Inability of Nigerian Stock Exchange, NSE to approve the draft rules for the implementation of the Investors Protection Fund, IPF has been a stumbling block to compensation of investors, who fall victim of unscrupulous dealings by some registered stockbrokers.
It would be recalled that recently, a group of investors lodged complaints with the NSE, demanding their money trapped in one of the stock broking firms suspended by the Exchange. The Exchange, however, told them that their complaints would have to wait until SEC approves the modalities for the implementation of the IPF.
The Identity Verification Consultants, IVC appointed by Nigerian Stock Exchange, NSE Investor Protection Fund, IPF, and Board of Trustees has verified 379 claimants, out of which the board approved 154 claimants for payment. The actual value of loss of the 379 claimants verified by the board is N1.694billion.
As at August 17, 2015, 23 claimants have been paid N7.282million, the highest claim before the Investor Protection Fund, IPF is N185million; while lowest claim before the IPF is N1, 400.
According to the Nigerian Stock Exchange, NSE total sum payable to the 154 claimants whose identities have been verified by the Identity Verification Consultants is N40.627million.
Only 81 claimants out of the total number of 154 will be paid full value of the loss of their investment; while 73 claimants will receive below full value of the loss of their investment.
NSE has further clarified that total number of 154 claimants that will receive exactly N400, 000 that is a full value of loss and below full value of loss at 78.
“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”, according to Lawrence Fubara Anga, a capital market solicitor who is the vice chairperson of the Board of Trustees of the Investor Protection Fund.
“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,” he added
The NSE IPF board 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.
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 loss from the stock market.
Currently, any dealing member firms of the Nigerian Stock Exchange is 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 IPF, subject to the approval of the Exchange. This is in addition to other sources of the IPF.
Mr. Oscar Onyema, the chief executive officer of the Nigerian Stock Exchange, NSE said the need to establish the IPF was informed by the desire of the NSE to give investors a statutorily backed avenue for reducing the losses they suffer as a result of bankruptcy.
He said that the IPF would strengthen the confidence of domestic investors, whose participation in retail investors’ activities in the market is encouraging adding that IPF would focus on efforts to sustain the market growth, while also sustaining the attraction of foreign investors in the Nigerian capital market.

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