SEC, CBN Unveil Guidelines On Securities’ Settlement

The Securities & Exchange Commission (SEC) and the Central Bank of Nigeria (CBN), on Friday unveiled a guideline on securities’ settlement in the country, as part of promoting “competitive, efficient, safe and sound post trading arrangements.”
The guideline is expected to ultimately enhance greater confidence in securities markets and better investor protection, while limiting systemic risk.
As part of the objectives, the guidelines which set out procedures for the settlement of securities, including the rights and obligations of the parties, seek to improve the efficiency of the market infrastructure, which should in turn promote and sustain the integration and competitiveness of the Nigerian securities markets.”
The guidelines cover settlement procedures and settlement cycles for the Nigerian Stock Exchange traded securities; FMDQ Over-The-Counter (OTC) securities; NASD OTC securities; Nigerian Commodity Exchange (NCX) traded securities; and Afex Commodities exchange.
While transaction charges would be agreed between the Registrars/Stockbrokers their banks, and Service Providers and included in their SLA (Service Level Agreement), “there shall be no charges to investors on e-payment of dividend/interest.”
Apart from FMDQ OTC, NASD OTC, NCX, the Nigeria Inter-Bank Settlement System Plc (NIBBS) and the NSE, parties to securities settlement in Nigeria would also include: Capital Market Registrars, CBN, SEC and Central Securities Clearing System PLC, which would serve as Central Securities Depository- Clearing & Settlement Agent. Others are Custodians, Dealing members firms, deposit money banks (DMBs), as well as Discount Houses.
For example, the document notes that while equities, exchange traded funds, mutual funds are to be traded on the NSE with the CSCS as clearing house, securities involving these instruments would be delivered via the CSCS just as payment, while cash shall be via settlement banks, the CBN and RTGS.
Unlisted company equities are to be cleared through the NASD, with CSCS as settlement agents for delivery and payment and the cash as in listed equities; just as bonds are to be traded over the NSE and FMDQ platforms with CSCS also as clearing and settlement agent. Money market instruments such as treasury bills, commercial papers and other notes are to be traded also on the FMDQ platform with CBN and CSCS as clearing/settlement agents. The commodities market would be through the NCX, with CSCS handling the clearing and settlement, just as delivery and payment.
Lending of securities like equities and bonds are to be via the NSE platform, while forex would be through the FMDQ to be settled through the CBN.
Dispute resolution mechanism in respect of securities settlement, the guidelines added, shall be governed by the relevant rules issued by CBN, SEC, the Exchanges, Chartered Institute of Stockbrokers and Investment & Securities Tribunal’s directives.
The regulatory bodies are empowered by the guidelines to “review and apply appropriate sanctions in the event of default and/ or infractions in securities settlement.”