms are hereby directed to send relevant information to NIBSS not later than Wednesday, December 30, 2015 to enable the firms log-on to NIBSS portal for validation of Bank Verification Numbers (BVN),” SEC said in statement on its website.

Under the proposed framework for the DCS brokers were mandated to provide their clients’ bank account details to the CSCS, being the agent of the Nigerian Stock Exchange (NSE) for the clearing and settlement of all securities traded on the Automated Trading System (ATS) of the NSE. Settlement of each trade carried out on the ATS shall then be done by direct payment into the client’s account as provided to the CSCS.

Already market stakeholders have said the DCS would prevent illegal sale of investors’ stock and payment would be prompt.

As against the current general practice where the payments for investors’ transactions go into the accounts of the brokers for onward disbursement to their clients, the general practice under the DCS would be sent to the net proceeds direct from the clearing and settlement system straight to the investors’ accounts while the existing practice of payment through brokers would become exceptional cases.

 

[ThisDay]