NSE Nominal Transfers Rules Take Effect

By Dipo Olowookere

Today, Wednesday, July 11, 2018, the Nigerian Stock Exchange (NSE) rules on nominal transfers have taken effect.

A notice released yesterday by the NSE disclosed that the rules were approved by the Securities and Exchange Commission (SEC) and would be officially taking effect today.

The rules on the nominal transfers are under the Rule 15.34 of the NSE Rulebook, from page 87 to 89.

The NSE Rulebook is a compilation of all the rules, regulations and guidelines of the market regulator in one document, which facilitates quick and easy access to the Rules by Dealing Members, Issuers, investors and all other stakeholders who require them.

Under the new rules, (a) No security listed on The Exchange shall be bought or sold outside the facilities of The Exchange.

(b) Any securities holder that wishes to transfer his securities by way of a nominal transfer shall apply to The Exchange through his Stockbroker for transfer of the securities. The Stockbroker shall carry out the requisite Know-Your-Client (KYC) enquiries on the securities holder and the proposed Transferee.

(c) The Exchange shall review the application and the supporting documents submitted by the Stockbroker to determine whether the relationship between the proposed Transferor and the proposed Transferee is sufficient for the transaction to be classified as a nominal transfer.

(d) In reaching a decision to classify a transaction as a nominal transfer The Exchange shall:

(1) With regard to a nominal transfer between corporate entities, consider whether a Party directly or indirectly controls the other Party, or both Parties are under common control. A Party shall be deemed to control another Party if it holds or is beneficially entitled to hold, directly or indirectly, more than fifty percent (50%) of the total voting rights in the other Party, its total income, or issued share capital. Connections between corporate entities include but are not limited to the following:

(A) Holding companies, subsidiaries and sister subsidiaries,

(B) A joint venture and a special purpose vehicle created for the purpose of the joint venture;

(2) With regard to nominal transfer between individuals, the NSE shall consider the following connections:

(A) Whether there is a familial relationship between Transferor and Transferee including but not limited to spouse, brother, sister, father, mother, child or step‐child;

(B) Whether the Transferor is acting as trustee of any trust or as the personal representative administering any deceased person’s estate; and the Transferee, is:

(i) a beneficiary of such trust or estate who has a familial relationship with the settlor of the trust or the deceased such as being a spouse, brother, sister, father, mother, child or step‐child; or

(ii) a body corporate in which the beneficiary under sub-rule (i) above is a shareholder, or

(iii) a trust whose terms confer a power on the trustees that may be exercised for the benefit of the beneficiary under sub-rule (i) above.

(3) With regard to a nominal transfer between an individual and a corporate entity, consider whether the individual is a beneficial shareholder of the corporate entity.

(e) The Parties shall comply with such directions as may from time to time be provided by The Exchange with regard to completing the transaction.

(f) In order for The Exchange to approve the transfer, the following documents shall be submitted to The Exchange:

(1) Application letter by the Stockbroker introducing the client and detailing the nature of the transaction;

(2) two (2) copies of the client’s CSCS shares Statement indicating the current shareholding position, where the shares are dematerialized;

(3) two (2) copies of a Letter of Authority addressed to The Exchange executed by the proposed Transferor;

(4) For a corporate entity, a duly executed board resolution and a certified true copy of its most recent Form CAC 7 (Particulars of Directors) and Form CAC 2 (State of Share Capital and Return Allotment of Shares);

(5) Original executed securities transfer form(s);

(6) Mandate executed by the Transferor in favour of the Stockbroker making the application;

(7) Other relevant documents such as means of identification of the Transferor, Transferee, any signatories or relevant person;

(8) In respect of a trust, a certified true copy of the trust deed; and

(9) In respect of the estate of a deceased, a cerfified true copy of the will and the probate or if intestate, the letters of administration;

(10) Such other documents as may be required by The Exchange.

(g) The Exchange shall charge a fee as may from time to time be determined and published by it as approved by the Commission.

(h) Where the transaction is eligible for approval by The Exchange, the Transferee shall execute an indemnity in a form to be prescribed by The Exchange.