Approved Guidelines on Securities Settlements in Nigeria

1.0 Preamble

Pursuant to the powers of the Securities & Exchange Commission (SEC) conferred on it by section 13 and further section 312 (3) of the ISA 2007 and in exercise of the powers conferred on the Central Bank of Nigeria (CBN) by section 47 (2) of the CBN Act 2007 to promote and facilitate the development of efficient and effective systems for settlement of transactions, the SEC and the CBN hereby issue the following guidelines for the settlement of all types of securities in Nigeria.

1.1 Objectives

The main aim of this guideline is to promote competitive, efficient, safe and sound post trading arrangements in Nigeria. This should ultimately lead to greater confidence in securities markets and better investor protection and should in turn limit systemic risk. In addition, the guidelines seek to improve the efficiency of the market infrastructure, which should in turn promote and sustain the integration and competitiveness of the Nigerian securities markets.

1.2 Scope of the Guidelines

The guidelines set out the procedures for the settlement of securities in Nigeria, including the rights and obligations of the parties. It also covers the settlement procedures and settlement cycle for the trades executed in the following exchanges: i. The Nigerian Stock Exchange traded securities. ii. FMDQ Over The Counter (OTC) Securities. iii. NASD Over The Counter (OTC) Securities iv. Nigerian Commodity Exchange (NCX) traded securities. v. Afex Commodities Exchange.

2.0 Securities Settlement Rules and Procedures

As a general rule, any securities transaction must trade or be reported through a licensed Exchange in line with the standard settlement guidelines.

2.1 The Exchange Traded Securities (Equities, ETFs, State, Corporate & Supranational Bonds)

• 2.1.1 After each day’s transaction (Day T), the clearing/settlement agent (CSCS) shall generate the financial obligations of each dealing member firms.
• 2.1.2 The clearing/settlement agent shall sort the financial positions of the dealing member firms based on their respective settlement banks to arrive at net position per settlement banks.
• 2.1.3 The clearing/settlement agent shall alert both the settlement banks and the dealing member firms of their net positions on Day T.
• 2.1.4 On Day T+2 for Equities and T+1 for Bonds, the clearing/settlement agent shall transmit the final financial net settlement obligation of dealing member firms to settlement banks through a payment system agent.
• 2.1.5 Where the clearing/settlement agent has direct access to the CBN RTGS, it shall transmit the final financial net settlement obligation to the CBN RTGS simultaneously with updating security records to achieve Delivery versus Payment (DVP).
• 2.1.6 On settlement day (T+3 for Equities, T+2 for Bonds), the clearing/settlement agent delivers the security while the payment system agent applies the net settlement advice; settlement banks shall then credit or debit the bank account of the dealing member firm.
• 2.1.7 On settlement day, the clearing/settlement agent shall update the record of the investors with the registrar.
• 2.1.8 Dealing member firms shall update investor cash accounts with proceeds less charges.

2.2 Federal Government Securities (Primary Auction)

• 2.3.1 After auction results, the Issuing Agent notifies successful bidders of financial obligations.
• 2.3.2 Successful bidders must fund accounts by Day T+2.
• 2.3.3 The Issuing Agent debits the bidder's cash account and credits their securities portfolio account (DVP) on Day T+2.
• 2.3.4 Failure to fund by Day T+2 allows the Issuing Agent to cancel the trade.

2.5 Investor’s Payments Procedure

• 2.5.1 Customer accounts should be credited with sale proceeds directly into their bank or stock broking account.
• 2.5.2 Payments shall reach the beneficiary not later than the next working day after settlement.

2.6 Dividend and Interest Payment

• 2.6.1 Issuers must provide funds to the Registrar within seven working days after approval.
• 2.6.2 Registrars shall pay dividends electronically on the due date.
• 2.6.4 Banks must credit investor accounts no later than T+1 after receiving the mandate and funds.
• 2.6.8 All new securities issuance must stipulate that dividends will be paid electronically into the investor's bank account.