Cancellation of share verification may depress share prices

While the verification lasted, share certificates were not available for trading due to the long delay. The non availability of the certificates led to scarcity of these stocks and rise demand and prices.

But operators say with the stoppage of the verification, allotments of new issues would be done six weeks after the closure of the offer in line with SEC rule and regulation 68(1) made pursuant to Investment and Securities Act , 1999 , except in cases where the apex bank suspects that laundered money was involves in the investment.

The non availability of share certificates for new issues for financial institutions like banks and insurance companies, has led to prospective investor preferring to buy from the secondary market since it takes longer time to get certificates for stocks bought from the primary market.

Ariyo Olushekun, managing director of Capital Assets Limited confirmed that prices of shares would be more realistic now. According to Ariyo before now, prices of stocks of banks that came to the market for new issues rose after it was lifted from technical suspension due to the non availability of the certificates for trading. The stock broker said the new development would restore investors’ confidence in the public offer of banks as interest was waning due to the anomaly. .

The Securities and Exchange Commission ( SEC) and the Nigerian Stock Exchange had made series of efforts in the past to get the apex bank jettison the idea of blanket share verification on the ground that it was delaying the issuance of share certificate and hindering trading in the relevant shares.

But last week, at the annual general meeting of the Nigerian Stock Exchange ,Ndi Okereke-Onyiuke, director general disclosed that the apex bank has bowed to their position.

According to Okereke-Onyiuke, "the management of CBN has taken a decision to stop the verification pre- allotment and if there is any suspected case of money laundry, verification will be done in such an instance."

The NSE DG said a lien would be put on suspected certificates by the Central Security and Clearing System (CSCS) to ensure that they are not traded until cleared.

Under the new arrangement, no list of subscribers should be sent the CBN. Instead, the board of the companies issuing the public offering is required to undertake the allotment while the CBN would write to SEC and get its approval if it wants to verify any new issue.