By Dipo Olowookere
The Securities and Exchange Commission (SEC) has approved the new rules drafted by the Nigerian Stock Exchange (NSE) to guide the establishment and usage of online trading portals by stockbroking companies operating in the nation’s capital market.
A notice released to the investing public at the weekend stated that the new rules were approved by SEC, the apex capital market regulator in the country, in August 2019.
Business Post gathered that under the new guidelines, operators intending to set up an online trading portal must get a dedicated and secure network connection alongside an Order Management System (OMS) approved by the exchange.
The new rules stipulated that no brokerage firms must operate an online trading portal without subjecting it to Vulnerability Assessment Penetration Testing (VAPT) by an authorized, credible Information Security company (VAPT Assessor) on a regular basis and in any event not less than twice every year.
It was noted that for existing online trading portal, the operators must within three months of the effective date confirm that it has procured a dedicated and secure network connection, and an approved OMS.
“Applications used by clients to access the OMS shall be protected by the requirement of strong passwords, strong authentication in line with industry standards, optimized for performance and regular security testing,” one of the guidelines said.
It was further stated that stockbrokers must conduct a comprehensive Know Your Client (KYC)exercise on all clients registered through the online trading portal before an online trading account is activated and before any transaction is carried out by clients on the portal. The dealing member shall keep the KYC records and any related records for a minimum period of six years.
The NSE further said to operating an online trading platform, stockbrokers must put in place at least two factor authentication, encryption, secure Hypertext Transfer Protocol (HTTPS), extended validation, policies and procedures to mitigate and guard their online trading portals from fraud, cyber-crime and other risks to the firm and its clients and other security standards as the NSE may prescribe from time to time.
The NSE said it would want all trading activities on the online trading portal be duly monitored and supervised by an authorized clerk employed by the brokerage company.
However, stockbrokers must disclose to their clients, via their online trading portals, and on their account opening forms, the risks associated with using the online trading portal.
They are not required to share commissions from trade transactions effected via the online trading portal except with other dealing members and such other registered market operators as the NSE may from time to time specify.
They must clearly display on the online trading portal all fees and charges (if any) associated with the usage of the online trading portal, as well as the details for customer service and the complaints management procedure.
They would be expected to take all reasonable precaution to ensure the availability, integrity, confidentiality and security of transmission of financial information to and from clients and as well exercise care in determining clients’ financial sophistication and suitability for particular investments recommended by the dealing member.
Under the new rules, stockbrokers are empowered to suspend or close a client’s account where it has been established that such account is being used for fraudulent transactions, money laundering, market abuse, and any other illegal purpose and notify the NSE of such account suspension or closure within 24 hours of the action.
However, it was stressed that “Any dealing member firm that contravenes any of the online trading portal rules shall be liable to pay a fine of not less than N250,000 and such other penalties as may be prescribed from time to time by the NSE.
View the full guidelines HERE
Adedapo Adesanya