The Nigerian securities and Exchange Commission (SEC) has prohibited Heritage Capital Markets Limited, a stockbroker and dealer on the Nigerian Stock Exchange (NSE), for alleged fraudulent sale of investor’s shares.
In a circular, SEC stated that it suspended Heritage Capital Markets “in connection with unauthorised sale of shares belonging to an investor”, using the capital market term for shares fraud.
SEC also suspended the directors and sponsored individuals of the company, including two former presidents of Institute of Chartered Accountants of Nigeria (ICAN), Mr. Chidi Ajaegbu and Mrs Ibironke Osiyemi. Ajaegbu is the Managing Director of Heritage Capital Markets Limited while Osiyemi chairs the board.
According to SEC, Heritage Capital Markets failed to comply with the Commission’s directives to restitute the affected investor.
“In view of the above, the general public is hereby informed that the suspension is indefinite and shall remain in force pending the resolution of the matter against the operator,” SEC stated.
Other suspended directors included Dr Elijah Ogbuokiri, Prof Emmanuel Emenyonu and Oluseyi Olanrewaju. Suspended sponsored individuals included Paul Onalo, chief compliance officer and Oyafemi Titus, a stockbroker.
Incorporated in November 1997, Heritage Capital Markets Limited is licensed by the Nigerian Stock Exchange (NSE), SEC and FMDQ to operate as broker-dealer in the Nigerian capital market as well as offer brokerage services in fixed income securities. It has authorised share capital of N2 billion and shareholders’ funds of more than N1 billion.
The latest suspension came on the heels of the expulsion of three stockbrokers and an accountant for shares fraud by the council of the Nigerian Stock Exchange (NSE) earlier this month. The expulsion earlier in December brought the number of stockbrokers that had been expelled in 2016 to about seven as the Exchange seeks to protect the market integrity against the tempting recourse to illegal shares sale by hard-pressed stockbrokers.
The three stockbrokers, who were members and authorised dealer on the Exchange, were stripped of their registration and authority to trade on the NSE for selling shares belonging to their clients without the mandate and consent of the clients.
With the stock market downtrend and economic recession fuelling temptations to sell investors’ shares in their custody, the NSE had recently started the implementation of newly amended rules aimed at tightening the noose on unauthorised sale and transfer of shares by unscrupulous stockbroking firms and traders.
Under the amended rules, the Exchange could withdraw the dealing licence of any erring stockbroking firm and trader as well as impose fines not less than N1 million on any offender.
According to the rule, no dealing member shall sell or transfer any securities without the authorisation of the owner.
“A dealing member that has sold or transferred any securities without the authorisation of the owner shall not be permitted to keep any benefits accruing from such transaction, including but not limited to bonuses, rights, commissions, cash dividends, capital appreciation, and any profit accruing therefrom whatsoever,” the rule stated.
Any dealing member that sells or transfers securities without the authorisation of the owner shall be required to buy back the securities along with any accrued benefits within a period of 14 business days.
Besides, where the unauthorised sale transaction is worth N5 million and below in value, the erring stockbroking firm will be liable to pay a fine of N1 million or three times the value of the sale or transfer, whichever is higher, and N5,000 for every day from the day on which the dealing member is required to buy back the securities by the Exchange until the day the dealing member completes buying back the shares for the owner.
Where the illegal sale transaction is higher than N5 million in value or the dealing member has engaged in such unauthorised sale, or transfer of securities on a previous occasion, it shall have its dealing license withdrawn by the council of the Exchange and shall in addition be liable to pay a fine of N5 million or three times the value of the sale or transfer, whichever is higher and N5,000 for every day from the day of the sanction until the day the dealing member completes buying back the shares for the owner.