Apr 25, 2018

Accessing the Investors’ Protection Fund of the Nigerian Stock Exchange | Adejorin D. Abiona

The Investors’ Protection Fund of the Nigerian Stock Exchange (IPF) is a scheme set up by virtue of the provisions of the Investments and Securities Act due to the activities of capital market operators which sometimes endanger the interests of investors[i]. The primary aim of the Investors’ Protection Fund is to compensate investors who suffer pecuniary losses resulting from some circumstances stated in ISA. This article examines the Investors’ Protection Fund as it relates to investors accessing the said fund.

Administration of the Fund

The Investors’ Protection Fund is administered by The Board of Trustees of The Nigerian Stock Exchange’s Investors’ Protection Fund (“The Board”) subject to the regulatory supervision of the Securities and Exchange Commission (the “Commission”).[ii]

Purpose of the Fund as it Relates to Investors

The purpose for establishing the investor protection fund is to protect investors in Capital Market by compensating those who suffer pecuniary loss arising from any of the following[iii]:

(a) Insolvency, Bankruptcy or Negligence:

The fund shall be used to compensate investors that suffer any loss arising from insolvency, bankruptcy or negligence of a dealing member firm of a securities exchange or capital trade point.

(b) Defalcation:

Defalcation refers a default, act of embezzling, failure to meet an obligation, misappropriation of trust funds or money held in any fiduciary capacity and failure to properly account for such funds[iv]. Investors are protected against defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received or deemed received by the dealing member firm in the course of its business as a capital market operator.

(c) Revocation or Cancellation:

The Fund shall also be applied in compensating persons who suffer pecuniary loss from the revocation or cancellation of the registration of a capital market operator pursuant to the provisions of section 38 of Investments and Securities Act which provides for registration and regulation of capital market operators by the Security and Exchange commission (SEC)

Who Can Access the Fund?

Every Investor with a dealing member firm of the Nigerian Stock Exchange (“The Exchange”) who suffers pecuniary loss in any of the circumstances stated above is entitled to claim compensation from the investor protection fund.

 Accessing the Fund

a.      Submission of Claim

A claim for compensation should be made in the first instance to The Exchange or the IPF with all supporting documents. A complainant must exhaust The Exchange’s complaint management procedure before making a claim from the IPF[v].

The claim should be the amount of the actual pecuniary loss suffered by him including the reasonable cost of disbursement incidental to the making and proving of his claim less any amount or other benefits received or receivable by him from any source other than the investor protection fund in reduction of the loss[vi].

Documents needed in support of a claim[vii]

i.            Copy of share subscription form

ii.           Contract Notes

iii.          Receipt issued by Firm

iv.          Account Opening Form

v.           Acknowledgement letter from the firm

vi.          Central Securities Clearing System (CSCS) transaction history statement

vii.        CSCS client account statement

viii.       Bank Statement

ix.          Copy of Cheque issued/ bank draft

x.           Registrar’s statement of transaction,

xi.          Shares allotment letter from registrars

xii.        Copy of share certificate,

xiii.       Letters of Administration/ Probate (in the case of an estate)

xiv.       Company incorporation documents (copy of certificate of incorporation, particulars of directors statement of share capital).

xv.        Means of identification e.g. driver’s license, international passport, national identity card, bankers confirmation etc.

xvi.       Such other documents evidencing identity and ownership over shares.

Where the claim of an investor is rejected, such Investor may institute an action to compel payment at the Investments and Securities Tribunal[viii].

b.      Verification

The Exchange shall verify every claim within thirty (30) days after its internal process and determine the amount or extent, if any, to which the claim shall be allowed. Payment shall only be made based on verified claims in accordance with the Investors' Protection Fund Rules and the provisions of the Investments and Securities Act[ix].

c.      Payment

Payment shall be made when it has been satisfied by evidence that[x]:

i. the investor has a claim against a Dealing Member;

ii. the investor has duly applied for settlement of its claim from the Dealing Member;

iii. the Dealing Member is unable to satisfy the claim within a reasonable period;

iv. the investor has exhausted The Exchange's internal complaint resolution procedure;

v. the investor has duly applied for compensation from the Fund; and

vi. The Exchange has verified the claim.

Amount of Compensation Payable

The maximum compensation payable to an investor is an amount that is determined by the Board from a written policy from time to time. The maximum amount payable set by the Board in 2015 is N400,000 (Four Hundred Thousand Naira) per Claimant[xi].

Where the loss is less than the maximum amount fixed by the Board at any given time, the investor may be paid the full amount of the loss, less any amount or value of all monies or other benefits received or receivable by him from a source other than the Fund in reduction of the loss[xii].

In addition to any compensation, the investor is also entitle to interest at the rate of five per cent per annum calculated from the day upon which a claim arose and continuing until the day upon which the claim is satisfied[xiii].


Many investors suffer financial losses from activities such as market manipulation, misrepresentation, false trading and negligence of some capital market operators and as such, it is quite important to adequately protect them. The IPF as examined above provides a form of protection to this Investors and it is commendable that the Nigerian government subscribes to this.

It is however noteworthy that the IPF is different from the NIPF. While the IPF compensates aggrieved investors for losses enumerated above, the SEC established the National Investor Protection Fund (“NIPF”) in line with its powers under of the ISA [section 13(k)] to compensate investors whose losses are not covered by the IPF.


[i]  Section 197, Investments and Securities Act, 2007.

[ii] Ibid

[iii] Sections 197, 212, Investments and Securities Act, 2007.

[iv] Section 315, Investments and Securities Act, 2007; Chief Livinus Ezemegbe v. The Nigerian Stock Exchange & Anor. 2006 Legalpedia SEC CV80

[v] The Nigerian Stock Exchange Investors’ Protection Fund: Frequently Asked Questions retrieved from http://www.nse.com.ng/regulation-site/becoming-an-investor/FAQs on February 11, 2018; Section 213, Investments and Securities Act, 2007.

[vi] Section 213 (6), Investments and Securities Act, 2007

[vii] The Nigerian Stock Exchange Investors’ Protection Fund: Frequently Asked Questions supra

[viii] Chief Livinus Ezemegbe v. The Nigerian Stock Exchange & Anor supra

[ix] Section 213, Investments and Securities Act, 2007.  Paragraph 4.01, The Nigerian Stock Exchange Investors’ Protection Fund Rules retrieved from http://www.nse.com.ng/regulation-site on February 11, 2018

[x] Paragraph 4.02, The Nigerian Stock Exchange Investors’ Protection Fund Rules supra

[xi] NSE Press release dated August 5, 2015 retrieved from www.nse.com.ng/mediacenter/pressreleases/pages/IPF-Set-to-Compensate-Investors on February 11, 2018

[xii] Paragraph 4.04, The Nigerian Stock Exchange Investors’ Protection Fund Rules supra

[xiii] Section 213 (7), Investments and Securities Act, 2007

Adejorin David Abiona 
Associate at Tokunbo Orimobi LP 
Source - LinkedIn 



Post a Comment

The Nigerian blawg

Disclaimer:- Posts and comments by the publishers of this blog do not constitute legal advice or create an attorney-client relationship.

Be the 1st to read our blawgs






Email *

Message *

Powered by Blogger.