The Investors’ Protection Fund of the
Nigerian Stock Exchange (IPF) is a scheme set up by virtue of the provisions of
the Investments and Securities Act due to the activities of capital market
operators which sometimes endanger the interests of investors[i]. The primary aim of the Investors’
Protection Fund is to compensate investors who suffer pecuniary losses
resulting from some circumstances stated in ISA. This article examines the
Investors’ Protection Fund as it relates to investors accessing the said fund.
Nigerian Stock Exchange (IPF) is a scheme set up by virtue of the provisions of
the Investments and Securities Act due to the activities of capital market
operators which sometimes endanger the interests of investors[i]. The primary aim of the Investors’
Protection Fund is to compensate investors who suffer pecuniary losses
resulting from some circumstances stated in ISA. This article examines the
Investors’ Protection Fund as it relates to investors accessing the said fund.
Administration of the Fund
The Investors’ Protection Fund is
administered by The Board of Trustees of The Nigerian Stock Exchange’s
Investors’ Protection Fund (“The Board”) subject to the regulatory supervision
of the Securities and Exchange Commission (the “Commission”).[ii]
administered by The Board of Trustees of The Nigerian Stock Exchange’s
Investors’ Protection Fund (“The Board”) subject to the regulatory supervision
of the Securities and Exchange Commission (the “Commission”).[ii]
Purpose of the Fund as it Relates to
Investors
Investors
The purpose for establishing the investor
protection fund is to protect investors in Capital Market by compensating those
who suffer pecuniary loss arising from any of the following[iii]:
protection fund is to protect investors in Capital Market by compensating those
who suffer pecuniary loss arising from any of the following[iii]:
(a) Insolvency, Bankruptcy or Negligence:
The fund shall be used to compensate
investors that suffer any loss arising from insolvency, bankruptcy or
negligence of a dealing member firm of a securities exchange or capital trade
point.
investors that suffer any loss arising from insolvency, bankruptcy or
negligence of a dealing member firm of a securities exchange or capital trade
point.
(b) Defalcation:
Defalcation refers a default, act of
embezzling, failure to meet an obligation, misappropriation of trust funds or
money held in any fiduciary capacity and failure to properly account for such
funds[iv]. Investors are protected
against 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 capital market operator.
embezzling, failure to meet an obligation, misappropriation of trust funds or
money held in any fiduciary capacity and failure to properly account for such
funds[iv]. Investors are protected
against 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 capital market operator.
(c) Revocation or Cancellation:
The Fund shall also be applied in
compensating persons who suffer pecuniary loss from the revocation or
cancellation of the registration of a capital market operator pursuant to the
provisions of section 38 of Investments and Securities Act which provides for
registration and regulation of capital market operators by the Security and
Exchange commission (SEC)
compensating persons who suffer pecuniary loss from the revocation or
cancellation of the registration of a capital market operator pursuant to the
provisions of section 38 of Investments and Securities Act which provides for
registration and regulation of capital market operators by the Security and
Exchange commission (SEC)
Who Can Access the Fund?
Every Investor with a dealing member firm of
the Nigerian Stock Exchange (“The Exchange”) who suffers pecuniary loss in any
of the circumstances stated above is entitled to claim compensation from the
investor protection fund.
the Nigerian Stock Exchange (“The Exchange”) who suffers pecuniary loss in any
of the circumstances stated above is entitled to claim compensation from the
investor protection fund.
Accessing the Fund
a. Submission
of Claim
of Claim
A claim for compensation should be made in
the first instance to The Exchange or the IPF with all supporting documents. A
complainant must exhaust The Exchange’s complaint management procedure before
making a claim from the IPF[v].
the first instance to The Exchange or the IPF with all supporting documents. A
complainant must exhaust The Exchange’s complaint management procedure before
making a claim from the IPF[v].
The claim should be the amount of the actual
pecuniary loss suffered by him including the reasonable cost of disbursement
incidental to the making and proving of his claim less any amount or other
benefits received or receivable by him from any source other than the investor
protection fund in reduction of the loss[vi].
pecuniary loss suffered by him including the reasonable cost of disbursement
incidental to the making and proving of his claim less any amount or other
benefits received or receivable by him from any source other than the investor
protection fund in reduction of the loss[vi].
Documents needed in support of a claim[vii]
i. Copy
of share subscription form
of share subscription form
ii. Contract
Notes
Notes
iii. Receipt
issued by Firm
issued by Firm
iv. Account
Opening Form
Opening Form
v. Acknowledgement
letter from the firm
letter from the firm
vi. Central
Securities Clearing System (CSCS) transaction history statement
Securities Clearing System (CSCS) transaction history statement
vii. CSCS
client account statement
client account statement
viii. Bank
Statement
Statement
ix. Copy
of Cheque issued/ bank draft
of Cheque issued/ bank draft
x. Registrar’s
statement of transaction,
statement of transaction,
xi. Shares
allotment letter from registrars
allotment letter from registrars
xii. Copy
of share certificate,
of share certificate,
xiii. Letters
of Administration/ Probate (in the case of an estate)
of Administration/ Probate (in the case of an estate)
xiv. Company
incorporation documents (copy of certificate of incorporation, particulars of
directors statement of share capital).
incorporation documents (copy of certificate of incorporation, particulars of
directors statement of share capital).
xv. Means
of identification e.g. driver’s license, international passport, national
identity card, bankers confirmation etc.
of identification e.g. driver’s license, international passport, national
identity card, bankers confirmation etc.
xvi. Such
other documents evidencing identity and ownership over shares.
other documents evidencing identity and ownership over shares.
Where the claim of an investor is rejected,
such Investor may institute an action to compel payment at the Investments and
Securities Tribunal[viii].
such Investor may institute an action to compel payment at the Investments and
Securities Tribunal[viii].
b. Verification
The Exchange shall verify every claim within
thirty (30) days after its internal process and determine the amount or extent,
if any, to which the claim shall be allowed. Payment shall only be made based
on verified claims in accordance with the Investors’ Protection Fund Rules and
the provisions of the Investments and Securities Act[ix].
thirty (30) days after its internal process and determine the amount or extent,
if any, to which the claim shall be allowed. Payment shall only be made based
on verified claims in accordance with the Investors’ Protection Fund Rules and
the provisions of the Investments and Securities Act[ix].
c. Payment
Payment shall be made when it has been
satisfied by evidence that[x]:
satisfied by evidence that[x]:
i. the investor has a claim against a Dealing
Member;
Member;
ii. the investor has duly applied for
settlement of its claim from the Dealing Member;
settlement of its claim from the Dealing Member;
iii. the Dealing Member is unable to satisfy
the claim within a reasonable period;
the claim within a reasonable period;
iv. the investor has exhausted The Exchange’s
internal complaint resolution procedure;
internal complaint resolution procedure;
v. the investor has duly applied for
compensation from the Fund; and
compensation from the Fund; and
vi. The Exchange has verified the claim.
Amount of Compensation Payable
The maximum compensation payable to an
investor is an amount that is determined by the Board from a written policy
from time to time. The maximum amount payable set by the Board in 2015 is
N400,000 (Four Hundred Thousand Naira) per Claimant[xi].
investor is an amount that is determined by the Board from a written policy
from time to time. The maximum amount payable set by the Board in 2015 is
N400,000 (Four Hundred Thousand Naira) per Claimant[xi].
Where the loss is less than the maximum
amount fixed by the Board at any given time, the investor may be paid the full
amount of the loss, less any amount or value of all monies or other benefits
received or receivable by him from a source other than the Fund in reduction of
the loss[xii].
amount fixed by the Board at any given time, the investor may be paid the full
amount of the loss, less any amount or value of all monies or other benefits
received or receivable by him from a source other than the Fund in reduction of
the loss[xii].
In addition to any compensation, the investor
is also entitle to interest at the rate of five per cent per annum calculated
from the day upon which a claim arose and continuing until the day upon which
the claim is satisfied[xiii].
is also entitle to interest at the rate of five per cent per annum calculated
from the day upon which a claim arose and continuing until the day upon which
the claim is satisfied[xiii].
Conclusion
Many investors suffer financial losses from
activities such as market manipulation, misrepresentation, false trading and
negligence of some capital market operators and as such, it is quite important
to adequately protect them. The IPF as examined above provides a form of
protection to this Investors and it is commendable that the Nigerian government
subscribes to this.
activities such as market manipulation, misrepresentation, false trading and
negligence of some capital market operators and as such, it is quite important
to adequately protect them. The IPF as examined above provides a form of
protection to this Investors and it is commendable that the Nigerian government
subscribes to this.
It is however noteworthy that the IPF is
different from the NIPF. While the IPF compensates aggrieved investors for
losses enumerated above, the SEC established the National Investor Protection
Fund (“NIPF”) in line with its powers under of the ISA [section 13(k)] to
compensate investors whose losses are not covered by the IPF.
different from the NIPF. While the IPF compensates aggrieved investors for
losses enumerated above, the SEC established the National Investor Protection
Fund (“NIPF”) in line with its powers under of the ISA [section 13(k)] to
compensate investors whose losses are not covered by the IPF.
References
[i] Section
197, Investments and Securities Act, 2007.
197, Investments and Securities Act, 2007.
[ii] Ibid
[iii]
Sections 197, 212, Investments and Securities Act, 2007.
Sections 197, 212, Investments and Securities Act, 2007.
[iv]
Section 315, Investments and Securities Act, 2007; Chief Livinus Ezemegbe v.
The Nigerian Stock Exchange & Anor. 2006 Legalpedia SEC CV80
Section 315, Investments and Securities Act, 2007; Chief Livinus Ezemegbe v.
The Nigerian Stock Exchange & Anor. 2006 Legalpedia SEC CV80
[v]
The Nigerian Stock Exchange Investors’ Protection Fund: Frequently Asked
Questions retrieved from
http://www.nse.com.ng/regulation-site/becoming-an-investor/FAQs on February 11,
2018; Section 213, Investments and Securities Act, 2007.
The Nigerian Stock Exchange Investors’ Protection Fund: Frequently Asked
Questions retrieved from
http://www.nse.com.ng/regulation-site/becoming-an-investor/FAQs on February 11,
2018; Section 213, Investments and Securities Act, 2007.
[vi]
Section 213 (6), Investments and Securities Act, 2007
Section 213 (6), Investments and Securities Act, 2007
[vii]
The Nigerian Stock Exchange Investors’ Protection Fund: Frequently Asked
Questions supra
The Nigerian Stock Exchange Investors’ Protection Fund: Frequently Asked
Questions supra
[viii]
Chief Livinus Ezemegbe v. The Nigerian Stock Exchange & Anor supra
Chief Livinus Ezemegbe v. The Nigerian Stock Exchange & Anor supra
[ix]
Section 213, Investments and Securities Act, 2007. Paragraph 4.01,
The Nigerian Stock Exchange Investors’ Protection Fund Rules retrieved from
http://www.nse.com.ng/regulation-site on February 11, 2018
Section 213, Investments and Securities Act, 2007. Paragraph 4.01,
The Nigerian Stock Exchange Investors’ Protection Fund Rules retrieved from
http://www.nse.com.ng/regulation-site on February 11, 2018
[x] Paragraph
4.02, The Nigerian Stock Exchange Investors’ Protection Fund Rules supra
4.02, The Nigerian Stock Exchange Investors’ Protection Fund Rules supra
[xi]
NSE Press release dated August 5, 2015 retrieved from
www.nse.com.ng/mediacenter/pressreleases/pages/IPF-Set-to-Compensate-Investors
on February 11, 2018
NSE Press release dated August 5, 2015 retrieved from
www.nse.com.ng/mediacenter/pressreleases/pages/IPF-Set-to-Compensate-Investors
on February 11, 2018
[xii]
Paragraph 4.04, The Nigerian Stock Exchange Investors’ Protection Fund Rules
supra
Paragraph 4.04, The Nigerian Stock Exchange Investors’ Protection Fund Rules
supra
[xiii]
Section 213 (7), Investments and Securities Act, 2007
Section 213 (7), Investments and Securities Act, 2007
Adejorin David Abiona
Associate at Tokunbo Orimobi LP
Source – LinkedIn