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Investors Protection Fund to pay investors compensation

Published by The Nation on Fri, 29 Aug 2014


The Investors Protection Fund (IPF) of the Nigerian Stock Exchange (NSE) may soon begin payment of compensations to investors as the board of trustees of the scheme finalises operating groundwork to ensure smooth and continuous operations.A source in the know of the activities of the IPF told The Nation that the board of IPF was rounding off operating structures and framework for the scheme and would roll out its maiden compensation soon to announce the commencement of effective operations.According to the source, after the approval of the IPF rules by the Securities and Exchange Commission (SEC), the board of trustees of IPF had gone back to the drawing board to ensure that it fashioned effective operating structure and framework that will sustain the scheme.Any moment from now, the IPF will do something. The board is well aware of anxieties by stakeholders but it is taking its time to ensure things are done very well. After the rules, there were still some background things that needed to be done, these are being finalized now, the source said.A management source at the NSE had hinted that the IPF would also look at the backlog of complaints already submitted to the Exchange as starting points for its operations in addition to new complaints.The IPF rules allow the NSE to submit complaints made to it to the IPF while investors can also directly petition the IPF.SEC had in January 2014 approved the rules for the NSEs IPF. The rules empower the board of IPF to make payment of compensation based on the claim submitted to the NSE and verified by the NSE or claim submitted to the board of IPF and verified by it, according to relevant sections of the ISA.Sources in the know said some of the post-approval groundwork included the written policy on compensation, management of funds and reporting guidelines in order to ensure that the operations of the scheme are transparent and equitable to all investors.The IPF rules empower the board of IPF to have at anytime a written policy on the maximum compensation payable to an investor who has suffered a loss. The board can review this maximum compensation limit from time to time according to prevailing circumstances at the market.Compensation would be paid subject to conclusive decision of the board on the basis of evidence that the investor has a claim against a dealing member, duly applied for settlement of its claim from the dealing member; the dealing member was unable or likely to be unable to satisfy the claim within a reasonable period and the investor then, duly applied for compensation from the Fund.The board of IPF is also empowered to invest the funds with a view to grow the capital base of the IPF.Part XIV of the Investment and Securities Act 2007 requires the Exchange to establish and maintain an investors protection fund to compensate investors with genuine claims of pecuniary loss against dealing member firms resulting from insolvency, bankruptcy or negligence of a dealing member firm of a securities exchange or capital trade points; and defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received by the dealing member firm in its course of business as a capital market operator.The NSE had in 2012 inaugurated a nine-man board of trustees under the chairmanship of Mr Gamaliel Onosode. Other members of the board included managing director of Nigerian Stock Exchange (NSE), Oscar Onyema; Misan Kofi-Senaya, managing director of Central Securities Clearing System (CSCS), Mr. Kyari Bukar, Chairman, Ibadan Zonal Shareholders Association (IBZA), Chief Sola Abodurin; Fubara Anga, Edosa Kennedy Aigbekaen, Sam Onukwe and Umaru Modibo.The IPF rules indicates that an investor whose claim is within the maximum limit may be paid the full amount of the loss, after deduction of any amount or value of all monies or other benefits received or receivable by the investor from a source other than the Fund in reduction of the loss.Besides, where the board is satisfied that in principle compensation is payable but considers that immediate payment in full would not be prudent having regard to other applications for compensation, or to any uncertainty as to the amount of the investors overall net claim, the draft empowers the board to pay an appropriate lesser sum in final settlement or to make a payment on account.The board may also determine to make a payment on account or to pay a lesser sum where the investor has any prospect of recovery in respect of the claim from any third party or through an application for compensation to any other person or authority.Compensation would be paid subject to conclusive decision of the board on the basis of evidence that the investor has a claim against a dealing member, duly applied for settlement of its claim from the dealing member; the dealing member was unable or likely to be unable to satisfy the claim within a reasonable period and the investor then, duly applied for compensation from the Fund.According to the rules, an application for compensation may be rejected if it is not promptly made and in any event within the periods stipulated in the ISA or where the investor is responsible for, or has directly or indirectly profited from, events relating to the dealing member firms business which gave rise to the firms financial difficulties.The draft empowers the board to make payment of compensation based on the claim submitted to the NSE and verified by the NSE or claim submitted to the board of IPF and verified by it, according to relevant sections of the ISA.In the event of multiple claims, person who claims in a double capacity for himself and as the personal representative of a deceased investor will be treated in respect of the representative claim as if he were the deceased investor without prejudice to his own personal claim.Also, where a person claims for himself and as a trustee, he will be treated in respect of the latter claim as a different person.But where two or more persons in partnership have a joint beneficial claim, the claim will be treated as the claim of the partnership; otherwise each of them would be taken to have equal shares in the claim unless the contrary is proved to the satisfaction of the board.According to the rules, where an agent has a claim for one or more principals, the principal or principals are to be treated as having the claim, to the exclusion of the agent.]]>
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