HOW TO BUY SHARES

Truly, buying or selling shares, beyond the analytics and decision-making process, becomes pretty easy. That's if you are familiar with the process. For somebody who isn't, it could sound scary, which may be a cause not to take action. So, let's demystify that, short and quick. It is easy to buy stocks. When you want to sell too, the process is uncomplicated. If you have any challenge at all, it is with how to decide which stock to buy or if and when to sell. Even these shouldn't prove herculean, because there are people who can advise you, either privately or professionally. So, there is nothing really stopping you!

Buying from the Primary Market
For more on what the primary market is, read this article. Simply put, it's the market for fresh issues. When a company is in the market to raise money through a fresh issue, there are receiving agents appointed to the issue, usually banks and stockbrokers. Applications will be returned through these agents and the application forms are usually obtainable from them (these days, you may have a chance to download it online too). To buy is simple: just obtain a form, complete it (easy process), attach your payment and return to any of the receiving agents. The agents often apply their official stamp to the form they give you, just to compel you to return it through them (they earn a commission for that). If you already have a stockbroker, this is more likely to be processed through him. So, if you hear a company is selling shares and you want to buy, it's easy, don't hesitate. Simply walk to any bank or stockbroker and you will get a form, most of the time. Warning: be careful each time with your signature; you will need to sign it when you want to sell and an irregular signature could pose some headache you won't enjoy. Note: there is no primary market sale.

Buying from the Secondary Market
For the secondary market (read more on the secondary market) buying isn't complicated too. To buy, get to your stockbroker with an instruction (learn to put business transactions, including stock orders, into writing), indicating what stocks you want. Complete a share transfer form for each stock, provide your money and your part is done. Five minutes' job! There again, remember you will sign the exact same signature, when you want to sell.

Selling Your Stock in the Secondary Market
The first thing to note is that it's only in the secondary market that you will sell your stock. This too, has to be done through a stockbroker. If you already have your stock in a CSCS account, the process is easy and quick, unless there is no demand for the stock. To sell, simply provide the instruction to your stockbroker, complete the share transfer form, making sure your signature is regular, and your part is done. Your stockbroker will do the rest. If there is demand for the stock, it could be sold in the next trading session. Once sold, you should have your money on the fourth day: t (transaction date) + 3.

When your shares are not in a CSCS account, the process is not different, except that your certificate has to first go for verification by the registrar, a process that could throw up delays. If you need money urgently, this could throw a spanner into your wheels, a good reason to always have your stocks in a CSCS account. All the same, all you need to do is to forward your certificate(s) to your broker, sign the transfer form, give him a sale order and sit back for your money. That easy!

How do you know at what price your share is actually bought or sold? Your stockbroker will advice you when the transaction is completed. This is done by means of a contract note which states the details of the transaction. Better still (that's if you have any doubt), you can obtain a report directly from the CSCS which shows you, conclusively, at what price your specific transaction was done. Is this important? Sometimes. As you possibly know, prices move from day to day and even at various times in a particular day. The differences from one day or point in a day to another could mean a lot of money, depending on transaction volume. Since it's only the closing price on a day that gets widely reported, you may never know at what exact price your transaction was actually done. Often you won't bother to know, but if you have to, it only takes going to the CSCS to secure the relevant transaction report.

Share Certificate

Pre-CSCS (the Central Securities Clearing System), this question didn't need to arise, because every shareholding was evidenced in a certificate, which the shareholder held until he chose to sell the stock. Today that is different: you can choose to keep your certificate or dump them with the CSCS. The later is technically referred to as dematerialisation which means throwing away that material (physical) evidence of your holding and going for electronic records. Even the current question may only be valid for a while, because, given the trend towards increased use of technology for documentations, certificates may one day disappear completely. For now you have a choice. So, which is better for you?

The important point to make here is that initial fears expressed by shareholders, about holding shares without certificates, have since been proved unfounded by the operation of the CSCS. It's been smooth by every indication and those who place their stock into a CSCS account have never missed the certificates.

What You Gain By Keeping a Certificate
Beyond seeing a fancy document, it's difficult to identify any additional benefit that comes from keeping your certificate. If it is to use it as a borrowing collateral, that can also be done neatly with your CSCS statement. If it is for security, it's more likely to get lost or burnt (though you can go through the hassle of a replacement). To cut it short, there is nothing your certificate does that you are disadvantaged with, using the CSCS

What to Gain By Placing in CSCS Account
The most crucial is the fact of substantially enhancing the speed at which you sell, a factor that is critical in a constantly moving market. When you transfer your holdings to a CSCS account, the share verification process goes with it. This means that the registrar certifies that you own the shares (by signature verification) before it gets into your personal account at the CSCS. If you urgently have to sell, the verification process, which could cause traumatic delays, is already concluded. The stockbroker could sell on the same day. If someone else still has a certificate, he could be on the verification process while price moves against him, for instance. CSCS puts you in ready mode for sales and that's a big factor in the stock market.

Even when you seek to borrow, using your shares, a CSCS account will speed things up, too. The reason is that your banker (or other lender) will also want the certificates verified. While this could drag, a CSCS account gets you going immediately.

With CSCS, the storage and handling problem is off you. A periodic statement helps you keep track of your account. If you need additional protection, a CSCS Special account will provide it. Besides, there is the trade alert system.

All said, the era of keeping share certificates should be in the past. We don't think you still need them for anything, unless you just want to slow up your transactions for no benefit. Get your stocks into a CSCS account and enjoy the flexibility of doing your transactions on the fly.

CSCS SPECIAL ACCOUNT

To the basics, first. When you buy stock from the secondary market, that is, on the floor of the stock exchange (through your stockbroker), a CSCS account has to be opened for you. If it isn't your first time, you must have one already. If you are using a different stockbroker, then they will open a new one attached to the current broker. How is the account opened? The stockbroker gives you a simple form to complete the first time you are transacting with him and with that, he gets a CSCS account opened for you to hold your purchases. Of course, sales are made from that account too. Periodically, you get a statement showing your account balance, in units of stock(s), not Naira. At any other time you desire (for instance to reconcile your holding), you can request a statement from CSCS, either through your broker or directly if you wish, just for a token fee. That statement is very key to tracking your holdings. If you use more than one stockbroker, you have a CSCS statement for your transactions through each. That sets the picture, I hope.

This article is however about the special account and trade alert. Well, both arise because, things go wrong at times with investors' stock holdings, because not all stockbrokers are honest. Surprised? Check the records: disciplinary actions against stockbrokers for abuses of customers' accounts are almost frequest and you can check with Nigerian stock exchange and the Securities and Exchange Commission. So, is your investment safe? Generally so, because the investor is heavily protected by the regulators and the law. That, however, does not vitiate the serious need for preventive controls. Don't wiat for things to go wrong before pursuing restoration which will take time, work and even some risk of failure toprove your case.

Your first protection is to monitor your regular account(s). Request that statement because most stockbrokers won't send it on their own. Take some time to reconcile your holding. Get off-cycle statements at occassional intervals, directly from CSCS, to re-check your holdings. Don't make the mistake of assuming that nothing will go wrong: stockbrokers sell investors' stocks, all the time! Sometimes, they claim it's in error (I've had personal experiences), at others, geniune fraud is established (check with the regulators). If you identify a problem, remedy can be sought, especially if you can't resolve amicably with the broker. See a further resource on how to seek redress against abuses by market operators.

Now, what about being proactive, to guard against any abuse, instead of pursuing redress? That's where either the CSCS special or the trade alert system will come in handy.

CSCS Special Account
This is a bit like the account the broker gets opened for you when you want to buy stocks through him. There is a big difference, though. This special account is not attached to any stockbroker, neither is any involved in opening it. You open it personally at the CSCS, just like you open an account at the bank. When it is opened, you will transfer stocks you have in the regular account with the stockbroker(s) to the special account. That account is fully under your control, like your bank account. Nothing can be sold from it by any stockbroker, because they don't control it. Your regular account is attached to a broker and he can always sell from it; not so with the special account. So how do you sell, you ask? You detatch what you want to sell (by completing a detachment form, duly signed according to your mandate in the CSCS account, and submitting to CSCS). In the detachment request, you specify a stockbroker that you are detaching to, who will sell for you. That gets transferred to your regular account with the broker, but just only what you have instructed to be transferred to him. The rest of your stock is still 'under lock and key' in your special account. The special account has a charge, but in our view, an affordable cost, given the benefit. Currently, it's N5,000 per annum for individual (non-institutional) investors.

Trade Alert
Not as proactive as the special account, but the trade alert, an NSE/CSCS initiative, still seeks to forestall an abuse than pursue remedy. It however works with your regular account (or special account), but mounts its road-block at the point of sale. A sale is initiated by the broker normally, but you get a trigger on your GSM phone to alert you of the transaction. No doubt, if it's a fraudulent transaction, you're going to abandon anything on hand to rush to your broker, the stock exchange or wherever. Anyway, trade alert expects you to make a phone-call to stop the transaction. A bit reactive, if you ask us, but still a protection. Banks are widely implementing such transaction triggers currently. Trade alert is a subscription service, but currently free for small investors with low-value transactions.

Which Do You Need?
Perhaps, the first question is whether you need any at all. Irrespective of the value of your stock-holding (which, in any case could be all your nest-egg, notwithstandiing the naira value), we believe it is part of the building blocks for your future of prosperity. In effect, its value is beyond the current market value of your stocks - it represents that quality life of success which you dream of. What all this says is simply that those investments mean more than money, they represent a key part of your future. If preserved and nurtured, they could make tomorrow positively different. You can't therefore spare any reasonable effort, not only to grow but also to protect them. If you see it that way, you might consider additional protection for your stock portfolio. You have the facts here to decide if you need a special account, trade alert or none.

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