Infractions: NSE Moves to Sanction Directors of Stockbroking Firms

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By Goddy Egene

The Nigerian Stock Exchange (NSE) has intensified moves to ensure directors of stockbroking firms are adequately punished for mismanagement of the firms or violation of market rules by the firms.

Currently, Rule 19.4 of the NSE gives the powers to punish only former employees of stockbroking firms that have been mismanaged or exposed to disciplinary action for violation of rules while the directors are left out. It has been observed that directors of stockbroking firms are often quick to resign in instances where the firms have either been mismanaged or exposed to disciplinary action for violation of the rules without any form of liability or accountability.

However, the NSE, THISDAY gathered, is making fresh moves to ensure that such directors are held accountable even after they have resigned from the stockbroking firms.

To make this effective, the NSE has proposed an amendment of its Rule 19.4, saying in view of the supervisory role of the Board of Directors over the management of stockbroking firms, it has become necessary to make directors more accountable for the activities of the management whom they oversee.

“Directors are persons duly appointed by the company to direct and manage the business of the company. However, it has been observed that directors are often quick to resign in instances where the firms have either been mismanaged or exposed to disciplinary action for violation of the Rules without any form of liability or accountability,” the exchange explained.

According to the exchange, the   objective of the proposed amendment is to make the rules more encompassing to hold both the management and board of Dealing Member firms accountable for activities which took place during their tenure.

The Speaker, House Representatives Yakubu Dogara, recently said sanctioning operators who commit infractions would go a long way in restoring investor confidence in nation’s capital market.

According to him, capital market regulators must be on top of their responsibilities in order to boost investor confidence in the market.

Dogara, who was a member of the House Committee that investigated the 2009 crash of the stock market, observed that most of the operators who contributed to the crash of the market went unpunished. He said investors would have more confidence in the market if they know that antiquate punish would be given to operators who commit infractions in the market.

“A lot of things are required to be put in place to return investors’ confidence. The regulators need to be at the top of their job.  Sanctions must be imposed on operators who commit infractions so that investors would have confidence to participate in the market. Even if I am going to lose my money, but seeing that those who perpetuated infractions are being dealt with, maybe to some extent I will have the confidence that the market still retains. We need to deepen the market, we need to create and sustain confidence in the market and for confidence to come back we need to do more. When we start applying sanctions, confidence will come back to the market.  Any person who abuses the market should be dealt with in accordance with the laws,” he said.

He therefore said capital market regulators should be empowered to sanction operators that arbitrary abuse the market so as to regain investor confidence.