Investors have engaged the services of brokers or dealers for easy participation in the financial world as the financial world can be full of mysteries and risks for investors especially when the languages and terms of the market are not understood.
Thus, a broker can be seen to be a financial intermediary executing order on behalf of his clients. That is, a broker facilitates securities trades on behalf of investors. Meanwhile, a dealer makes trades on his own account.
Registered brokers shall have the following functions amongst others:-
- A broker facilitates sale and purchase of securities on a recognized securities exchange on behalf of his clients.
- A broker discloses to the Commission any dealings in a security valued at a minimum of N50 million executed in a single deal or in multiple deals on the same day on behalf of his clients.
- A broker is expected to report any suspected market manipulation or insider dealing to the Commission within 48hrs.
Registered dealers shall have the following functions amongst others:-
1.A dealer facilitates sale and purchase of securities on a recognized securities exchange on his own account;
- A dealer discloses to the Commission any dealings in a security valued at a minimum of N50 million executed in a single deal or in multiple deals on the same day on his own account.
- A dealer is expected to report any suspected market manipulation or insider dealing to the Commission within 48hrs.
It is however unlawful for any broker or dealer to effect a transaction or attempt to engage in any transaction except such a person is registered with SEC and in accordance to Rule 55 of the SEC Rules and Regulations, 2013. Below are the requirements;
An application for registration as broker/dealer shall be filed on Form S.E.C. 3 contained in schedule III to these rules and regulations and shall be accompanied by:-
(1) a minimum of two sets of completed Form S.E.C. 2 to be filed by the sponsored individuals;
(2) a copy of Certificate of Incorporation certified by the Corporate Affairs Commission (C.A.C.); where a copy not certified is filed, the applicant shall present the original copy for sighting by an authorized officer of the Commission;
(3) a copy of Memorandum and Articles of Association certified by the Corporate Affairs Commission which among others shall include the power to act as a broker/dealer;
(4) a copy of CAC Form containing particulars of directors certified by the Corporate Affairs Commission;
(5) copy of latest audited accounts or audited statement of affairs for companies in operation for less than one (1) year;
(6) profile of the company covering among others brief history of the company organizational structure, shareholding structure, principal officers, etc. (see Form S.E.C. 3 for details);
(7) Fidelity bond representing 20% of paid-up capital;
(8) sworn undertaking to keep proper records and render returns;
(9) a copy of the dealership certificate of the authorized dealing clerk being sponsored by the applicant;
(10) evidence of minimum paid-up capital of N70 million.
Broker acting as agent
- A broker acting as agent of the transferor shall verify the certificate for such security with the registrar of the security before any deal on such security can be executed on an exchange. On no account shall a client’s holding be disposed of without specific mandate.
- The period between the lodgment and verification of a certificate shall not exceed ten (10) days provided that where there is a need to exceed the prescribed period, the broker/dealer shall notify the Commission justifying the need for an extension of time.
- Where the security is available, the broker with the mandate to buy shall execute its client’s order including lodgment within five (5) working days: Provided that where the security is not available within the stipulated period, the broker shall revert to the client for further instructions.
- In the case of nominal transfer, the broker shall submit evidence of verification and lodgment with the registrar within five (5) days and the certificates (where applicable) mailed by registered post by the broker to the clients within five (5) days of collection from the registrar.
- Unauthorized disposal of securities or non-purchase or delay in purchase of securities where available and non-remittance of the proceeds of sale to client shall attract a penalty of at least N100,000 and a further sum of not less than N5,000 for every day from the date of disposal without authority, or date mandate was supposed to be executed or date proceeds were supposed to be remitted
The brokers and dealers are key players in the activities leading to the public offers of securities. A broker acts as an agent by engaging in the business of effecting transactions in securities for the account of others while a dealer acts as a principal by engaging in the business of effecting transactions in securities for his own account. The stockbroker is also regulated by the Chartered Institute of Stockbrokers Act.