When it comes to making money, the only skill most people know is to work hard. People think that mastering their skills would make their income jump exponentially. In our places of work, the popular view is the idea of specialization.
Most people think that specialization can make them get promoted and through promotion, their income would increase. This is why people who are paid through employment acquire degrees upon degrees.
When they acquire those degrees and get their income raised by their employers, they now discover that getting a degree and increment in salary neither translate nor guarantee financial freedom. Getting rich through your skill, promotion and increment of wages are always slow.
If getting rich had to do with education and skill, all educated people would have been rich. For you to be rich, irrespective of your status and background, you must discover a legitimate formula of making money through a quicker and innovative way. If you have not found the formula, getting rich always seems hard and staying poor seems natural.
One of the ways to fast track your plans of making is to expand your reality in the stock market. Doing that increases your leverage, then getting rich becomes easier.
The richest people in the world are those who continually explore the stock market. Examples are people like Bill Gates who always invests heavily in the stock market and through that multiply his money.
So also is Warren Buffet, the stock market Guru who always puts his eggs in one basket and watches them grow. He has made billions of dollars from the stock market and is also known for building companies from the scratch and taking the shares to the public for sales.
Through these, he became the second richest man in the world. Alhaji Aliko Dangote, who I always refer to as the Warren Buffet of Nigeria started Dangote Sugar in march, 2000 with N50 million. He took the company to the stock exchange last year and sold 30 per cent of its shares to the public by way of offer for sale of 54 billion naira(N54,000,000,000). He bought national salt at (N5) per share and sold 400 million units of his shares in the company at the stock exchange for 22 naira(N22) per share, thereby pocketing N8.8 billion (N8,000,000,000).
What a way of making money through a faster plan. You may not have a billion or even a million naira to play in the market, but you can use the little you have to create wealth by joining the club of people that are making money through the faster plan.
The way to do it is to buy stocks when they are low and sell when the prices have gone up. The language is “Buy low and sell high”. Apart from the secondary market, you can take advantage of the primary market to make money in shares.
Companies coming to raise money through the primary market for the first time otherwise known as the Initial Public Offer (IPO) always give investors high returns on their investment. The reason is because their shares are not always available at the market when they are listed.
The unavailability of the shares makes it to move upwards and investors who know how to quickly verify his/her certificate can easily take advantage of that to make money. Readers should watch out for offers coming to the market.
Nigeria is an emerging market. The shares of companies in an emerging economy give incredible returns. Don’t be surprised if in the next few years you discover that a unit of some company’s shares are sold for between N500 to N 1000 per share. You can position yourself for the incoming surge in the market.
Don’t tell us that you were not told. I keep saying it that the prices of our shares are low and the best time to take position is now before it goes beyond the reach of low income earners. See you next Week
Thursday, March 20, 2008
Thursday, March 13, 2008
Wealth Creation Through Shares
Investment is a plan. You need a plan to start with nothing and retire rich in the stock market. The essence of attaining financial freedom early is for you to have time making money instead of working from cradle to the grave.
Getting rich begins with a right plan and actualizing your plans gives you freedom from the bore of earning a living. When I was working in a financial institution few years ago, I developed a plan to work for a maximum of five years before disengaging from paid employment.
For me to realize my plan at the set time, I got enrolled in the school of financial education through reading and mentoring. I purchased over forty books on investments and finance to hone myself on investment skills. I always put to practice what I read and taught by investing the little I was receiving monthly in shares. As a matter of fact, I started buying shares with five thousand naira. Instead of working for five years as planned, I disengaged from paid employment in three years.
Though I did not have enough money to play bigger in the stock market and business then, but I was mentally prepared to use the little I had to create wealth. The speed at which you can change and expand your context in order to adapt to the changes in the investment world today is critical to every one of us who wants to succeed and do well financially.
One of my mentors said “if you have a slow industrial age plan or context, you are left behind financially by younger people with faster minds and more accelerated ideas". He said this accelerated rate of change of context is why we have twenty-year olds who are billionaires and fifty-year olds still hoping to find two hundred thousand naira as annual salary.
For us to retire rich, we need to develop a blueprint to wealth. Instead of following our parents financial plan of working and retire after 35 years of service and depending on government for the rest of our lives, we should develop alternative ways of attaining financial freedom. One of the platforms is through the stock market. With adequate planning and basic financial education, we can retire rich in the stock market in 5 to 10 years depending on how fast you want to achieve this plan.
The idea of working all your life and savings to achieve financial freedom is a very slow plan. So many people work and save but did not invest.
Working and saving cannot give us wealth. We must invest our money in financial instruments that give high returns. I was doing a research few years ago on five hundred naira invested in a particular bank in 1973 and another five hundred naira put in saving account during the period. The N500 invested in the bank would be worth over ten million naira by now while the one put in saving account cannot be up to a hundred thousand naira.
With what you have, you can start buying shares through the primary and secondary market. This can be done by setting aside N5,000 to N10,000 monthly if you are low income earner. For example, if you had bought the public offer of Japaul Oil shares late last year, your money would have worked hard to give you more than 300% returns on your investment by now.
Before going to press, Japaul Oil is about N13 per share. There are other instruments like mutual funds, debentures etc. You can also invest in Right Issues on the floor of Nigerian Stock Exchange even if you are not existing shareholders of the company.
Through your broker, you can purchase the rights of people not ready to take up their rights. You can also take advantage of private placement to retire rich if you are financially capable. Private placement is what some people called the investment of the rich.
To me, private placement is not for the rich alone. Depending on your plan, you can retire rich in the stock market through careful planning.
See you next week.
Getting rich begins with a right plan and actualizing your plans gives you freedom from the bore of earning a living. When I was working in a financial institution few years ago, I developed a plan to work for a maximum of five years before disengaging from paid employment.
For me to realize my plan at the set time, I got enrolled in the school of financial education through reading and mentoring. I purchased over forty books on investments and finance to hone myself on investment skills. I always put to practice what I read and taught by investing the little I was receiving monthly in shares. As a matter of fact, I started buying shares with five thousand naira. Instead of working for five years as planned, I disengaged from paid employment in three years.
Though I did not have enough money to play bigger in the stock market and business then, but I was mentally prepared to use the little I had to create wealth. The speed at which you can change and expand your context in order to adapt to the changes in the investment world today is critical to every one of us who wants to succeed and do well financially.
One of my mentors said “if you have a slow industrial age plan or context, you are left behind financially by younger people with faster minds and more accelerated ideas". He said this accelerated rate of change of context is why we have twenty-year olds who are billionaires and fifty-year olds still hoping to find two hundred thousand naira as annual salary.
For us to retire rich, we need to develop a blueprint to wealth. Instead of following our parents financial plan of working and retire after 35 years of service and depending on government for the rest of our lives, we should develop alternative ways of attaining financial freedom. One of the platforms is through the stock market. With adequate planning and basic financial education, we can retire rich in the stock market in 5 to 10 years depending on how fast you want to achieve this plan.
The idea of working all your life and savings to achieve financial freedom is a very slow plan. So many people work and save but did not invest.
Working and saving cannot give us wealth. We must invest our money in financial instruments that give high returns. I was doing a research few years ago on five hundred naira invested in a particular bank in 1973 and another five hundred naira put in saving account during the period. The N500 invested in the bank would be worth over ten million naira by now while the one put in saving account cannot be up to a hundred thousand naira.
With what you have, you can start buying shares through the primary and secondary market. This can be done by setting aside N5,000 to N10,000 monthly if you are low income earner. For example, if you had bought the public offer of Japaul Oil shares late last year, your money would have worked hard to give you more than 300% returns on your investment by now.
Before going to press, Japaul Oil is about N13 per share. There are other instruments like mutual funds, debentures etc. You can also invest in Right Issues on the floor of Nigerian Stock Exchange even if you are not existing shareholders of the company.
Through your broker, you can purchase the rights of people not ready to take up their rights. You can also take advantage of private placement to retire rich if you are financially capable. Private placement is what some people called the investment of the rich.
To me, private placement is not for the rich alone. Depending on your plan, you can retire rich in the stock market through careful planning.
See you next week.
Thursday, February 21, 2008
Why parents secure children’s future through stock investments
Rules, regulations of NSE: Interpretation and Enforcement (I)• Wednesday, Feb 20, 2008
Ladies and Gentlemen, interested Stakeholders, colleagues in the noble profession of capital market operations; you are welcome once again to this important programme. You will agree with me that in every profession or sphere of life there are rules and regulations for the orderly conduct and behaviour of willing members, for the good relationship between the mother regulator or authorities and market players, and any person or body corporate. Usually these rules and regulations from the beginning of time as in the Garden of Eden are made succinctly clear and in most cases instructive. In modern times, one can say it is made for the good governance of a given undertaking. Cases abound to show that strong regulatory framework is among the key success factors in capital market operations. Not only that, we can recall the trajectories of failure of Enron and Baring Bank and come to terms with the important role of rules and the regulations in the light of capital market operations.
A formidable rule and regulation as is the case of Rules and Regulations of the Nigerian Stock Exchange is the back bone driving serious minded analysts, investment brokers, and Investors to look at investment opportunities in our market. One is happy to note that the Rules and Regulations of Exchange are an embodiment of market practice over the years, norms, usages and concepts of good corporate governance that meet International best practice.
In general, capital market rules and Regulations are meant to provide the level and type of acceptable professionalism relevant to the continous evolution of an investor-friendly, operator-friendly and regulator-friendly capital market. The present Rules and Regulations of the Exchange have become very necessary to set the mode of authorised conducts among Stakeholders in view of the significant metamorphosis of the capital market, as is presently constituted, characterised by the evolution of ground-breaking changes such as the emergence of Central Securities Clearing System Limited, the operations of the Automated trading System, ATS, remote Trading, e-bonus, e-lodgement, e-IPO’s, e-Rights etc.
These significant changes in the structure of the capital market have compelled the need for the new Rules and Regulations that take cognizance of these transformations.
In the light of the above, we will be looking at the Nigerian Stock Exchange-rules and regulations that take congnisance of these transformations.
In the light of the above, we will be looking at the Nigerian Stack Exchange-rules and regulations as an integral part of this paper. The importance of rules in human affairs is too obvious to require restating. Rules are menat to position the goal before a game starts and not in the middle of the game. They are meant to provide the basis and the standards for human behaviour or conduct. Rules and Regulations are fundamental to sound corporate governance.
Without Rules and Regulations, human beings will behave like animals; without Rules and Regulations nothing will become an offence. Without Rules and Regulations, every conduct will become acceptable such as rape, armed robbery, sale of stocks without mandate etc.
I must not fail to tell you that I feel honoured and delighted by the invitation to address the above topic, especially coming from the background of a market operator. This presentation is an excerpt of the rules and regulations and will be presented and discussed with a copy of the rules and regulations as recently reviewed.
Background of exchange rules and regulations:
Rules and regualations are made pursuant to an enabling law, to ensure orderliness in the securities business, promote transparency and create standards of acceptable conducts in the capital market, in the instant case.
The Nigerian Stock Exchange was created by the Lagos Stock Exchange Act of 1962. The Lagos Stock Exchange transmitted to the Nigerian Stock Exchange in 1977. However section 263 (1) (a) of the Investments and Securities Act, 1999 has repealed the Lagos Stock Exchange Act of 1961. Consequently, the Nigerian Stock Exchange now derives its powers from the ISA, 1999. The rules and regulations of the Exchange came into force from 1st of January 2007 and have been made pursuant to and in furtherance of the ISA, 1999.
In the case of: Union Bank Registrars Vs SEC (2004) 1NISLR 113 Pages 150-151
The honourable Investments and Securities Tribunal held as follows:
“In law, the codes, rules and regulations made by SEC and the self Regulatory Organisations as authorised by SEC and its enabling law (ISA, 1999) are not some inferior form of legislation. Legislation. Legally the rules and codes of practice guiding the professionals conduct carry out the makers’ commands, as does an Act of the National Assembly.”
This is collectively known as delegated legislation.
The clear implication of the above ruling is that the codes of conduct as well as the Rules & Regulations of both SEC and NSE have the same binding force with, and not inferior to, the ISA.
Again in the case of:
Molten trust Limited, M.O. Oduwole Vs Securities and Exchange Commission (2007) 2 NISLR 139 at 143 Ratio 1, the Court held inter alia;
“Stock broking business is evolving over the years, practices, rules and infrastructure were evolved to ensure conformity to certain accepted standards. Being a sensitive market every Stockbroker is enjoined to conform to these market standards” (P. 164 Para B)
Stockbroking business is a professional business-it is not an all-comers affair, hence the need for rules & Regulations and religious complaiance with them.
One can now proceed to highlight some specific provisions and Articles of the Exchange Rules & Regulations.
Article 1highlights the binding effect of the Rules & Regulations on dealing members in their relationship with the Exchange and between themselves.
Article 2 Duty to observe and report breaches
Every Dealing member is obligated to report any breach or suspected breach of and Rules & Regulations by another member. This is to safeguard the integrity of the market, as any scam from any member will jeopardise the integrity of the entire Capital market. The market has hardly survived the confidence crises visited by the Bonkolans Nestle Plc share Scam that occurred in 2002.
Again consider what happened in December 2006, when the Managing Director of Jenkins Investment Limited, Mr. Richard Omobogie allegedly carried out massive unauthorised sales of his clients securities to the tune of hundreds of millions of naira, and ran away with the loot. The crises would have been nipped in the bud if someone had spotted or discovered it and reported him.
The pain of any financial scam by any Dealing member must go round to other Dealing members not only in terms of crises of confifence visited on the market but also in terms of the possible depletion of the investors protection fund to which every member is a contributor.
Section 156 (1) OF ISA 1999, states:
“If at any time the amount available in an investors protection fund is not sufficient to satisfy the liabilities which are ascertained against a Secrurities Exchange or Capital Trade point, the Board may impose on every member company a levy of such amount as it thinks fit: or if approved by the Commission shall impose a levy of such sum, which shall in the aggregate be the equivalent to the amount specified in the approval”.
S. 156 (2), states;
“The amount of such levy shall be paid within the time and in the manner specified by the Board generally or in relation to any particular case”.
The combined effect of S. 156 (1) and (2) of ISA is that if members fail to report breaches by fellow members leading to financial losses to investors such investors can bring actions for compensation through the IPF and if the amount standing to the credit of IPF is not enough to satisfy investors claims, the Exchange is at liberty to impose a further levy against members. Thus the financial loss occasioned by a Dealing member will be distributed, as it were, to other members.
One is aware of a suit of N726 million filed by a single client of Jenkins Investment Limited, Mr. Ogunlesi Johnbosco against the IPF. The implication of the success of this case on the entire market is not difficult to imagine. Article 2 of the Exchange Rules & Regulations should be taken seriously as complacency will lead to financial losses to every Dealing member.
Article 7: mode of changing directors and shareholders
This Article requires prior approval of the Exchange before a dealing member can change its directorship or shareholdings. This has become necessary as the Exchange wishes to ensure that only people of integrity own or control stockbroking Firms, and who are willing to take reasonable care to ensure the business of stockbroking is done in such manners as to uphod the revlevant standards that attend international best practices. The Exchange wishes to ensure adequate corporate governance among its memebrs, hence the need to ensure that only persons of proven integrity can own or run Stock-broking Firms as to preserve the integrity of the Capital market. Will the Exchange grant its approval if Tafa Balogun applies for a Stock-broking license or wishes to come on the board of an existing Stockbroking Firm? You may keep the answer to yourself.
Article 6: prescribed mode of advertisement
It is necessary for members to keep to the mode of advert specifid by the Exchange. Stockbroking products are basically honogenous that it is difficult to claim superiority of knowledge in a professional field such as Stockbroking. It is better for a Firm’s service delivery to recommend it to clients than loud-mouthed claims.
Article 8: Association with non-Dealing members
This article requires special consent of the Council of the Exchange before entering into any profit-sharing agreement or partnership with any person or Firm that is a non-member. This has become relevant in view of the fact that many members deal with numerous” joblers” who will not uphold the high standards of ethics and professionalism required in the very sensitive Stockbroking business. This has given rise to a number of third party payments that have been the bane of the Stock market.
In molten trust case, Supra, the Honourable Tribunal Oberves at Page 165, Para B:
“It has been said several times that the capital market is a very sensitive market dealing with intangible assets and easily successptible to fraud, thus the need for procedures and rules ensuring that the presenter of the certificates is the real beeneficial owner”.
Article 10: Scope of Business Activities
This articile states, “No dealing member shall carry on any other business save that of dealing in securities and those activities which are ancillary thereto”.
By the provisions of this article it is wrong for many Stockbroking Firms that operate Finance Houses, Bureax De Change and other businesses that have no direct bearing with Stockbroking. Ogbu is a stock market analyst.
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Feb, 17 2008: Ogun seeks implementation of traffic regulations...more If there is anything that has impacted greatly on a greater number of Nigerians, in terms of capital development and appreciation, it is the capital market.Many Nigerians now create future for themselves by investing in the capital market.Many who were unable to own a company have become co-owners of big companies through their investments in the capital market. Chukwuebuka NwososiThe boy is the son of VICTOR and AMAKA NWOSISI. The father said he bought some stocks as a way of keeping something for him. He said that the stock would make start from some where and get to the next step. To make children look up to something has informed the decision of some parent’s to buy shares for their children.Buying shares is a kind of introduction to capital market. I mean that by buying shares for my children at tender age, it marks a sense of belonging and responsibility to my ward.A lot of people buy shares for their children for different reasons. Just as people make different plans in life, set different targets, so do people have different purposes for doing certain things.I believe that as a father, one has got a lot of responsibilities for his family and children. This is why I consider it wise to remember my children in most of my financial decisions. I will also make such a provision that what always becomes the case, when the man passes on, sharing properties is totally avoided. One of the ways of doing this is by buying shares in their names. It is another way of showing them love and securing a comfortable future for them.I have always wanted to make my children feel happyI saw investment in the stock market as a safe investment; hence I decided to put the little savings I have in the market for my children so that by the time they grow, they would see something to start life with. I learnt about capital market sometime ago, but the fact has been that I have not been playing actively in it. I decided to play with the little I have in buying some stocks for my children. I want to buy stocks for my children at times as a birthday gift to them. This is one of the reasons why I decided to buy stocks using their names to avoid controversy of who gets what, at the time I may not be around.Capital market has been a veritable source of savings for a lot of people. People tend to spread their funds in form of savings by giving different codes so that it will not be easy to pull such funds immediately, when one is in financial need.However, at times the nonchalant attitude of some stockbrokers tends to discourage some people from patronising the capital market, though the market is improving. My advice is that the Nigerian Stock Exchange ought to step up its supervisory roles to check these kinds of stockbrokers. I decided to buy stocks now that I have gotten the awareness of the capital market.The capital market is the only place one can make money without any stress. So I decided to create this enabling environment for my children so that when they grow, they will have foundation to start from.I never saw capital market as a market because, no market is seen trading at the custom street where the building of the Nigeria Stock Exchange is situated. This was one of the reasons why I did not give it a second thought when I first heard of it. Not until I tried it that I came to see that it is not fraudulent.I have started investing in the market, although I have been investing at low ebb. I have not put much fund into it. If I have put much fund, I would have benefited more. Since I started I have not stopped even though I have been buying 1,000 or 2,000 units of it. I believe that after some year’s time, they will appreciate and add value. It will also help my children to know that their parents love them very well.Osagie AmadasunThis is the child of REBECCA AMADASUN. The woman though, said she did not invest much in the capital market but that she has been hearing from people what the market is all about.Becky said that if the capital market were to be what she has heard, it means that the market just started of recent to improve. I never saw capital market as a market because no market is seen trading at the custom street where the building of the Nigeria Stock Exchange is situated.Initially, I never saw the capital market as a viable market where one could make huge profits. I felt it is another form of brand that was developed by fast brains in the country. The moment I started seeing people who testify that they have reaped bountifully from the market, I decided to give the market a hot chase.The hot chase I mean in this regard, is using all available funds that come to me for stock investment. I do this in various ways which include buying for my children individually, to give them sense of belonging. I got interested in the capital market because of the level of improvements noticed. A lot of people have said that they made millions from the market.They were saying that to my hearing without knowing they were putting me to a challenge. When I got back to the house, I discussed with my husband and told him I would start with buying for Osagie. He gave me the go- ahead.I really came to know about the market not quite long. I know that capital market is where stocks are traded. Stocks are intangible goods that people say, give the investor more money than the ones we call tangible goods. I can understand that the capital market in recent times has been doing well.People have made a lot of testimonies how they made a lot of money from the market. It was the testimony of one of my friend’s father that jolted me. The man said that in 1988, he bought a share worth N15, 000.00. By the year 2005, the number of shares not only increased but the share price also increased. He revealed that with a mere N15, 000, he was able to reap more them N85, 000.000 from the stock. He regretted not having more of the stocks by then.After hearing all he said, I decided to discuss the matter with my husband who is always sensitive to anything that would bring progress to the family. He said if I considered it wise, than I should give it a trial. I therefore started with buying for my son; Osagie. My husband has also bought various stocks on his own for my other children including myself. I was having the mind that buying for my children are a ways of establishing them and having something ready for them to grow and meet.I know that with the stock I bought for my children, they would have something to start life with. I can tell you, most people are not yet convinced that huge sums of money can be made through stock investment. They have the opinion that money is made through two ways; as a government paid worker and as a trader who brings his goods out in the morning to display, and packs them every in the evening at the close of market. I made incursion into the stock trading through my children because I want to leverage on my capital investment. You know that if all big men in Nigeria should stop engaging in more fund raising through the various transactions only to eat what they already have, time shall come when their money would finish because there is no replacement. So I decided to go into the market in order to grow investments.When you don't have the knowledge of anything, you became confused. This confusion makes you think that the practice is wrong. This is what happens to some of the people who say the market if fraudulent.The capital market investment is a future investment. The future in this regards could be two months, three months or even years. So the reason why I embraced the stock trading is to make savings for the rainy day. You know today one is strong, moves around, fends for himself, but times shall come when one is no longer strong as to move around to fend for himself. It is to made provision for this kind of situation that made me go into stock trading so that my children future would be secured.I know that unless one makes a lot of money he would not be able to own a company of his. But one can become a co-owner of even the biggest company in Nigeria by buying the company stock through either the primary market or the secondary market. When you become co-owner of a company, you can attend the general meeting of the company where issues of the company are discussed. The pride of becoming part owner of a big company or business institution like banks is enough to drive one mad. I decided to secure ownership of most of those companies I bought shares into for my children to give them good standing when they grow. They have been part owners of all the companies I bought into.
Ladies and Gentlemen, interested Stakeholders, colleagues in the noble profession of capital market operations; you are welcome once again to this important programme. You will agree with me that in every profession or sphere of life there are rules and regulations for the orderly conduct and behaviour of willing members, for the good relationship between the mother regulator or authorities and market players, and any person or body corporate. Usually these rules and regulations from the beginning of time as in the Garden of Eden are made succinctly clear and in most cases instructive. In modern times, one can say it is made for the good governance of a given undertaking. Cases abound to show that strong regulatory framework is among the key success factors in capital market operations. Not only that, we can recall the trajectories of failure of Enron and Baring Bank and come to terms with the important role of rules and the regulations in the light of capital market operations.
A formidable rule and regulation as is the case of Rules and Regulations of the Nigerian Stock Exchange is the back bone driving serious minded analysts, investment brokers, and Investors to look at investment opportunities in our market. One is happy to note that the Rules and Regulations of Exchange are an embodiment of market practice over the years, norms, usages and concepts of good corporate governance that meet International best practice.
In general, capital market rules and Regulations are meant to provide the level and type of acceptable professionalism relevant to the continous evolution of an investor-friendly, operator-friendly and regulator-friendly capital market. The present Rules and Regulations of the Exchange have become very necessary to set the mode of authorised conducts among Stakeholders in view of the significant metamorphosis of the capital market, as is presently constituted, characterised by the evolution of ground-breaking changes such as the emergence of Central Securities Clearing System Limited, the operations of the Automated trading System, ATS, remote Trading, e-bonus, e-lodgement, e-IPO’s, e-Rights etc.
These significant changes in the structure of the capital market have compelled the need for the new Rules and Regulations that take cognizance of these transformations.
In the light of the above, we will be looking at the Nigerian Stock Exchange-rules and regulations that take congnisance of these transformations.
In the light of the above, we will be looking at the Nigerian Stack Exchange-rules and regulations as an integral part of this paper. The importance of rules in human affairs is too obvious to require restating. Rules are menat to position the goal before a game starts and not in the middle of the game. They are meant to provide the basis and the standards for human behaviour or conduct. Rules and Regulations are fundamental to sound corporate governance.
Without Rules and Regulations, human beings will behave like animals; without Rules and Regulations nothing will become an offence. Without Rules and Regulations, every conduct will become acceptable such as rape, armed robbery, sale of stocks without mandate etc.
I must not fail to tell you that I feel honoured and delighted by the invitation to address the above topic, especially coming from the background of a market operator. This presentation is an excerpt of the rules and regulations and will be presented and discussed with a copy of the rules and regulations as recently reviewed.
Background of exchange rules and regulations:
Rules and regualations are made pursuant to an enabling law, to ensure orderliness in the securities business, promote transparency and create standards of acceptable conducts in the capital market, in the instant case.
The Nigerian Stock Exchange was created by the Lagos Stock Exchange Act of 1962. The Lagos Stock Exchange transmitted to the Nigerian Stock Exchange in 1977. However section 263 (1) (a) of the Investments and Securities Act, 1999 has repealed the Lagos Stock Exchange Act of 1961. Consequently, the Nigerian Stock Exchange now derives its powers from the ISA, 1999. The rules and regulations of the Exchange came into force from 1st of January 2007 and have been made pursuant to and in furtherance of the ISA, 1999.
In the case of: Union Bank Registrars Vs SEC (2004) 1NISLR 113 Pages 150-151
The honourable Investments and Securities Tribunal held as follows:
“In law, the codes, rules and regulations made by SEC and the self Regulatory Organisations as authorised by SEC and its enabling law (ISA, 1999) are not some inferior form of legislation. Legislation. Legally the rules and codes of practice guiding the professionals conduct carry out the makers’ commands, as does an Act of the National Assembly.”
This is collectively known as delegated legislation.
The clear implication of the above ruling is that the codes of conduct as well as the Rules & Regulations of both SEC and NSE have the same binding force with, and not inferior to, the ISA.
Again in the case of:
Molten trust Limited, M.O. Oduwole Vs Securities and Exchange Commission (2007) 2 NISLR 139 at 143 Ratio 1, the Court held inter alia;
“Stock broking business is evolving over the years, practices, rules and infrastructure were evolved to ensure conformity to certain accepted standards. Being a sensitive market every Stockbroker is enjoined to conform to these market standards” (P. 164 Para B)
Stockbroking business is a professional business-it is not an all-comers affair, hence the need for rules & Regulations and religious complaiance with them.
One can now proceed to highlight some specific provisions and Articles of the Exchange Rules & Regulations.
Article 1highlights the binding effect of the Rules & Regulations on dealing members in their relationship with the Exchange and between themselves.
Article 2 Duty to observe and report breaches
Every Dealing member is obligated to report any breach or suspected breach of and Rules & Regulations by another member. This is to safeguard the integrity of the market, as any scam from any member will jeopardise the integrity of the entire Capital market. The market has hardly survived the confidence crises visited by the Bonkolans Nestle Plc share Scam that occurred in 2002.
Again consider what happened in December 2006, when the Managing Director of Jenkins Investment Limited, Mr. Richard Omobogie allegedly carried out massive unauthorised sales of his clients securities to the tune of hundreds of millions of naira, and ran away with the loot. The crises would have been nipped in the bud if someone had spotted or discovered it and reported him.
The pain of any financial scam by any Dealing member must go round to other Dealing members not only in terms of crises of confifence visited on the market but also in terms of the possible depletion of the investors protection fund to which every member is a contributor.
Section 156 (1) OF ISA 1999, states:
“If at any time the amount available in an investors protection fund is not sufficient to satisfy the liabilities which are ascertained against a Secrurities Exchange or Capital Trade point, the Board may impose on every member company a levy of such amount as it thinks fit: or if approved by the Commission shall impose a levy of such sum, which shall in the aggregate be the equivalent to the amount specified in the approval”.
S. 156 (2), states;
“The amount of such levy shall be paid within the time and in the manner specified by the Board generally or in relation to any particular case”.
The combined effect of S. 156 (1) and (2) of ISA is that if members fail to report breaches by fellow members leading to financial losses to investors such investors can bring actions for compensation through the IPF and if the amount standing to the credit of IPF is not enough to satisfy investors claims, the Exchange is at liberty to impose a further levy against members. Thus the financial loss occasioned by a Dealing member will be distributed, as it were, to other members.
One is aware of a suit of N726 million filed by a single client of Jenkins Investment Limited, Mr. Ogunlesi Johnbosco against the IPF. The implication of the success of this case on the entire market is not difficult to imagine. Article 2 of the Exchange Rules & Regulations should be taken seriously as complacency will lead to financial losses to every Dealing member.
Article 7: mode of changing directors and shareholders
This Article requires prior approval of the Exchange before a dealing member can change its directorship or shareholdings. This has become necessary as the Exchange wishes to ensure that only people of integrity own or control stockbroking Firms, and who are willing to take reasonable care to ensure the business of stockbroking is done in such manners as to uphod the revlevant standards that attend international best practices. The Exchange wishes to ensure adequate corporate governance among its memebrs, hence the need to ensure that only persons of proven integrity can own or run Stock-broking Firms as to preserve the integrity of the Capital market. Will the Exchange grant its approval if Tafa Balogun applies for a Stock-broking license or wishes to come on the board of an existing Stockbroking Firm? You may keep the answer to yourself.
Article 6: prescribed mode of advertisement
It is necessary for members to keep to the mode of advert specifid by the Exchange. Stockbroking products are basically honogenous that it is difficult to claim superiority of knowledge in a professional field such as Stockbroking. It is better for a Firm’s service delivery to recommend it to clients than loud-mouthed claims.
Article 8: Association with non-Dealing members
This article requires special consent of the Council of the Exchange before entering into any profit-sharing agreement or partnership with any person or Firm that is a non-member. This has become relevant in view of the fact that many members deal with numerous” joblers” who will not uphold the high standards of ethics and professionalism required in the very sensitive Stockbroking business. This has given rise to a number of third party payments that have been the bane of the Stock market.
In molten trust case, Supra, the Honourable Tribunal Oberves at Page 165, Para B:
“It has been said several times that the capital market is a very sensitive market dealing with intangible assets and easily successptible to fraud, thus the need for procedures and rules ensuring that the presenter of the certificates is the real beeneficial owner”.
Article 10: Scope of Business Activities
This articile states, “No dealing member shall carry on any other business save that of dealing in securities and those activities which are ancillary thereto”.
By the provisions of this article it is wrong for many Stockbroking Firms that operate Finance Houses, Bureax De Change and other businesses that have no direct bearing with Stockbroking. Ogbu is a stock market analyst.
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Feb, 17 2008: Ogun seeks implementation of traffic regulations...more If there is anything that has impacted greatly on a greater number of Nigerians, in terms of capital development and appreciation, it is the capital market.Many Nigerians now create future for themselves by investing in the capital market.Many who were unable to own a company have become co-owners of big companies through their investments in the capital market. Chukwuebuka NwososiThe boy is the son of VICTOR and AMAKA NWOSISI. The father said he bought some stocks as a way of keeping something for him. He said that the stock would make start from some where and get to the next step. To make children look up to something has informed the decision of some parent’s to buy shares for their children.Buying shares is a kind of introduction to capital market. I mean that by buying shares for my children at tender age, it marks a sense of belonging and responsibility to my ward.A lot of people buy shares for their children for different reasons. Just as people make different plans in life, set different targets, so do people have different purposes for doing certain things.I believe that as a father, one has got a lot of responsibilities for his family and children. This is why I consider it wise to remember my children in most of my financial decisions. I will also make such a provision that what always becomes the case, when the man passes on, sharing properties is totally avoided. One of the ways of doing this is by buying shares in their names. It is another way of showing them love and securing a comfortable future for them.I have always wanted to make my children feel happyI saw investment in the stock market as a safe investment; hence I decided to put the little savings I have in the market for my children so that by the time they grow, they would see something to start life with. I learnt about capital market sometime ago, but the fact has been that I have not been playing actively in it. I decided to play with the little I have in buying some stocks for my children. I want to buy stocks for my children at times as a birthday gift to them. This is one of the reasons why I decided to buy stocks using their names to avoid controversy of who gets what, at the time I may not be around.Capital market has been a veritable source of savings for a lot of people. People tend to spread their funds in form of savings by giving different codes so that it will not be easy to pull such funds immediately, when one is in financial need.However, at times the nonchalant attitude of some stockbrokers tends to discourage some people from patronising the capital market, though the market is improving. My advice is that the Nigerian Stock Exchange ought to step up its supervisory roles to check these kinds of stockbrokers. I decided to buy stocks now that I have gotten the awareness of the capital market.The capital market is the only place one can make money without any stress. So I decided to create this enabling environment for my children so that when they grow, they will have foundation to start from.I never saw capital market as a market because, no market is seen trading at the custom street where the building of the Nigeria Stock Exchange is situated. This was one of the reasons why I did not give it a second thought when I first heard of it. Not until I tried it that I came to see that it is not fraudulent.I have started investing in the market, although I have been investing at low ebb. I have not put much fund into it. If I have put much fund, I would have benefited more. Since I started I have not stopped even though I have been buying 1,000 or 2,000 units of it. I believe that after some year’s time, they will appreciate and add value. It will also help my children to know that their parents love them very well.Osagie AmadasunThis is the child of REBECCA AMADASUN. The woman though, said she did not invest much in the capital market but that she has been hearing from people what the market is all about.Becky said that if the capital market were to be what she has heard, it means that the market just started of recent to improve. I never saw capital market as a market because no market is seen trading at the custom street where the building of the Nigeria Stock Exchange is situated.Initially, I never saw the capital market as a viable market where one could make huge profits. I felt it is another form of brand that was developed by fast brains in the country. The moment I started seeing people who testify that they have reaped bountifully from the market, I decided to give the market a hot chase.The hot chase I mean in this regard, is using all available funds that come to me for stock investment. I do this in various ways which include buying for my children individually, to give them sense of belonging. I got interested in the capital market because of the level of improvements noticed. A lot of people have said that they made millions from the market.They were saying that to my hearing without knowing they were putting me to a challenge. When I got back to the house, I discussed with my husband and told him I would start with buying for Osagie. He gave me the go- ahead.I really came to know about the market not quite long. I know that capital market is where stocks are traded. Stocks are intangible goods that people say, give the investor more money than the ones we call tangible goods. I can understand that the capital market in recent times has been doing well.People have made a lot of testimonies how they made a lot of money from the market. It was the testimony of one of my friend’s father that jolted me. The man said that in 1988, he bought a share worth N15, 000.00. By the year 2005, the number of shares not only increased but the share price also increased. He revealed that with a mere N15, 000, he was able to reap more them N85, 000.000 from the stock. He regretted not having more of the stocks by then.After hearing all he said, I decided to discuss the matter with my husband who is always sensitive to anything that would bring progress to the family. He said if I considered it wise, than I should give it a trial. I therefore started with buying for my son; Osagie. My husband has also bought various stocks on his own for my other children including myself. I was having the mind that buying for my children are a ways of establishing them and having something ready for them to grow and meet.I know that with the stock I bought for my children, they would have something to start life with. I can tell you, most people are not yet convinced that huge sums of money can be made through stock investment. They have the opinion that money is made through two ways; as a government paid worker and as a trader who brings his goods out in the morning to display, and packs them every in the evening at the close of market. I made incursion into the stock trading through my children because I want to leverage on my capital investment. You know that if all big men in Nigeria should stop engaging in more fund raising through the various transactions only to eat what they already have, time shall come when their money would finish because there is no replacement. So I decided to go into the market in order to grow investments.When you don't have the knowledge of anything, you became confused. This confusion makes you think that the practice is wrong. This is what happens to some of the people who say the market if fraudulent.The capital market investment is a future investment. The future in this regards could be two months, three months or even years. So the reason why I embraced the stock trading is to make savings for the rainy day. You know today one is strong, moves around, fends for himself, but times shall come when one is no longer strong as to move around to fend for himself. It is to made provision for this kind of situation that made me go into stock trading so that my children future would be secured.I know that unless one makes a lot of money he would not be able to own a company of his. But one can become a co-owner of even the biggest company in Nigeria by buying the company stock through either the primary market or the secondary market. When you become co-owner of a company, you can attend the general meeting of the company where issues of the company are discussed. The pride of becoming part owner of a big company or business institution like banks is enough to drive one mad. I decided to secure ownership of most of those companies I bought shares into for my children to give them good standing when they grow. They have been part owners of all the companies I bought into.
Wednesday, February 13, 2008
Stock Terminologies
Who is a Stockbroker?
A Firm or a person who is authorized to buy and sell securities on behalf of investors for a commission called Brokerage. The commission charged is regulated by the Stock Exchange and the Securities and Exchange Commission (SEC).
What is an Issuing House?
An Issuing house is an authorized agent that helps in the preparation of prospectus to sell new securities offered to the public companies and governments.
What are Securities?
Securities are stocks, shares, bonds and debentures.
What are Shares and Stocks?
Stocks and Shares show investors holdings in a particular company, and are often used interchangeably. Shares are securities of companies that give the shareholders opportunity to share in the profit of the companies in form of dividends and bonuses. The benefits here are not fixed. Shareholders in this category assume the greater risk but generally exercise a greater degree of control.
What are Bonds and Debentures?
They represent other kinds of securities. They are documents legally representing a promise by the company or by Government. Both Bonds and Debentures are to be paid with an agreed interest rate over a definite period of time. Claims of both bonds and debentures are relatively high and the holders here assume lesser risk as compared to ordinary share holders. Bonds are usually issued by Governments while debentures are issued by companies. Debentures are of different types:
(I) Redeemable
(ii) Irredeemable
(iii) Convertible and
(iv) Inconvertible debentures
(I) Redeemable debentures are stocks in which the stockholders receive their capital together with the interest instalmentally.(ii) Irredeemable debentures are stocks that the holders do not receive the capital until the contract is terminated.(iii) Convertible debentures are those debentures with fixed interest rate and set maturity date. They can be traded in for a given amount of stocks at any time at the option of the investor. The issuer, however, has the right to call them in, to be redeemed either in cash or for common stock.(iv) Inconvertible debentures are those that cannot be traded in for a given amount of stock.
Why should an investor approach the Stockbroker for purchase of shares instead of making direct contact with the company?
Security market dealing on stocks and shares are carried out on the floor of The Nigerian Stock Exchange and it is only the Dealing Members (Stockbrokers) of the NSE that are authorized to do so.
Who should buy shares?
Stocks and Shares buying are allowed for anyone (Nigerians and Foreigners) who is 18 years and above. Parents can buy shares for their children in their own names and can transfer same using nominal transfer when those children attain legal age.
What is the cost of buying Shares and Stocks?
It actually depends on the price and the quantity an investor is buying at a time. All you need to know, as an investor is the statutory charges and broker's commission due on purchase.
Which Stocks should I buy?
The choice of Stocks to buy actually depends on the investor's purpose on investing. An investor is advised to discuss with stockbroker for professional advice on what to buy after determining his own objective.
What are the benefits due on buying shares?
There are lots of benefits due to shareholders:
(I) Capital gains as market prices of the shares increase.
(ii) Dividend that is part of company's profit.
(iii) Bonus issues which are paid from company's reserve to existing shareholders.
(iv) Use of share certificate or CSSC statement as collateral for obtaining loan from banks.
(v) Right to attend meeting of shareholders and participate in the deliberation as voting members.
Can an investor divest without the consent of the company?
An investor can divest without the consent of the company. All he needs to do is to give a Stockbroker a mandate instruction to sell his holdings.
What other services do Stockbrokers provide?
(I)Provide professional advice on choice of investment.(ii) Act as issuing houses and portfolio managers.(iii) Fund Management.(iv) Financial consultancy services.
Who do I approach when I have problems with a share certificate or dividend?
The Registrar of the company. Registrars act as agents to the companies who appoint them. Other functions of a Registrar are as follows:(I) Register the shares and the names of the owners in the members' (shareholders) register.(ii) Prepares share certificates and send them to the shareholders.(iii) Pay out approved dividend to shareholders (iv) Verification of shareholders signature
How do I get compensated in case of bankruptcy/winding up of a company?
In case of Bankruptcy, after settling the preference shareholders/other creditors the left over will be used to settle the ordinary shareholders.
When is transaction of an investor complete?
The transaction of an investor is completed in transaction day + three working days (T+3) after the transaction has been consummated on the floor, although arrangements are on to put in place transaction day + one day (T+1) for settlement of trades.
How can an investor achieve his investment objectives?
Seeking advisory service from a stockbroker on a regular basis could assist an investor to
achieve his investment objectives.
Any relationship between the NSE and CSCS?
NSE and CSCS operate independently. Shares for trading on the floors of NSE must be in CSCS system (Depository) before they could be traded on. After trading, clearing and settlement of trades are handled by CSCS. The CSCS is a subsidiary of the Nigerian Stock Exchange (NSE).
If a physical certificate is desired on stocks held by CSCS, how can this be offered?
The shareholder requesting for certificate will complete a form; this form is called Certificate Request Form (CSCS CRF1). The form is to be completed through his stockbroker and passed on to the Registrar with details like CSCS and CHN numbers. Thereafter, the Registrar will process the certificate and forward to the shareholder.
How do I know that I am in the hand of the right Broker?
We are always available at the capital market; we are strategically positioned to offer excellent products and services for our existing and prospective clients. Our existing client Network within and outside our vicinity, strong issued share capital, experienced team, up-to-date research and market analysis guaranteed you of the very best value and future for your
investment.
Why the option of Capital Market?
Sincerely speaking, there are various kinds of investment an investor can put his fund, but Capital market has an edge over other forms of investment because of the following reasons:(I) Shares are inflation adjusted; that is to say capital market goes in-line with inflation rate unlike money market where your interest and capital are fixed until the expiration of the contract. Then you can now rollover your investment provided you wish to do so and re-negotiate your interest rate. Consider an investment of NGN500, 000.00 in money market about five years ago, and another investment of the same amount in shares for the same duration. Because the interest rate is fixed in money market, the rate of growth of investment in capital market is far higher than that of money market. Below is a graphical representation of the above scenario.(ii) Another form of investment in this category is CBN Treasury bills. The interest rate here is lesser than what is obtainable in money market, except that it is not prone to any form of risk. The interest rate per annum is about 12% unlike money market where the interest rate is about 18% to 20% per annum. The benefits in the capital market are not fixed unlike other forms of investments as mentioned above. Below is a graphical representation of the rate of growth of the three forms of investments.
A Firm or a person who is authorized to buy and sell securities on behalf of investors for a commission called Brokerage. The commission charged is regulated by the Stock Exchange and the Securities and Exchange Commission (SEC).
What is an Issuing House?
An Issuing house is an authorized agent that helps in the preparation of prospectus to sell new securities offered to the public companies and governments.
What are Securities?
Securities are stocks, shares, bonds and debentures.
What are Shares and Stocks?
Stocks and Shares show investors holdings in a particular company, and are often used interchangeably. Shares are securities of companies that give the shareholders opportunity to share in the profit of the companies in form of dividends and bonuses. The benefits here are not fixed. Shareholders in this category assume the greater risk but generally exercise a greater degree of control.
What are Bonds and Debentures?
They represent other kinds of securities. They are documents legally representing a promise by the company or by Government. Both Bonds and Debentures are to be paid with an agreed interest rate over a definite period of time. Claims of both bonds and debentures are relatively high and the holders here assume lesser risk as compared to ordinary share holders. Bonds are usually issued by Governments while debentures are issued by companies. Debentures are of different types:
(I) Redeemable
(ii) Irredeemable
(iii) Convertible and
(iv) Inconvertible debentures
(I) Redeemable debentures are stocks in which the stockholders receive their capital together with the interest instalmentally.(ii) Irredeemable debentures are stocks that the holders do not receive the capital until the contract is terminated.(iii) Convertible debentures are those debentures with fixed interest rate and set maturity date. They can be traded in for a given amount of stocks at any time at the option of the investor. The issuer, however, has the right to call them in, to be redeemed either in cash or for common stock.(iv) Inconvertible debentures are those that cannot be traded in for a given amount of stock.
Why should an investor approach the Stockbroker for purchase of shares instead of making direct contact with the company?
Security market dealing on stocks and shares are carried out on the floor of The Nigerian Stock Exchange and it is only the Dealing Members (Stockbrokers) of the NSE that are authorized to do so.
Who should buy shares?
Stocks and Shares buying are allowed for anyone (Nigerians and Foreigners) who is 18 years and above. Parents can buy shares for their children in their own names and can transfer same using nominal transfer when those children attain legal age.
What is the cost of buying Shares and Stocks?
It actually depends on the price and the quantity an investor is buying at a time. All you need to know, as an investor is the statutory charges and broker's commission due on purchase.
Which Stocks should I buy?
The choice of Stocks to buy actually depends on the investor's purpose on investing. An investor is advised to discuss with stockbroker for professional advice on what to buy after determining his own objective.
What are the benefits due on buying shares?
There are lots of benefits due to shareholders:
(I) Capital gains as market prices of the shares increase.
(ii) Dividend that is part of company's profit.
(iii) Bonus issues which are paid from company's reserve to existing shareholders.
(iv) Use of share certificate or CSSC statement as collateral for obtaining loan from banks.
(v) Right to attend meeting of shareholders and participate in the deliberation as voting members.
Can an investor divest without the consent of the company?
An investor can divest without the consent of the company. All he needs to do is to give a Stockbroker a mandate instruction to sell his holdings.
What other services do Stockbrokers provide?
(I)Provide professional advice on choice of investment.(ii) Act as issuing houses and portfolio managers.(iii) Fund Management.(iv) Financial consultancy services.
Who do I approach when I have problems with a share certificate or dividend?
The Registrar of the company. Registrars act as agents to the companies who appoint them. Other functions of a Registrar are as follows:(I) Register the shares and the names of the owners in the members' (shareholders) register.(ii) Prepares share certificates and send them to the shareholders.(iii) Pay out approved dividend to shareholders (iv) Verification of shareholders signature
How do I get compensated in case of bankruptcy/winding up of a company?
In case of Bankruptcy, after settling the preference shareholders/other creditors the left over will be used to settle the ordinary shareholders.
When is transaction of an investor complete?
The transaction of an investor is completed in transaction day + three working days (T+3) after the transaction has been consummated on the floor, although arrangements are on to put in place transaction day + one day (T+1) for settlement of trades.
How can an investor achieve his investment objectives?
Seeking advisory service from a stockbroker on a regular basis could assist an investor to
achieve his investment objectives.
Any relationship between the NSE and CSCS?
NSE and CSCS operate independently. Shares for trading on the floors of NSE must be in CSCS system (Depository) before they could be traded on. After trading, clearing and settlement of trades are handled by CSCS. The CSCS is a subsidiary of the Nigerian Stock Exchange (NSE).
If a physical certificate is desired on stocks held by CSCS, how can this be offered?
The shareholder requesting for certificate will complete a form; this form is called Certificate Request Form (CSCS CRF1). The form is to be completed through his stockbroker and passed on to the Registrar with details like CSCS and CHN numbers. Thereafter, the Registrar will process the certificate and forward to the shareholder.
How do I know that I am in the hand of the right Broker?
We are always available at the capital market; we are strategically positioned to offer excellent products and services for our existing and prospective clients. Our existing client Network within and outside our vicinity, strong issued share capital, experienced team, up-to-date research and market analysis guaranteed you of the very best value and future for your
investment.
Why the option of Capital Market?
Sincerely speaking, there are various kinds of investment an investor can put his fund, but Capital market has an edge over other forms of investment because of the following reasons:(I) Shares are inflation adjusted; that is to say capital market goes in-line with inflation rate unlike money market where your interest and capital are fixed until the expiration of the contract. Then you can now rollover your investment provided you wish to do so and re-negotiate your interest rate. Consider an investment of NGN500, 000.00 in money market about five years ago, and another investment of the same amount in shares for the same duration. Because the interest rate is fixed in money market, the rate of growth of investment in capital market is far higher than that of money market. Below is a graphical representation of the above scenario.(ii) Another form of investment in this category is CBN Treasury bills. The interest rate here is lesser than what is obtainable in money market, except that it is not prone to any form of risk. The interest rate per annum is about 12% unlike money market where the interest rate is about 18% to 20% per annum. The benefits in the capital market are not fixed unlike other forms of investments as mentioned above. Below is a graphical representation of the rate of growth of the three forms of investments.
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