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Allegations Against Nigerian Stock Brokers: How Well Do You Know Your Stockbroker?

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Allegations against Nigerian Stock Brokers have continually being on the increase as far back as anyone can remember, and as the only recognized dealing members of the Nigerian Stock Exchange, this is not surprising.

Nigerian stock brokers serve as the platform through which groups and individuals buy and sell securities in the Nigerian  Stock Exchange. To a large extent, for those who take stock investment as a core means of their livelihood, your stock broker has a huge role to play in your financial future. If you happen to have an unreliable stockbroker, you would be building a bridge that could lead to disaster.

Are the allegations against Nigerian stock brokers warranted? What are these allegations actually?

The fact is, many Nigerian stock investors are totally ignorant about the doings and dealings of the Nigerian Stock Exchange and their licensed operators. All most Nigerians do is buy into stocks when it opens up and just forget about it.

But for those who trade stocks, knowing how the game is played is very important; and aside being a stock trader, if you hold several stock port-folios or you are interested in this financial instrument, it is of utmost importance that you become aware and knowledgeable especially of the activities of Nigerian Stock Brokers.

In this article, the first on stock investment in this site, we will have a look and get insight into the activities of some unscrupulous stockbrokers so you would understand why it is important to research very well before contracting a stockbroker or any stock-broking firm.

Common Allegations Against Nigerian Stock Brokers

The following are some of the most common allegations against Nigerian stock brokers and tips on how to outsmart them in their own game.

Churning

This is the practice by stock brokers of excessively buying and selling of securities in a client’s account thus keeping it busy with the singular purpose of increasing commissions. This is completely unethical and keeps the brokers pocket filled with cash while the investor bears the blunt.

Manipulation of Share Certificates and Dividend Warrants

The manipulation or alteration of share certificates and dividend warrants happen when the stockbroker has access to them. This could happen if you used the stock brokers address during public offers or during de-materialization for lodging into the CSCS.

Fraud-minded and unscrupulous stock brokers, working in conjunction with likeminded registrars could call up the signature of investors with the aid of computer/internet technology, then practice and master it. With this, the share transfer forms could be signed and the share certificates traded in the market without any qualms.

You could see the serious implications of entrusting share certificates to stockbrokers in the name of trust. Do not trust anyone with sensitive documents no matter how trustworthy they may appear to be.

Cloning of Share Certificates

This might shock as cloning is related to the biotechnological world. Yes, shares certificates are now being replicated with the aid of technology. The cloned copy looks exactly like the twin copy of the original. Often times, this distasteful act is perpetrated in connivance with other operators who should have discovered the act.

Abuse of Certificates of Dead Shareholders

An investor whose share certificates/dividend warrants has been tampered with might eventually find out and enforce a redress or even nip the process in the bud before it matures into full blown fraud.

However, the case is not the same with a dead investor. Unless his transaction with the broker was documented before his demise and handed over as evidence to his successor or lawyer, the fraud would never be uncovered. In this instance, the shares of the dead would be left at the full mercy of the stockbroker.

CSCS Account Duplication

CSCS is an acronym for Central Security clearing System. It is an account that protects your securities and is necessary for trading stocks.

It has been discovered that the CSCS account of investors could be duplicated by stockbrokers. How is this nefarious act carried out? In most instances one of the CSCS accounts would bear the correct information as name and contacts address while the other would bear his name but with slight alteration, and possibly a different contact address. Let me illustrate. For example, a CSCS account could bear the name Michael Daniel while the duplicated version would bear Michael Daniels. Agreed, this could be a typographical error but what happens to the money in the fictitious accounts as it is never returned to the rightful owner.

Impudent buying into Private Placements

This is another area where the activities of stockbrokers have been called into question. Usually, in connivance with those issuing, the stock broker encourages the client to buy into these private placements, making them believe that they would soon be listed in the exchange.

This is not always the case as private placement is a prelim to listing and does not guarantee being listed. This leaves the stockbroker happy in terms of brokerage commission and the issuer with ready fund. But what about the investor?

So, are these allegations against Nigerian stock brokers warranted? Are they enough to discourage investors from investing in stocks?

As I round up this article, I would like to state categorically that you cannot do without stockbrokers if you must trade stocks. The fact that a bull has horns does not prevent it from being used as meat. With proper research and inquiries, your sojourn into stock trading is going to be fruitful.

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