NSE Dealing Members License Requirements; Draft Paper
Category: Capital Market
January 30, 2012
In November 2011, The Nigerian Stock Exchange develops priority initiatives which are expected to be beneficial to all stakeholders in the market and make it a gateway to the African market and NSE recently developed registration guidelines for dealing member firms as a follow up to the priority initiatives earlier developed.
Application Procedure for Dealer Member Firms
Any organization wishing to be licensed as a Dealing Member of The Nigerian Stock Exchange (The Exchange) must apply and be duly licensed by The Exchange in accordance with the relevant laws including Investment and Securities Act, Securities and Exchange Commission Rules and Regulations Pursuant to the Investment and Securities Act (SEC Rules), Rules and Regulations Governing Exchange Dealing Members (Rules) and other relevant rules and Regulation Governing the capital market.
Requirements for granting an Approval-In-Principle
Any organization applying for a Dealing Membership License of The Exchange must submit evidence that the company:
Is a duly incorporated limited liability company in Nigeria under the Companies and Allied Matters Act, Cap. C20 LFN 2004;
Shall not engage in any business other than trading in securities listed on The Exchange;
Documents to be submitted
The following documents must be submitted along with the application for a Dealing Membership License;
A Certified True Copy of the Memorandum and Articles of Association of the Applicant Company which must contain, amongst others, the following provisions.
Certified True Copy of Certificate of Incorporation, Forms CO2 (Returns of Allotment of Shares), CO7 (Particulars of Directors) and CO6 (Location of Registered Office).
Minimum Capital Requirement
The Applicant Company shall be required to submit evidence of its minimum paid up capital as prescribed by SEC from time to time to operate its business model in the prescribed percentage holding of liquid and stock assets.
An Approval-In-Principle (AIP) will be granted to an Applicant Company who, upon a thorough evaluation of its application, documents submitted in support of its application and interview of its Investors, members of the Board of Directors and top management, The Exchange is of the opinion that the Applicant Company has successfully met the requirements set forth above.
Requirements for Commencement of Operations
Once the Dealing Member Firm is ready to commence business and after 3months of the grant of an AIP, it should apply in writing to The Exchange for a date to conduct a Certification Inspection.
The company will at the Inspection provide evidence to show the following:
Payment of following fees
N15, 000,000 Dealing Membership License;
N1, 000, 000 contribution to Investor Protection Fund;
N 780,000 ATS Trading Engine;
N 995,000 ATS Trading System Upgrade;
N 100,000 Trade Guarantee Fund (CSCS);
N 25,000 CSCS Eligibility Fee
Copies of the share certificate issued to each investor or evidence of share ownership
Manual of operations;
Minutes of pre-commencement Board Meeting.
Contact with The Nigerian Stock Nigerian
Duly completed application form and supporting documents should be submitted in both hard and soft copies in sealed envelopes to the address below:
The Chief Executive Officer
Nigerian Stock Exchange
2/4 Customs Street,
Attention: Broker Dealer Regulations
All enquiries should be referred to the above address.
Full Acquisition of a Dealing Member Firm
Where a limited liability company duly incorporated by the CAC wishes to acquire 100% holding in a Dealing Member Firm, the following shall be required:
The Dealing member firm must write to notify The Exchange of its intention to sell/transfer its license to another organization and seek approval.
The Acquiring Company must meet all the requirements set forth above to qualify for a dealing membership.
In addition to the above, the following documents must be forwarded to The Exchange:
i. A copy of the Transfer/Sales Agreement;
ii. Board resolution approving the acquisition of the Dealing Member
iii. Evidence of payment of transfer fee to The Exchange.
Sale/Transfer of significant shareholding in a Dealing Member firm
Where a limited liability company duly incorporated by the CAC wishes to acquire more than 5% holding in the shareholding of a Dealing Member Firm, the following will be required:
The Dealing Member firm shall request for an approval in the change of the shareholding structure of the firm stating the specific number and percentage of shareholding to be acquired.
The following documents must be submitted along with the application:
Where the acquiring subject is an individual, the individual must submit an application to The Exchange requesting approval to obtain the stated shareholding, where it is a company, a board resolution approving the acquisition must be forwarded to The Exchange;
Proposed changes in the directorship and management of the firm.
Dealing member – Broker/Dealer:
A Dealing Member has been defined under Rule 169(ix) as “a Member company who has been granted license by The Exchange as a Dealer in securities hereinafter referred to as Member”.
An organization wishing to register with the SEC as a Dealing Member must take note of the following:
A Dealing Member shall be registered as a Broker/Dealer under Rule 31 of the Securities and Exchange Commission Rules and Regulations (SEC Rules) by the SEC;
The Dealing Member firm shall operate within the provisions defined for Broker/Dealer by the SEC Rules.
A Broker shall be registered by the Commission as a Broker and licensed by The Exchange as an agent of the Dealing Member. The Broker shall not be known as a member of The Exchange;
The Broker may be defined as an agent for buying, selling, or dealing in securities by the investor through a Dealing Member.
A Dealer shall be registered by the Commission as a Dealer and licensed by The Exchange as an agent of the Dealing Member. The Dealer shall not be known as a member of The Exchange.
The Dealing Member as the primary regulator of the Dealer shall ensure compliance of all relevant rules, regulations, policies, instructions, circulars, and notices of The Exchange, Commission and all other regulatory authorities.