PREFACE - Nigerian Stock Exchange

1 PREFACE The Rulebook of The Nigerian Stock Exchange , 2015 (the Rulebook ) is a compilation of all the Rules, Regulations and Guidelines ( Rules ) of The Exchange in one (1) document. It will facilitate quick and easy access to the Rules by Dealing Members, Issuers, investors and all other stakeholders who require them. In providing an overall enhanced experience, users of the Rulebook will observe: a. A consolidated Index of all the Rules, as of today, 31 December 2015. b. Division into Parts, Chapters, and Sections, which have been grouped into related subject matters for ease of access and efficient use. c. Chapters and Section breaks, which have a numbering system that will enable us to add new provisions without disturbing the order of existing provisions, as necessary.

2 D. A comprehensive editing of the Rules for consistency and clarity. e. A consolidation and re-ordering of the Rules for improved flow and rationality in the context of the Rules. f. A cleaning up where there were overlaps and duplications of provisions. g. Updated cross-references in order to make relevant connections between related provisions. For our stakeholders who may be interested in the historical changes and developments to the Rules, we will also retain the links on our website to the Rules (Dealing Members Rules | Issuers Rules) as they appeared in separate documents prior to compilation in the Rulebook. 31 December 2015 i Index INDEX TO RULES AND REGULATIONS GOVERNING DEALING MEMBERS Rule Title Page CHAPTER 1. GENERAL RULES Section I: General, Corporate & Administration of Rules Rule : Preamble 2 Rule : Application 2 Rule : Authority to Administer Rules of The Exchange 2 Rule : General Conduct 2 Rule : Observance of Rules and Regulations 2 Rule : Duty to Observe and Report Breaches 3 Rule : Non-Agency Relationship 3 Rule : Identification of Business Documents 3 Rule : Scope of Business Activities 3 Rule : Dealing as Agent or Principal 3 Rule : Dealing Member to Sponsor Application for Quotations 3 Rule : Right to Charge Brokerage Income 3 Rule : Brokerage Requirement 4 Rule : Disclosure Obligation 4 Rule : Prohibition of Business Relationship Based on Guarantee 4 Rule : Prohibition Against Preferencing of Customers 4 Rule.

3 Effect of Client Defaulting 4 Rule : Limitation of Liability of The Exchange 5 Rule : Indemnification to The Exchange 5 Rule : Right to Facilities and Data of The Exchange 5 Rule : Publication and Subscription to Daily Official List 5 Rule : Amendments to Laws, Rules, Codes or Guidelines Cited 6 Rule : Interpretation of the Rules and Regulations 6 Rule : Definitions 6 Section II: Fees Rule Powers to Impose Fees and Charges 11 Rule Annual Subscription and Fees 11 Rule Notification of Fees and Charges 12 Rule Mode of Payment 12 Rule Dealing Member Fees and Charges 12 Rule Transaction Fees 12 ii Index Rule Title Page CHAPTER 2. OPERATION AND MANAGEMENT OF MEMBER ORGANIZATIONS Section III: Acquiring and Maintaining a Dealing Membership Licence Rule Application Procedure 14 Rule Requirements for Granting an Approval-In-Principle 14 Rule Additional Documents to be Submitted 15 Rule Minimum Capital Requirement 17 Rule Approval-In-Principle 18 Section IV: Commencement Requirements Rule Requirements for Commencement of Operations 18 Rule Contact with The Nigerian Stock Exchange 23 Section V.

4 Transfer/Sale of Dealing Membership Licence Requirements Rule Acquisition of a Dealing Member Licence 24 Rule Proprietary Interest of The Exchange over Dealing Membership Licences 24 Rule Sale/Transfer of a Significant Shareholding in a Dealing Member Firm 25 Rule Obligations of Parties during Mergers and Acquisitions of Dealing Member Firms 25 Section VI: Classification of Registration Rule : Dealing Member Broker/Dealer 26 Rule : Broker 26 Rule : Dealer 27 Rule : Revocation of Inactive Dealing Members Licences 29 Rule : Resignation of Membership of The Exchange 29 Rule : Mode of Changing of Directors and Shareholders 30 Rule : Disclosure of Directorship 30 Rule : Dual Board Membership Prohibited 30 Rule : Approval of The Exchange about Material Changes 30 Rule : Qualification of Chief Executive Officer 30 Rule : The Chief Executive Officer & Managing Director s Position 30 Rule : Specific Actions Requiring Prior Consent of The Exchange 31 Rule : Regulation of Publications 32 Rule : Notification of Change of Approved Persons 32 Rule : Notification of Business Address and Closure of Office 32 iii Index Rule Title Page Section VII: Capital and Financial Reporting Rule : Minimum Capital Requirement 32 Rule : Net Liquid Capital Requirement 33 Rule : Accounting Year End 33 Rule : Submission of Financial Reports to The Exchange 33 Rule : Extension of time for Submission of Annual Financial Statements 34 Rule.

5 Prohibition of Manipulation of Financial Statements 35 Section VIII: Authorized Clerks: Eligibility, Registration etc. Rule : Requirements for becoming an Authorized Clerk 35 Rule : Eligibility and Admission Procedures for Authorized Clerks 36 Rule : Robing and Induction Ceremony for Authorized Clerks 36 Rule : Register of Authorized and Unauthorized Clerks 37 Rule : Engaging an Unauthorized Clerk 37 Rule : Authorized Clerks to be Fit and Proper Persons 37 Rule : Conditions for Introducing Authorized Clerks 37 Rule : Fees 37 Rule : Change of Employment of Authorized Clerks 37 Rule : Transfer of Authorized Clerks 38 Rule : Annual Fit and Proper Evaluation 38 Rule : Power to Suspend or Revoke the Registration of Authorized Clerks 39 Rule : Continuous Development Programme (CDP) 39 Rule : Prohibition of Unauthorized Persons 40 Section IX: Management / Supervision / Internal Controls Rule.

6 Responsibility for Employees Actions 40 Rule : Suitability of Members' Employees 40 Rule : Supervision and Internal Controls 40 Rule : Qualification to Manage Investments and Provide Investment Advice 41 Rule : Prior Written Consents 41 Rule : Control of Offices and Trading Terminals 42 Rule : Improper Use of Information 43 Rule : Information Barrier Policies 43 Rule : Risk Management 44 Rule : Members' Duty to Report Legal Actions 45 Rule : Corporate Governance 45 Rule : Obligation to Disclose Money-Laundering Activities 45 Rule : Anti-Money Laundering and Combating the Financing of Terrorism 46 iv Index Rule Title Page Section X: Compliance Officers Rule : Supervisors' or Compliance Officers' Reporting Requirements 47 Rule : Appointment of Compliance Officers 47 Rule : Chief Compliance Officer 48 Rule : Identification of Compliance Officers to The Exchange 49 Rule : Definition of Roles, Responsibilities and Obligations 49 Rule : Protection of Compliance Officers 51 Rule : Termination / Resignation of Appointment 52 Rule : Penalties 53 Section XI: Customer Accounts Rule : Know Your Client 53 Rule : Supervision of Customer Accounts 54 Rule : Prohibited Practices 55 Rule : Confirmation of Orders and Mandates 56 Rule : Issuance of Contract Notes 56 Rule : Maintenance and Segregation of Client's Account 57 Rule : Monthly Financial Statements to Clients 57 Rule : No Unauthorized Use of Client Funds.

7 Segregation of Client Funds 58 Rule : Prohibition of Unauthorized Sale of Securities 60 Rule : Misappropriation of Funds 61 Rule : Discretion in Customer Accounts 61 Rule : Grants of Discretion (Books and Records) 62 Rule : Payments for Purchase or Sale of Securities 62 Rule : Third Party Transactions (Sales Proceeds in the Name of Third Party) 62 Section XII: Errors and Error Accounts Rule : Responsibility for Accuracy of Orders 62 Rule : General Ledger Error Accounts 62 Rule : Expunging Bargain 63 Rule : Cancellation of Trades 64 Rule : Obvious Errors 64 Section XIII: Books and Records Rule : Record of Transactions and Right of Inspection 67 Rule : Co-operation in Connection with Inspections or Investigations 68 Rule : Client Record Keeping 68 Rule : Clients Complaints Management 69 v Index Rule Title Page Section XIV: Communications Rule : Communication with the Public 69 Rule : Prescribed Mode of Advertisement 70 Rule : Information Provided to Clients 70 Rule : Unauthorized Dissemination of Information 71 CHAPTER 3.

8 TRADING AND Exchange OPERATIONS Section XV: NSE Trading Operations Rule : Official Days and Hours of The Exchange 72 Rule : Extension or Reduction of Trading Times 72 Rule : Valid Transactions 72 Rule : Recognized Parties to Deals 72 Rule : Mode of Trading 73 Rule : Trading Method 73 Rule : Trading Parameters 73 Rule : Maintenance of Trading Systems 73 Rule : Approved Workstations 73 Rule : Access to the Trading Engine 73 Rule : Permission to Use the Trading System 74 Rule : Responsibility of Dealing Member 74 Rule : Right to Appoint Users 74 Rule : Conditions for Appointment of Users 74 Rule : Admittance into the Trading Floor 74 Rule : Use of Trading System Access Codes 74 Rule : Obligation to Change Password 74 Rule : Restrictions 75 Rule : Securities Eligible for Trading 75 Rule : Closure of Register 75 Rule : Restriction of Price Movement Ex-Div Day 75 Rule : Cancellation of Dividends 75 Rule : Trade Types 76 Rule : Order Entry and Execution 77 Rule : Entry of Customers' Orders 83 Rule : Order Prices 83 Rule : Unit of Trading 83 Rule : Minimum Price Variations 83 Rule : Pricing Methodology 84 Rule : Pricing Methodology - Par Value Rule 85 Rule : Block Divestments 86 vi Index Rule Title Page Rule : Notification of Trade in Securities Amounting to 5% of an Issuer s Total Listed Securities or More 86 Rule : Prohibition of Trading in Exchange Listed Securities Outside The Exchange 86 Rule : Nominal Transfers 87 Rule : Cross Deals 89 Rule : Trade Warehousing 89 Rule : Post Trade Allocation 89 Rule.

9 Short Selling 90 Rule : Penalties for Naked Short Selling 90 Rule : Borrowing Required to Short Sell 90 Rule : Marking of Short Sale Orders 91 Rule : Intermittent System Decoupling 91 Rule : Hard-To-Borrow Securities 91 Rule : The Exchange s Discretion to Act in Time of Emergency 92 Rule : Suspension on Trading of Securities 92 Rule : Trading Halts Due to Extraordinary Market Volatility (Index Circuit Breakers) 92 Rule : Recognition of Bargain Slips 93 Section XVI: Clearing and Settlement Rule : Time Frame for Delivery and Settlement 93 Rule : Transfer Forms 93 Rule : Direct Cash Settlement 93 Rule : Seller's Responsibility for Benefits 94 Rule : Delivery of Transfer Instruments 95 Rule : Genuineness and Regularity of Documents 95 Rule : Verification of Transfer 95 Rule : Duty to Report Failed Transaction 95 Rule : Consequences 95 Rule : Defective Transfer 95 Rule : Disputed Title 96 Rule : Contribution to the Trade Guarantee Fund 96 Section XVII: Member Conduct Rule : Just and Equitable Principles 96 Rule : Council's Decisions and Directives 96 Rule : Duty to Act in Clients Best Interest 96 Rule : Zero-Tolerance Policy 97 Rule : General Conduct, Sharing of Brokerage Income.

10 And Association with Non-Dealing Members 97 vii Index Rule Title Page Rule : Trading Floor Dress Code, Identification Badges and Access Control Cards for Authorized Clerks 97 Rule : Conduct on the Trading Floor 99 Rule : Prohibition of Smoking, Gaming, or Gambling 100 Rule : Eating and Drinking Areas 100 Rule : Care in the Use of Computer Terminals 100 Rule : Responsibility for Damage to Equipment 100 Rule : Front Running and Trading Ahead of Customers 100 Rule : Prohibition of Market Manipulation and Illegal Market Dealings 101 Rule : Prohibition of Pegging/Stabilizing of Securities 102 Rule : Prohibition of Insider Trading 102 Rule : Churning; Fictitious or Deceptive Trading Patterns 104 Rule : Maneuvering with Intention to Defraud 105 Rule : Prohibitio