EFCC Alerts Investors on Latest Capital Market Scams

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By Dipo Olowookere

The Economic and Financial Crimes Commission (EFCC) has raised an alarm over the “recent trends in capital market related fraud.”

The anti-graft agency disclosed that until recently, capital market scams usually involved transfer of shares from one stock broking house to another one of the syndicate fraudster’s choice where the shares are fraudulently sold without the knowledge of the real owner.

“It also involved stealing of share certificates, stealing of dividend warrants and clearing them through a fraudulent bank account opened in the name of the original owner.

“The fraudsters usually target accounts which have been dormant for a long period as well as shares of deceased investors.

“This fraud is carried out in connivance with a syndicate at Nigerian Stock Exchange/Central Securities Clearing System and Registrars of the companies whose shares are traded.

“Sometimes the scammers lodge the cheques issued to them by the stock broking firms and clear them through Microfinance banks. The microfinance banks are currently being used by these fraudsters because they are not yet compliant with the Bank Verification Number (BVN) system.”

EFCC further narrated that in recent times, one of the new modes of fraud in the capital market is Portfolio Management Scams. Under this method, the investor is persuaded to release his shares to the stock broking firm hoping to receive the promised returns which the stock broking firm may not honour.

“Meanwhile, all the shares of the investor will be sold by the stock broking firm and the proceeds used for other personal interest, making it difficult for the stock broking firm to buy back the shares for the investor when required.

“This is similar to Ponzi schemes in which the fraudster promises their target huge returns as interest on their money. The only difference is that under Portfolio Management, the investors’ releases his/her shares to be sold by the stock broker, while in a pure Ponzi scheme, cash is paid to the fraudster.”

Head of Capital Markets and Insurance Unit at the EFCC, Mr Adesola Kolawole Amusan, who threw light on these scams, strongly advised members of the public to regularly log into the websites of the NSE, www.nigeriastockexchange.com; Securities and Exchange Commission (SEC), www.sec.gov.ng; and the Central Securities Clearing System (CSCS), www.cscsnigeria.com); to verify the status of any stock broking firm whether it is registered or under suspension, before subscribing to any of their offers.

He also warned investors not to give their hard earned money to any individual or company that promises to turn their money around within a short period with a guarantee to pay them huge returns that are in excess of the average returns in the financial system.

Mr Amusan appealed to the Central Bank of Nigeria (CBN) to consider bringing Micro Finance Banks to comply with the Bank Verification Number (BVN) scheme so as to curtail fraud still being perpetrated through them so as to bring an end to the practice of fraudulent clearing of cheques.

He also advised the shareholders to obtain and fill a trade alert form with the CSCS which will enable them to receive alerts any time there is a transaction on their stock broking accounts.

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