The shareholders who spoke with The Guardian, yesterday, explained that though the recent global financial meltdown impacted on the Nigerian capital market negatively, there was need to investigate and apportion blame where necessary.

National Coordinator Proactive Shareholders Association of Nigeria, Mr Tiawo Oderinde described the move as a welcome development,adding that it would help "sanitise the system".

He added that the investigation would exonerate law-abiding stockbrokers, while those found wanting adding to him would be identified.

On his part, the Lagos State Coordinator of Independent Shareholders Association of Nigerian (ISAN), pointed out that the investigation is not an indication that the stockbrokers are guilty, adding that in the long run, it may be difficult to divorce the problem from the recent global meltdown.

Chairman of EFCC, Mrs. Farida Waziri, had on Monday, in Abuja, accused Nigerian stockbrokers of aiding and abetting money laundering.

The EFCC boss, who spoke in her office in Abuja, while receiving the executive of Association of Stockbroking Houses of Nigeria (ASHON), disclosed that current investigation of banks had revealed that looted funds were being laundered into the stock market through acquisition of shares.

"The stock market is the platform for the development of the economy and it is important that it sets in place, adequate rules to ensure that its members do not sabotage the economy. Concurrent with share manipulation, the initial indices show that looted funds are being laundered into the stock market through acquisition of shares," said Waziri

Making reference to Falcon Security, which allegedly owes N90 billion, the EFCC boss said what the current investigation of banks has revealed is the alleged active connivance of stockbroking firms to manipulate share prices and distort the market.

"When we got this complain, we invited Falcon Securities' Managing Director and asked why his company was owing that much but do you know that he could not explain what went wrong. The general trend has been for banks to offer loans to stockbroking firms and these loans are then used to manipulate the share prices of the bank, and to mop up the shares of the same bank prior to a public offer.

"At the face value, granting a loan is a simple bank-customer relationship but the utilisation of the loan is a breach of the provisions of Section 20 of the BOFIA and the regulations of the Central Bank of Nigeria (CBN) and carries a jail term of between two and three years. It is also a breach of the Investment and Securities Act.

"Under Section 23 of the Money Laundering Act, firms carry on the business of investment and securities (this includes stockbroking firms) are designated as financial institutions and there is an obligation on them to file with the Nigerian Financial Intelligence Unit all suspicious transactions, and file with the Nigerian Financial Intelligence Unit all currency transactions above N500,000 for individuals and the N2 million for companies," she said.

Waziri said the anti-graft agency would start the immediate enforcement of the provisions of the Money Laundering (Prohibition) Act 2004, and prosecute all stockbroking firms that default in their obligation to the suspicious transactions reports and currency transaction reports.

The EFCC boss also insisted that stockbroking firms should comply with other provisions of the Money Laundering (Prohibition) Act 2004, such as the ones requiring them to know their customers, take proper documents of identification, and set up anti-money laundering structures.

Lagos State Coordinator of ISAN, who spoke with The Guardian yesterday, also said the investigation would exonerate the law abiding stockbrokers and used the opportunity to appeal to call for an overhaul of relevant regulatory agencies.

Two Stockbrokers who spoke on the development said majority of the Brokers are not to blame for the turn of event in the banking sector.

The Guardian Newspaper, Wednesday September 9, 2009.