Securities are written or printed financial documents by which the claims of holders in specified property are secured. They could be stocks, shares, bonds and debentures traded on a Stock Exchange.
WHAT ARE STOCKS AND SHARE?
Stocks and Shares represent ownership interest in a business.
WHAT ARE BONDS AND DEBENTURES?
They are other kinds of securities. They are legal documents representing a promise by the company or by Government (incase of a bond) to pay back a loan plus certain amount of interest over a definite period of time.
WHO IS AN INVESTOR?
A person or an institution who uses his savings or borrowings to buy securities.
HOW ARE STOCKS AND SHARES BOUGHT ON THE STOCH EXCHANGE?
Stock and Shares are bought and sold on The Nigerian Stock Exchange through Dealing Members known as Stockbrokers.
CAN SHARES BE TRANSFERRED?
Yes, The investor should contact a stockbroker. Even in the case of a deceased shareholder shares can be transferred to his children or sold as the case may be.
WHICH STOCKS SHOULD I CHOOSE?
That depends on what you want from your investments. The stocks quoted (or listed) on The Nigerian Stock Exchange range from Government stocks to ordinary shares and their dividends vary from low to high. The important thing is to determine your own objectives first, discuss with a stockbroker and then invest accordingly.
WHAT ARE SCRIP OR BONUS SHARES?
These are new shares made fully- paid by the capitalization of reserves and allotted free of charge to ordinary shareholders in proportion to their existing holdings. In this process, fractions of shares sometimes arise and are often aggregated and sold, after which a cash payment in respect of the fraction is made to every shareholder entitle to it.
WHAT DOES “XSC” MEAN?
It is a financial expression for “without the scrip”. A stock that is purchased during the without the scrip period will not earn a scrip declared in that period for its new owner.
WHAT DOES A STOCKBROKER CHARGE FOR HIS SERVICES?
A stockbroker charges a commission called “Brokerage” The charges vary, depending on the kind of services provided: however, charges by Stockbrokers are controlled by the Council of The Nigerian Stock Exchange.
WHAT DOES AN INVESTOR GAIN BY BUYING SHARES?
Dividend which is part of company’s profit.
Bonus shares – i.e. extra shares fully paid out of reserve which is distributed to existing holders.
Capital appreciation as market prices of shares increase.
Right to attend meeting of shareholders and participate in its deliberation as voting members.
Use of share certificate as collateral for bank borrowing.
WHAT OTHER SERVICES DO STOCKBROKERS PROVIDE?
Provide professional advice on the selection and management of investments.
Act as issuing Houses and Portfolio Managers.
Assist project sponsors to raise money on the capital market.
HOW ARE THE ACTIVITIES OF STOCKBROKERS CONTROLLED?
As members of The Nigerian Stock Exchange change, they agree to and are regulated by a body of Rules and Regulations which dictate their relationship with The Nigerian Stock Exchange, their clients and other members.
WHY ARE STOCKBROKERS’ ACTIVITIES REGULATED?
The regulating of Stockbrokers activities is done to protect the investing public and maintain public confidence in the buying and selling of securities.
WHO DO I APPROACH WHEN I HAVE PROBLEMS WITH A SHARE CERTIFICATE OR DIVIDEND?
The Registrar of the company.
WHAT IS THE RELATIONSHIP BETWEEN INVESTOR AND STOCKBROKER?
For the Capital Market to be vibrant, effective and investor-friendly, the relationship between the investor and stockbroker cannot be over-emphasized. In this context, the stockbroker must know his Client/Investor very well because great reliance and trust will be placed on the decisions he takes on behalf of his Client/Investor. It cannot be gainsaid, therefore, that the stockbroker must of necessity command the confidence of his client. On this foundation, rests the success and growth of any Capital Market.
WHAT IS CHN?
CHN represents Clearing House Number assigned to every shareholder at the first point of entry into CSCS system by completing CSCS-R005 shareholders particulars.
CAN AN INVESTOR WITHDRAW HIS/HER CERTIFICATES BEFORE OR AFTER TRADING?
Once a certificate is deposited with the Depository, it is immobilized and can therefore not be withdrawn.
WHEN THE STOCKBROKER DEPOSITS THE INVESTOR’S SHARE CERTIFICATE WITH THE DEPOSITORY, WHAT DOES HE GET IN RETURN AS EVIDENCE OF THE LODGEMENT?
He gets a receipt/acknowledgment.
IF THE NEW INVESTOR WANTS TO SELL, WHAT IS THE PROCEDURE?
He/she instructs his/her stockbroker to sell from the stockholdings in CSCS system. He/she executes a transfer form which his/her stockbroker will forward to the CSCS along with the allotment forms after trading.
CAN AN INVESTOR CHANGE FROM ONE STOCKBROKER TO ANOTHER UNDER THE CSCS OPERATIONS?
Yes. The investor is free to change from one stockbroking firm to another. A stockbroker should ask his/her client if he/she has bought shares through CSCS before completing shareholders particulars which should be completed only once. The shareholder should give subsequent Houses he deals with the Clearing House Number (CHN) assigned to him at the first point of entry into CSCS system.
CAN A CLIENT (SHAREHOLDER) TAKE THE CSCS STATEMENT TO ANOTHER STOCKBROKING FIRM?
Yes, he can.
HOW FREQUENTLY WILL THE STOCK POSITION FROM CSCS BE ISSUED?
Statement of stockholdings is issued every quarter to all shareholders free of charge. Any request for statement outside the quarterly statement which attracts a fee of N100.00 can be obtained as and when requested.
CAN A SHAREHOLDER REQUEST FOR THE STATEMENT OF HIS STOCK POSITION DIRECTLY FROM THE CSCS?
The stockbrokers are expected to request for their clients stock position. However, since transparency is one of the cardinal focuses of CSCS, A shareholder can request for his statement of stockholding from CSCS in writing by attaching a fee of N100.00. the shareholder’s name and account number must be specified in the letter. At the point of collecting the statement of stock position, the shareholder will be required to show proof of ownership.
HOW CAN AN INVESTOR USE HIS STOCKHOLDINGS IN CSCS AS COLLATERAL?
An investor should note the following procedure for obtaining loan:
The lender can confirm from CSCS the statement of stockholding issued to a shareholder/prospective borrower or write CSCS for as status report of a prospective borrower’s shareholdings in CSCS system. For a fee of N100.00, the confirmation of the statement or the issuance of a status report will be done and communicated by CSCS to the lender.
A memorandum jointly signed by the parties requesting CSCS to place lien on a specific quantity of the holdings should be forwarded to CSCS limited. Also, a signed transfer form by the borrower stating the units and the securities affected by the lien and undated letter signed by the borrower authorizing the lender to sell in the event of default, must be given to the lender.
It is essential that the memorandum be registered at the Stamp Duty Office.
Upon the receipt of the memorandum referred to in two (2) above, the shareholding would be moved into a CSCS Reserved lien. Account with the interest of the lender NOTED. This will be communicated to the parties.
Where the borrower defaults or fails to discharge his obligations under the contract, the lender at the expiration of the loan due-date shall:
Inform the borrower of his default and the lenders intention to proceed to execute the transfer form to realize the benefit of the contract.
The lender will write CSCS to remove the lien to enable sale to be effected and attach evidence of (a) above.
CSCS will be obliged to remove the lien on the holdings upon such instruction from the lender after the expiration of the loan due-date and inform the parties accordingly.
The lender after (a-c) above can then give a copy of the undated letter and the transfer form completed by the borrower to a specific quantity of the holdings.
