Brokers’ infractions rise despite NSE enforcement

The Nigerian Stock Exchange (NSE) is still playing a catch-up role in its efforts at reducing dealing members infractions, following an upsurge in the number of sanctioned operators, as shown in its dealing member’s compliance report –the BrokerTraX. 

The NSE, in its bid to improve investors’ confidence in the market, commenced a strong campaign against market infractions by its dealing members by introducing a dealing member’s compliance report, BrokerTraX.

However, between January 2013 and April 2015, the NSE has sanctioned seven dealing member firms and three individuals.  The number of dealing members infractions penalised rose from just one in 2010 to nine in 2011. It was eleven in 2012, twenty in 2013, and 25 in 2014.

The implication is that currently, some dealing member firms of the NSE have been referred to the Economic and Financial Crimes Commission (EFCC) for unauthorised sales of their clients shares. Most of them are under investigation while some are in court.

The suspect firms, as shown in the BrokerTraX are: First Alstate Securities Limited, Lakesworth Securities Limited, Bytofel Trust & Securities Limited, Gosord Securities Limited, Fittco Securities Limited, Securities Solutions Limited, ITIS Securities Limited, Mact Securities Limited, Giljohn Investment Limited,  First Equity Securities Limited, Omas Investment & Trust Limited, and Mayfield Investment Limited.

With the BrokerTraX, investors can now make more informed decisions about where to invest by viewing names of Dealing Member Firms t​hat have been found liable for contravening market rules. The goal is to reduce contravention of market rules to its barest minimum, in line with deliberate and sustained effort to restore confidence, according to the NSE.

Our checks show that following consistency over a four-year period, dealing members average compliance (rendition of regulatory returns) has started to decline.

In 2010, dealing member compliance level on rendition of regulatory returns was 38 percent, 2011 (55%), 2012 (75%), and 2013 (94%). In 2014, their compliance level declined to 76 percent. Though the NSE still believes that with its ‘zero tolerance policy’ on regulatory infractions, there has been an increase in compliance by dealing members. The Nigerian bourse had in 2014 carried out 557 enforcement actions against the dealing members.

The number of enforcement actions on dealing members has been on the increase since 2010.  The NSE enforcement actions rose from five in 2010 to 247 in 2011; it was 437 in 2012 and 424 in 2013, BusinessDay checks further show.

The Disciplinary Committee of the NSE Council had taken action against Calyx Securities Limited for allegation of suspected price movement on DN Meyer Plc. The firm was then suspended from trading on all the floors of the Exchange for five trading days effective 27th February 2013, and fined the sum of N1.5million which was reduced to N1million only after the firm admitted and pleaded for leniency, being a first time offender.

There was also disciplinary action against Apel Asset Limited for breach of Article 15,104 & 107 of the Rules and Regulations Governing dealing member firms. The firm was then suspended from trading on all the floors of the Exchange for five trading days, effective 27th February 2013, and fined the sum of N6 million. 

Also, the NSE carried out disciplinary action against EDC Securities Limited for breach of Article 15,104 & 107 of the Rules and Regulations Governing dealing member firms. The Firm was then suspended from trading on all the floors of the Exchange for five trading days, effective 27th February 2013, and fined the sum of N5million.

Bytofel Trust & Securities Limited was also penalised for unauthorised aale of 375,871 units of Union Bank Plc shares of Akan Ndem. The firm was then suspended from trading on the floors of the Exchange, fined the sum of N5million and was meant to refund the sum of N6.617million to the complainant being total profit made by Bytofel from the unauthorised sale.

Gosord Securities Limited was another firm the  NSE council took disciplinary action against, after unauthorised sale of its clients’ shares.  The firm has been expelled and their Dealing Member license revoked. 

Another dealing member firm, said to have engaged in unauthorised sale of clients shares and had its dealing member license revoked, was Lakesworth Securities Limited. Also, Fittco Securities Limited was said to have engaged in unauthorised sale of clients shares. The firm has been referred to the Securities and Exchange Commission, as indicated in the BrokerTraX