No guarantee on equities, NSE issue warnings to stockbrokers

The Nigerian Stock Exchange (NSE) has issued a circular to stockbrokers warning them against a breach of the extant capital market rules which prohibit brokers from providing any guarantee on quoted shares, or other securities.

The circular, obtained by The Nation at the weekend, came on the heels of a guaranteed investment scheme that involved a leading stockbroker.

Preliminary investigations by the NSE and Securities and Exchange Commission (SEC) have established that the troubled stockbroking firm, Partnership Securities Limited (PSL), breached the extant capital market rules and engaged in illegal activities that led to estimated loss of about N4.8 billion by some 300 investors.

Citing its rulebook, The Exchange stated that guaranteed investment scheme is prohibited by the Rules of the Exchange, warning that it would impose sanctions on any erring stockbroker.

According to the dealing members’ rules, rule 1.15 that deals with prohibition of business relationship based on guarantee, Rulebook of the Exchange, 2015, dealing members of the Exchange shall not “enter into any business relationship with a client premised on a guaranteed return to the client.”

The rule 1.15 also forbids dealing members from “guarantee, directly or indirectly, a customer against loss in any account or in any securities transaction executed by the dealing member for such customer, or previously agreed with the customer on a profit margin”.

Violation falls under engaging in illegal activities and transactions under such activities could be deemed unauthorised transactions. Such violations carry wide-ranging fines and sanctions under the rules of the market, including monetary sanction, revocation of dealership license and cancellation of stockbroking license.

Partnership Securities, owned by Mr. Victor Ogiemwonyi, a leading stockbroker and council member of the Exchange, is embroiled in a shares investment scandal. Some 300 investors had alleged that they were allegedly swindled of more than N4.8 billion in investment schemes promoted by Partnership Securities Limited. Representatives of the investors alleged that they were approached by Ogiemwonyi to surrender their shares to him for management under his Partnership Securities Deposit Account (PSDA) with a promise to provide a guaranteed return periodically. Shares worth more than N4.8 billion were misappropriated through this scheme.

Some of the other victims included Mr. Godwin Anono, Chairman, Standard Shareholders Association of Nigeria with over N160 million worth of shares, Mr. Alabi Olusola with over N12.540 million worth of shares; Mr. Solesi Samuel with over N40 million worth of shares and a widow with over N4 million worth of shares among others.

Narrating his ordeal, Mr. Alabi Olusola said Ogiemwonyi called him to deposit his shares, which had not been traded over the years, in the custody of his stockbroking firm to manage those shares and generate 10 per cent returns, which would be paid to Alabi twice a year.

“The deal was such that I can back out at any time I wish. When in 2014 the returns were not forth coming, Ogiemwonyi started giving one excuse or the other; that the returns are being reinvested, it was then I realised that he was playing foul, hence I demanded for my shares which could not be returned to me,” Alabi said.

The Exchange had on October 18, 2016 suspended PSL from trading on all its floors nationwide.

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