• Wednesday, February 28, 2024
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BusinessDay

NSE hedges investors’ risks of loss with N872m IPF asset

With about N872million in the kitty of the Nigerian Stock Exchange (NSE), the bourse has further positioned itself against any threat of claimable losses by stock investors.

Barely 43 months after the national council of the Nigerian Stock Exchange (NSE) established this growth fund –Investor Protection Fund (IPF) –led by Gamaliel Onosode, net assets of this fund have risen by about N247million, from a seed capital of about N625 million as at 2012.

“The fund has been increasing because they are placed in fixed deposits and treasury bills (T-Bills), with accruing interest,” according to Lawrence Fubara Anga, a capital market solicitor, who is the vice chairperson of the Board of Trustees of the Investor Protection Fund.

The Investor Protection Fund is a statutory fund established by the NSE pursuant to Section 197 of the Investment and Securities Act (ISA) to compensate investors who suffer pecuniary losses from the stock market.

Currently, dealing member firms of the Nigerian Stock Exchange are meant to contribute a mandatory initial payment of N1million to the IPF prior to the Dealing Members firm’s acquisition of a Dealing Membership license from the Exchange.

The value of the mandatory initial payment by Dealing Membership may be changed from time to time, as determined by the Board of the IPF, subject to the approval of the Exchange. This is in addition to other sources of the IPF.

Already, the Board of Trustees of the Investors’ Protection Fund has started compensating the 154 claimants for pecuniary losses they suffered as a result of wrong doing by certain dealing member firms of the Exchange. As at Monday, no fewer than 23 claimants had been paid N7.2million from the Investor Protection Fund.    

Oscar Onyema, CEO, Nigerian Stock Exchange, said on Monday that the Exchange received 429 claims of stock related losses but the 158 claimants due to be compensated are investors whose claims were verified by the Exchange, approved by the Board of Trustees (BoT) of the IPF, and whose identities were verified by an identity verification consultant engaged by the IPF.

The NSE insisted that the claimants were found to be eligible for compensation in accordance with the relevant provisions of the Investment and Securities Act and the Investors’ Protection Fund rules.

The losses must arise from: the revocation or cancellation of the registration of a dealing member firm by the Securities and Exchange Commission (SEC); the insolvency, bankruptcy or negligence of a dealing member firm of the Exchange; and defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives, in relation to securities, money or any property entrusted to, or received or deemed received by the dealing member firm in the course of its business as a dealing member firm.

Anga said the asset classes chosen to invest these monies are in accordance with the provisions of the Rules and the provisions of the ISA approved by the board of trustees as part of the risk mitigation process for the fund.

The Board of Trustees of the IPF had in accordance with the Rules of the Fund, set a maximum compensation amount of N400,000 per claimant.  The total amount approved by the Board of Trustees as compensation payment to the 154 investors is N40.6million.

These 154 investors are being compensated for defalcation committed by 29 dealing member firms of the Exchange who are either inactive or have been expelled as members of the Exchange, according to Onyema.

“It has been a long, rigorous and transparent process getting to this stage. We researched global best practices and based on our findings, we took decisions on various issues regarding the IPF, benchmarking our processes and procedures against other international investors’ protection funds.

“First of all, we put in place an appropriate corporate governance structure for the Fund; we adopted Rules for the IPF and then following transparent and auditable selection processes, we appointed auditors as well as identity verification consultants. We then commenced the process of identifying claimants and verifying their claims. We must thank the claimants for their patience,” Anga said.

“This milestone gives me great pleasure, as it affirms our commitment to the continuous development of initiatives that will bolster confidence in the capital market. Though the compensation payment may not be a complete restoration, it is a show of good faith on our part, to investors. I thank the Board of Trustees for their guidance and commitment, the claimants for their valuable patience, and all other stakeholders for their contributions towards the success of this exercise,” Onyema added.

Iheanyi Nwachukwu