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The stock market is cracking down on the embezzlement of investor funds

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By Taofik Salako, Deputy commercial editor of the group

The Nigerian Stock Exchange (NSE) has started implementing an amended regulatory framework with stricter rules and sanctions against the embezzlement of investors’ funds, unauthorized use of their deposits and the commingling of funds from investors. investors with others.

A copy of the amended rules, obtained this weekend, shows a more decisive framework with heavy penalties for abuse.

Under the new rules, a brokerage firm or trading member is warned against handing over the proceeds from the sale of a client’s securities or transferring part or all of the client’s balance to a third party.

Any brokerage firm or trading member who contravenes the rule will be required to return the client’s brokerage account to its original state and pay a minimum fine of N 250,000 and / or face a trading suspension on Exchange floors for a period of time to be determined by the Exchange.

In addition, the amended framework made it illegal for stock brokers to bring a non-exchange-related dispute involving clients or other non-contractual relationships in the exchange and trading on the Exchange, as well as to confuse funds in the exchange. ‘investors in the operational funds of brokerage firms.

Under the Amendments, the Trading Member must not withdraw or transfer a client’s funds from a bank account designated as the client’s bank account, or operate that other bank account for any transaction other than buying and selling. sale of securities in the name of its clients or in any other bank account. contrary to the new provisions. A first-time violator under this rule must be warned, a second-time violator will be subject to a minimum fine of 500,000 naira while in the event of a subsequent violator, the trading member will be suspended from its activities. on the floors of the Stock Exchange for no less than five working days and pay a minimum fine of 500,000 naira.

Brokerage firms are prohibited from withdrawing or transferring client funds from accounts receivable to settle any transaction carried out by the negotiating member as principal, or to settle any commercial debt of the negotiating member.

According to the rules, no sum of money shall be drawn from a client account other than cash duly necessary for payment by or on behalf of a client in connection with debts owed by the client to the trading member for the liabilities resulting from transactions carried out for the client. or to meet margin calls or other customer obligations.

In addition, no money will be withdrawn from a customer account other than that intended for the payment of a customer at the request of the customer, as well as money belonging to the negotiating member that could have been paid into the customer account.

The Exchange is also strengthening its inspection and oversight by blocking regulatory loopholes exploited to thwart inspection.

Under the rules, each negotiating member must keep proper accounts on its stock exchange transactions. Now, the Stock Exchange has further defined its inspection mandate and imposed fines.

When a negotiating member fails to produce the required account records during a review or inspection, the negotiating member is suspended from trading floors until the information is provided and, in addition from the suspension, the Exchange may impose a fine not exceeding 50 N, 000 payable within five working days, for any violation of the rules of cooperation with inspectors and examiners.

Obviously, the Exchange declares that a brokerage firm or a trading member will be deemed not to have cooperated fully and promptly in a review or investigation when the trading member engages in either. set of the following actions, which include falsifying or modifying business policies and non-financial information; misrepresentation or delay in providing examination information as indicated in the examination notice; failure to provide books and records within the specified time frame for on-site review or failure to indicate when they would be produced and withholding of information relating to any aspect of the review or investigation .

When a negotiating member does not fully cooperate with a reviewer when conducting a review in accordance with the above, the company is immediately suspended from trading on the Exchange floors until full cooperation is achieved. provided.

In addition to the suspension, the Exchange will impose a fine not exceeding N50,000 payable within five business days;

When a negotiating member fails to pay the fine prescribed in sub-rule (c) above within the time specified, that negotiating member will be liable to an additional fine not exceeding N 5,100,000, according to the amended framework.

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