SEC, NSE To Begin Direct Payment For Sale Of shares

As part of the ongoing initiatives to protect investors and eliminate fraudulent activities in the Nigerian Capital Market, the Securities and Exchange Commission (SEC) and Nigerian Stock Exchange (NSE) have approved the take-off of direct cash settlement of securities system for payment of sale proceeds into an investor’s nominated bank account.

The capital market regulators changed from the 55-year old analogue settlement payment system to automated real time payment regime.
According to the statement on the NSE website, Direct Cash Settlement will commerce fromJanuary 4, 2016, which is the direct payment of proceed of sale of securities into an investor’s nominated bank account.
The Steering Committee on Direct Cash Settlement maintained that with the effective take-off of Direct Cash Settlement, investors in the Nigerian Capital Market would be credited directly with the net proceeds of stock market transactions which would address the illegal sale of investors’ securities. Direct cash settlement is a process where cash proceeds from trades executed by brokers on the Exchange settles directly into investors’ bank account.
The innovative investors’ settlement system is part of the on-going initiatives to protect investors and eliminate fraud in the Nigerian capital market.
The direct cash settlement system would enable investors’ bank accounts to be credited directly with the net cash proceeds of stock market transactions by brokers on the Exchange, to address the illegal sale of investors’ securities.
The process starts with the mandate by a client to the broker to sell his or her shares. Once the shares are sold, payment would be made directly into the client’s desired bank account.
The new system contrasts with the current practice where proceeds from the sale of securities were paid directly into the stockbroker’s account before being remitted to the client’s account after deducting transaction fees.
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