EFCC alerts Nigerians of fraudlent activities in the capital market

The Economic and Financial Crimes Commission EFCC today
released a statement alerting the
public of possible fraudulent activities in the capital market.
Read the statement below.
The general public has been urged to be acquainted
with recent trends in Capital Markets related fraud.
Until recently, Capital Markets scams usually involved

transfer of shares from one Stock broking house to
another one of the syndicate fraudster’s choice where
the shares are fraudulently sold without the
knowledge of the real owner.
It also involved stealing of share certificates, stealing of
dividend warrants and clearing them through a fraudulent
bank account opened in the name of the original owner. The
fraudsters usually target accounts which have been dormant
for a long period as well as shares of deceased investors.
This fraud is carried out in connivance with a syndicate at
Nigerian Stock Exchange/Central Securities Clearing System
and Registrars of the Companies whose shares are traded.
Sometimes the scammers lodge the cheques issued to them
by the stock broking firms and clear them through
Microfinance banks. The Microfinance banks are currently
being used by these fraudsters because they are not yet
compliant with the Bank Verification Number system.
In recent times, one of the new modes of fraud in the Capital
Markets is Portfolio Management Scams. Under this method,
the investor is persuaded to release his shares to the stock
broking firm hoping to receive the promised returns which the
stock broking firm may not honour.
Meanwhile all the shares of the investor will be sold by the
stock broking firm and the proceeds used for other personal
interest, making it difficult for the stock broking firm to buy
back the shares for the investor when required.
This is similar to Ponzi Schemes in which the fraudster
promises their target huge returns as interest on their money.
The only difference is that under Portfolio Management, the
investors’ releases his/her shares to be sold by the stock
broker, while in a pure ponzi scheme, cash is paid to the
fraudster.
Adesola Kolawole Amusan, Head, Capital Markets and
Insurance Unit, Economic and Financial Crimes Commission,
EFCC, who threw light on this scams, strongly recommended
that members of the public should regularly log into the
websites of Nigerian Stock Exchange – NSE
(www.nigeriastockexchange.com), Securities and Exchange
Commission – SEC (www.sec.gov.ng), and Central Securities
Clearing System – CSCS(www.cscsnigeria.com) to verify the
status of any Stock Broking Firm whether the firm is
registered or under suspension, before subscribing to any of
their offers.
Further to this, he warned investors not to give their hard
earned money to any individual or company that promises to
turn their money around within a short period with a
guarantee to pay them huge returns that are in excess of the
average returns in the financial system.
He also advised the shareholders to obtain and fill a trade
alert form with the CSCS which will enable them to receive
“alerts” any time there is a transaction on their stock broking
accounts.
Amusan appealed to the Central Bank of Nigeria (CBN) to
consider bringing Micro Finance Banks to comply with the
Bank Verification Number (BVN) scheme so as to curtail fraud
still being perpetrated through them so as to bring an end to
the practice of fraudulent clearing of cheques.