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Stockbroking Firms Move to Reduce Operational Risks

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capital market
  • Stockbroking Firms Move to Reduce Operational Risks

Stockbroking firms under the auspices of the Association of Stockbroking Houses of Nigeria (ASHON) have underscored the importance of sound risk management culture among capital market operators in order to safeguard market integrity and investors’ confidence.

As part of its initiatives to promote risk management culture, ASHON has partnered a frontline management consulting firm, IRM Professionals, to address a range of inherent risk management issues, which impact on the operations of securities firms in Nigeria and proffered the way forward.

Managing Partner, IRM Professionals, Mrs Owodunni Yussuff, who spoke at the risk management forum for stockbroking firms, , explained that certain risks were peculiar to capital market operations and they should be managed in order to ensure business continuity.

Yussuff stated that the risks were usually classified into business risk and consequential risk, saying that business risks include credit risk and market risk while consequential risks comprise legal risk, liquidity risk, operational risk, settlement risk and reputational risk

She explained that apart from the technical risks, there are regulatory risks that are currently affecting capital market operators in Nigeria.

“As part of minimum operating standard (MOS), they are expected to have a risk management function, and a risk manager. But many of them are not well equipped in the area of risk management department for optimal performance. As of now, many of our operators have not established what we call risk culture. The principal risk associated with a broker, dealer or a capital market operator in Nigeria is compliance with the rules and regulations of the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange and the Investment and Securities Acts (ISA). Capital market operators are obliged to comply with the regulatory rules and regulations in order to avert sanctions with its attendant implications on corporate reputation,” Yussuff said.

Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Chief Patrick Ezeagu, said that the Association decided on the risk management training in view of inherent risks associated with capital market operation.

He assured that capacity building would always be on the front burner of ASHON’s activities in order to support global competitiveness of capital market operators in Nigeria..

“Effective and efficient risk management structure positions stockbroking houses to exist in perpetuity as going concern. Risk changes over time and, therefore, tools for identifying and managing risk must change over time, and the only way you can ensure that we are prepared to manage risks is to continually train and re-train risk managers within the capital market space,” Ezeagu said.

According to him, it is necessary to consistently train those who are involved in the day to day management of risk associated with stockbroking businesses because once the integrity of the market is assured by the fact that people operate within rules and regulations guiding the market, then you can be sure that the market is well protected.

“The market is guided by rules and regulations and there is the apex institution that is like the “big brother” watching you. These are the things that ensure that there is integrity and investors can trust the market and participate actively in the market,” Ezeagu said.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Finance

CBN Directs Banks to go After COVID-19 Financial Criminals

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Godwin Emefile

Central Bank Asks Banks to Stay Abreast Frauds and Rising COVID-19 Financial Crimes

The Central Bank of Nigeria has directed all financial institutions in Nigeria to update alert protocols in their Anti-Money Laundering/Combating the Financing of Terrorism monitoring tools, in accordance with emerging trends of rising COVID-19 related financial crimes.

In a circular titled, ‘Administrative letters to all banks and other financial institutions’ issued on Monday and signed by J.M. Gana, the Director, Financial Policy and Regulation Department, the apex bank said changes in business activities and financial transactions due to the shift caused by COVID-19 pandemic have led to the surge in financial crimes globally.

Therefore, it said financial institutions must now adapt quickly and keep abreast of the new emerging financial risks and other developments to arrest this new and emerging ML/TF.

According to the circular, this includes strategic investment in data mining and artificial intelligence software to monitor financial transactions effectively and report as quickly as possible.

The central bank said the Nigerian Financial Intelligence Unit, the central repository of suspicious transactions and other financial information, had released a comprehensive report on STRs and others.

It stated that the NFIU had identified cybercrimes, frauds, counterfeiting and substandard goods, diversion of public funds and misuse of non-government organisations funds as some of the ongoing crimes that banks across the nation need to stay abreast and report.

Other suspicious transactions and red flags identified in the report were some e-commerce companies with little or zero history or internet presence suddenly receiving multiple payments from unrelated third parties.

Similarly, it said individuals with zero or little history of financial transactions receiving multiple payments from unrelated third parties. It also noted that customers who suddenly start delaying in the supply or purchases of medical supplies and payment of goods linked to known brands, yet the beneficiary is an individual, not a corporate company should be flagged.

The measures, the apex bank said were necessary due to the rising numbers of unusual transactions from banks’ customers and unscrupulous individuals.

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Finance

Union Bank Secures US$40 Million Facility from IFC Global Trade Finance

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Union Bank Secures US$40 Million Facility from IFC Global Trade Finance

Union Bank of Nigeria Plc said it has secured a US$40,000,000 finance guarantee facility from the IFC, a member of the World Bank Group.

In a note to the Nigerian Stock Exchange, the lender said the facility would help boost access to finance for local businesses and enable increased international trade for Nigeria.

It explained that the facility “will support Union Bank to establish working partnerships with nearly 300 major international banks within the GTFP network, thereby broadening access to finance and reducing cash collateral requirements for Nigerian businesses.

“The facility will enable the continued flow of trade credit into the Nigerian market at a time when imports are critical, and the country’s exports can generate much-needed foreign exchange.

Under the IFC’s Global Trade Finance Program (GTFP) terms of the agreement, GTFP offers benefiting banks partial or full guarantees covering payment risk on Union Bank’s trade-related transactions.

Accordingly, these guarantees are transaction-specific and may vary depending on underlying instruments like letters of credit, trade-related promissory notes, guarantees, bonds, and advance payment guarantees.”

Emeka Emuwa, Chief Executive Officer of Union Bank, said, “Union Bank is pleased to join the IFC’s Global Trade Finance Program. This is a significant achievement as we continue to expand our trade financing offerings to our
customers. Even in these peculiar times, we remain focused on contributing to economic growth by developing tailored solutions that help our customers harness the teeming opportunities that still exist in the Nigerian market.

Eme Essien Lore, IFC’s Country Manager for Nigeria, said, “Keeping trade moving is essential to growth and job creation, especially during the challenging economic times we are living through today. We welcome Union Bank to IFC’s Global Trade Finance Program and value a partnership that will make a positive impact on Nigeria’s economy.

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Finance

Apapa Customs Command Generate N367.6bn in Nine Months

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Nigeria Customs Service

Customs Command Apapa Realises N367.6bn Between January and September

The Nigeria Customs Service, Apapa Command, said it generated N367.6 billion in the nine-month ended September 2020.

Mohammed Abba-Kura, the Customs Area Controller, disclosed this while speaking with newsmen in Lagos.

He said a total of 328 containers of goods worth N19.5 billion were seized during the period. This, he said represents an increase of 37 containers when compared to the same period of 2019.

Speaking further, Abba-Kura said the N367.6 billion realised in the first nine months of the year, represented a 17 percent or N54.1 billion increase from N313.5 billion it collected during the same period of 2019.

The Apapa Command generated N14.3 billion as revenue in the third quarter from customers’ duty and other charges.

He said “The difference recorded was made possible as a result of resilience of officers in ensuring that importers and agents are made to do proper declarations, adhere strictly to import/export guidelines in tandem with extant laws.”

Commenting on the seizures, Abba-Kura said, “These items were seized mainly because of various forms of infractions which range from false declarations, non-adherence to import/export guidelines and failure to comply with other extant regulations as enshrined in the Customs and Excise Management Act.

“In the area of export trade, the period under review recorded exportation of goods worth N26,273,706,822 exported from the country.”

“These exported goods include mineral resources, steel bars, agricultural products among others with a total tonnage of 378,447 million tonnes free on board value of $85.8m. Similarly, the volume of export from January to September 2020 stood at N78.6bn with FOB $257,003,965.”

He added that the compliance level rose to about 60 percent during the period, highlighting the reason for the surge in the number of seizures made.

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