STOCKBROKERS OPERATING BELOW STANDARDS, SAYS NSE

Only a quarter of stockbrokers and dealers on the Nigerian Stock Exchange (NSE) meet the Minimum Operating Standards (MoS) for the stock market, a report has said.

An inspection report by the NSE obtained by The Nation yesterday indicated that 44 per cent of the stockbrokers fell below the minimum average; 31 per cent were average. Only 25 per cent of stockbroking firms are operating with the acceptable minimum standards.

The NSE inspected capital market firms between August and December, last year. The report indicated that 223 firms were inspected in 18 weeks, including 192 broker dealers, 30 brokers and one dealer.

The NSE rates firms along a scale of five for the MoS. Based on the MoS rating methodology, 54 firms were fully compliant and scored five points, representing 25 per cent of the population of dealing members inspected. Sixty one firms scored between three and four points, representing 31 per cent, while 108 firms scored two points or less representing 44 per cent of dealing member firms.

With this discovery, the Exchange plans to do final assessment and follow-up inspection of the 169 firms that scored between zero and four points to review the deficient areas from the 2015 inspection in order to revalidate their level of compliance.

The inspections, according to the report, are expected to commence next week’s Monday, February 29 and it will end on May 31, this year.

According to the report, the 169 firms scheduled for the MoS follow-up inspections will be expected to comply with the five requirements of the MoS for their registered function.

“Firms that fail to fully comply will be adjudged to be not compliant with the MoS requirements. Appropriate steps will be taken with respect to these firms to ensure that they exit the market in an orderly manner,” the report indicated.

The NSE had introduced the MOS in April 2014 as part of efforts to develop a stronger, stable and sustainable capital market. The MOS are a set of standards prescribed by the Exchange for dealing members to develop robust controls; strong governance framework and effective human capital that will enable them achieve best-in-class operations in order to compete on a global level for the benefit of investors and the capital market.

The main objective of the MOS is to ensure effective operational, technological and governance structures among the dealing members of the Exchange.

On the rationale for the new standards, the Head, Legal and Regulation Division, Nigerian Stock Exchange (NSE), Ms Tinuade Awe, said the new minimum operating standards were meant to complement the tremendous transformation that the market had undergone in recent years and to extend these forward-moving traits to the dealing members.

According to her, the objective of the minimum operating standards is to transform the operators into more competitive and compliant operators.

“We intend to ensure that the broker dealers, brokers and dealers have very robust controls, strong governance framework and sustainable operations that will enable them compete on a global scale for the benefit of the investors and the capital market,” Awe said.

She noted that the capital market is very dynamic with a diverse mix of local and foreign investors who can only invest with the confidence that the dealing members operate pursuant to clearly defined standards that are comparable to those to which broker dealers in other markets operate with.

“We simply cannot afford to be inferior to anyone in terms of size, skill, technology or organisational governance of our market participants,” Awe added.

 

LTV

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