Stock Exchange Expels 90 Stockbrokers from Capital Market

 In Investor News

Authorities at the Nigerian Stock Exchange (NSE) has revoked the operating licence and expelled Midland Capital Markets Limited from the capital market, bringing to 90 the number of stockbrokers so far expelled from the market this year.

A regulatory document obtained by The Nation indicated that the decision to revoke the operating licence and expel Midland Capital Markets Limited was taken by the National Council of the Exchange, the highest administrative organ of the NSE.

Midland Capital Markets Limited has also been deregistered as a capital market operator by the Securities & Exchange Commission (SEC). While the regulatory document was silent on the reason for the revocation and expulsion of the stockbroking firm, capital market regulators traditionally apply the highest punishment of expulsion and revocation of licence to serious offences that could undermine investors’ confidence including fraud and inability to meet major operating requirements for the function.

With the expulsion, the stockbroking firm will not be able to trade in the Nigerian Stock Market and other international markets that Nigeria has Memorandum of Understanding (MoU) with; Nigerian capital market authorities have standing bilateral agreements with several other jurisdictions including Morocco, Angola, China, Ghana, Kenya, Malaysia, Mauritius, South Africa, Tanzania and Uganda.

With the expulsion, investors who have their investment accounts with the expelled stockbrokers will be required to move their accounts to other functional stockbroking firms.

Also, Directors, Executives, Top Management and other employees of Midland Capital Markets Limited will not be able to secure any employment in the capital market without prior clearance and written consent of the Exchange.

“Dealing members are advised not to engage in any activity with the above mentioned firm. Also, all authorised clerks and employees of dealing member firms are strongly advised against allowing themselves to be used in carrying out activities that are capable of affecting the integrity of the market,” NSE stated.

The Exchange stressed the need for dealing firms to always comply with extant rules and regulations.

Under Rule 6.12 of the Rulebook of the Exchange, 2015, members of the Exchange are disallowed from employing any of directors, authorised clerks or other persons including principal officers such as the chief executive officer, chief finance officer, chief compliance officer and chief risk officer, who have been indicted by the Exchange or the Commission without prior regulatory approval.

Also, the rule disallows other stockbroking firms from employing any person who was an officer or employee of a stockbroking firm or dealing member expelled from the Exchange; any person expelled, as an authorised clerk or its equivalent, from any other exchange; any person refused admission as a member of the Chartered Institute of Stockbrokers or any person expelled from its membership; any person expelled as a member of any professional association or institute and any person who is insolvent or has been convicted of theft, fraud, forgery, or any other crime involving dishonesty.

The Rulebook of the Exchange 2015 provides that: where the Exchange revokes a dealing member’s licence, the Exchange shall immediately commence the process of expelling such dealing member.

Besides, the rules empower the NSE to suspend any authorised clerk or revoke the registration of any authorised clerk who has breached any rules or regulations of the Exchange or is found to be complicit in any breach of such rules or regulations.

Also, suspension of any stockbroking firm by SEC will lead to immediate suspension by the NSE while revocation of any broker’s registration will lead to expulsion of the firm by the NSE.

“Without prejudice to all the remedies open to the dealing member, where a dealing member is suspended by the Commission, as soon as the Exchange is notified, it shall immediately commence the process of suspension or expulsion of the dealing member.

“Where a Dealing Member’s registration is revoked by the Commission, as soon as the Exchange is notified, it shall immediately commence the process of expulsion of the dealing member,” the rules stated.

The NSE had recently revoked the operating licence and imposed a fine of N582.37 million on a stockbroking firm-Bytofel Securities and Investment Limited, for allegedly engaging in fraudulent activities in the stock market.

Bytofel Securities was expelled for engaging in “unauthorised sales of clients’ shares and misappropriation of clients’ funds”.

The Nation had earlier reported the expulsion of 67 stockbrokers from the master list of dealers at the stock market. A regulatory report had indicated that the expulsion was the final phase of the delisting of the stockbroking firms, after their dealing licences had been revoked by the exchange.

A source at the exchange said the expulsion followed recommendation of the disciplinary committee of the council of the exchange and the final approval of the National Council of the Exchange.

That round of expulsion in May 2017 brought the number of stockbroking firms that had then been expelled from Exchange to 88 stockbroking firms. The Nation had earlier in April 2017 reported the expulsion of 21 stockbroking firms for various infractions ranging from poor capitalisation to unauthorised sales of investors’ shares.

https://www.financialwatchngr.com/2017/12/11/stock-exchange-expels-90-stockbrokers-capital-market/

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