What is a bond?
A bond is a loan and the investor or holder of the bond is the lender. When you purchase a bond, you are lending money to a government, local government council, state government, federal agency or a corporation, known as the issuer. The government uses it to fund budget deficit, for instance, or to build roads, electric power stations, finance factories, etc. When you purchase a bond, in return the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the face value of the bond (the principal) when it ‘matures’

What is the difference between a bond and a stock?
The key difference between stocks and bond is that stocks make no promise about dividends or returns, but when the Government Issue a bond, it guarantees to pay back your principal (the face value) plus interest. If you buy the bond and hold it to maturity, you know exactly how much you are going to get back. That is why bonds are also known as ‘fixed-income’ investment – you are sure of a steady payback or yearly income.
The buyer of stocks or shares in a company has purchased part of the equity and becomes part –owner. He is only entitled to dividend declared by the company when it makes profit.

What are the types of Bonds?

• Sovereign Bond(such as FGN Bond)

When you buy FGN bonds you are lending funds to the federal government for a specified period of time. The FGN bond is considered as the safest of all the investments because it is backed by the ‘full faith and credit’ of the government. They have no default risk, meaning that it is virtually certain your interest and principal will be paid as and when due. The income you earn is exempted from state and local taxes.

• State and Local Government Council Bonds

 When you purchase state and local government council bonds you are lending to the issuers who promise to pay you a specified amount of interest (usually semi – annually) and return the principal to you on a specific maturity date. State and local government bonds are debt obligation issued by the state government, local government councils and other governmental entities to raise money to build schools, roads, hospitals as well as other projects for public good.

• Government Sponsored Enterprise Bond

These are bonds that help support project relevant to public policies, such as helping certain groups, such as farmers, homeowners, students, etc to raise money for financing specific projects. These bonds do not carry the full-faith and-credit of government. The investors are likely to hold them in high regard because they have been issued by a government agency.

• Corporate Bond

Corporate bond are debt obligation issued by private or public corporations. The corporations use the funds for building facilities, purchase of equipment to expand the business, etc. When you purchase corporate bond, the corporation promises to return your money, or principal at maturity date, but you are being paid interest semi – annually. The interests you receive are taxable. Corporate bonds do not give you an ownership interest in the issuing corporation.

Are there Risk and Reward in investing in bond?
Any time you lend money you run the risk that it will not be paid back – credit risk. Another source of risk for certain bonds (bond with call option) is that your loan may be paid back early, or ‘called’ this is known as prepayment risk. When you buy a bond, the prospectus will indicate whether a bond is callable and give you a ‘yield-to-call’ figure. The greatest danger for a buy –and-hold bond to an investor is rising inflation rate – inflation risk. A rise in inflation makes prices fall and yields-or interest rates-rise. However, inflation risk, credit risk and prepayment risk are all figured into the pricing of bonds. The more the risk the higher the yield. Investors demand higher yields for longer maturities, as the longer you tie your money up in a bond the more at-risk.

Why should I invest in FGN bond?
• Retirement
• Starting or expanding a business
• Settlement after apprenticeship
• Pay children school fees in future(e.g for University education)
• Building a house
• Future projects by town unions, associations, student union
• To fund future social events such as Marriages and weddings, etc
• Settlement of pension insurance obligation( for Corporate Fund Managers), etc

What is the attractiveness/benefits of FGN Bonds to the investors?
• It serves as risk-free investment
• It is income is tax exempt
• It provides relatively high and stable returns
• The principal element ( collected at maturity) can be used as collateral for securing credit facilities from banks
• Bondholders that want cash can trade the bonds on the floor of Nigeria Stock Exchange(NSE) for immediate cash before maturity
• It qualifies as liquid assets for banks from two years to maturity

What are the benefits of FGN bonds to the Economy?
• It fosters economic development by promoting the use of lon-term funds for lon-term investment in the economy
• It serves as an efficient way of mobilizing domestic financial resources for productive investment in a non-inflationary manner
• It allows self reliance of the country by reducing over reliance on short-term borrowing form CBN & commercial banks
• It provides a basic infrastructure for the development of the financial system and the overall economy
• It serves as a diversified portfolio investment outlet to corporate and individual investors

What are the benefits of FGN bonds to the Government?
• It helps government funds its deficits in a non-inflationary manner
• It provides benchmark yield-curve for pricing other securities/bonds
• It engenders rational management of Government’s fiscal and monetary operations
• It provides the basic infrastructure for the development of the financial system and the overall economy
• It strengthens the implementation of monetary policy by the Central Bank of Nigeria
• It introduces transparency, discipline and stability in the financial system

What is dematerialization of bond certificates?
It is a term which describes a shift from issuance of physical certificate to an electronic form. It involves the use of a depository, in this case, the Central Securities Clearing Systems Ltd(CSCS) which provides the platform for the securities.
Although DMO still issues physical certificates on request, modern securities trading system de-emphasizes the use of physical certificates. Advancement in electronic communication and custodian services allow book-entry records and trade verification which has made trading more reliable and easier to manage than the use of physical certificates.

How can I be aware of the forth coming issues?
• National Dailies
• DMO Website –  FGN bond Issuance Calendar

Q. What services are offered by Kinley Securities Limited?

      Kinley Securities Limited is one of the leading stock broking firms in Nigeria and a member of the Nigerian Stock Exchange (NSE) licensed and registered by the Securities and Exchange Commission (SEC) 27th February,1997 as a Capital Market operator and with the Central Bank of Nigeria to deal in Treasury Bills

Q. What do I need to open a stockbroking account with Kinley Securities Limited?

     A. Duly Completed account opening form and supporting documents.

    Please visit www.kinleysecuritiesltd.com/account-opening/ to get started.

Q. How do I register for online access?

     A. Once you open a stockbroking account with us, your Central Securities Clearing System (CSCS) account details will be generated, and an online account will automatically be opened for you and login details will be sent to you via our welcome email.

Q. What is Direct Cash Settlement?

     A. Direct Cash Settlement (DCS) is the process of crediting sales proceeds directly into investors’ bank accounts by CSCS on settlement date (T+3). This is a default option for all investors.

Q. What if I want my proceeds credited to my stockbroking account to enable me buy stocks immediately with my proceeds?

   A. You will be required to complete a Direct Cash Settlement (DCS) form, then tick NO to enable you sell and use the  proceeds to buy other stocks before the actual settlement on T+3. If you will like to withdraw the cash subsequently, please refer to the How do I withdraw funds from my account question in this document.

Q. How do I log on as a first timer on the Kinley Securities mobile app?

    A. Please click on the webpage link in the mail to change your password, you will receive a successful mail notification confirming that the password change has been successful. Proceed to log on, set up answers to the security questions which will be useful when you need to do a password reset by yourself on your account. Once a successful log on has been initiated online, then you can proceed to log into the mobile app.

Q. How can I access and monitor my Kinley stockbroking account?

    A. You can monitor your stocks and access your stockbroking account by logging on www.kinley.xcloudintegra.com using YOUR CUSTOMER ID and PASSWORD.

Q: How can I fund my Kinley stockbroking account for stock purchase from my banks account?

    A. Kindly initiate a fund transfer to our designated bank account with details below using your eight-digit portfolio ID (which is often also your CSCS number) as the payment narration. For example, narration for a transaction should be “10100199”.

Bank name: Kinley
Securities Limited

Account Name: Guarantee
Trust Bank (GTBank)

 Account No-.0011547162

Q. How do I place orders online or mobile app?

    A. From the dashboard on the online portal, click PLACE ORDER > complete the details for the order > clickSUBMlT.

    A. From the dashboard on the app, click on the SEARCH BUTTON to type stock name or select the stock from the dropdown list > select OPTION to buy or sell > click GET QUOTE and click SUBMIT.

Q. How do I know when trades are executed on my behalf?

    A. An automatic trade notification email will be sent once a trade is carried out on your account, hence, the need to provide your current and functional email address.

Q. How do I give an instruction for an action to be performed on my account?

    A. Our KinleySec app and online channels enable clients to have Direct Market Access (DMA) to the stock market as well as a view of the market in real-time which facilitates easier placing of orders, monitoring of account and review of transaction history.

Q: How do I withdraw funds from my account?

    A. To withdraw funds, simply follow the steps below:

Withdrawal using the website

• Log
  on to your online account via the website (www.kinley.xcloudintegra.com)
• Click
  WITHDRAW FUNDS on the dashboard
• Enter
  the amount for withdrawal and click SUBMIT

Withdrawal using the mobile app

Log on to your online account via the Stocks module of the Kinley Securities mobile app

• Click the three blue lines on the top left of the dashboard
• Select WALLET and click on WITHDRAW
• Enter the amount and click PLACE WITHDRAWAL

Q: How do I use my sales proceeds or returns?

    A. The amount can be reinvested or withdrawn.

To withdraw any amount, kindly indicate transfer details on your mandate and provide your account details

Q. How do I retrieve my unpaid dividends?

    A. Shareholders are required to complete the e-dividend mandate form for the stock and upload at their bank for direct payment of outstanding dividends to shareholder’s nominated bank account. Do note the below should be completed on the form before the bank processes on the Nigeria Inter-Bank Settlement System (NIBSS) portal for submission to the registrar. Below are a few details to note:

• Please ensure that the bank stamp is on the passport photograph affixed on the mandate form and anywhere else on the document.
• Ensure the account opening date and Bank Verification Number (BVN) are indicated on the e-mandate form
• Tick the company’s name on the form

Q. What should I do if I notice inconsistency in my portfolio online and that of Central Securities Clearing System (CSCS)?

    A. If you notice any inconsistency in your online portfolio and that of CSCS, please send us an email to info@kinleysecurities.com using your registered email address and your online portfolio will be reconciled to reflect your status at Central Securities Clearing System (CSCS)

Q. How do I follow up on unpaid dividends after processing the e-mandate at the bank?

    A. We advise that you request for copies of the processed e-mandate form(s) including confirmation of date it was uploaded on the portal from the bank and forward to the Registrar for follow up

Q. How do I download the e-mandate form for stocks in my portfolio

    A. Please visit www.kinleysecuritiesltd.com > click on DOWNLOADS > select E-MANDATE FORM to download e-mandate form for each registrar.

Q. How do I generate my statement online?

    A. To generate your statement online, simply follow the steps below:

• Visit our website via www.kinley.xcloudintegra.com
• Another window will appear advising you to login with your USER ID and PASSWORD which will take you to your dashboard
• Click on VIEW STATEMENT on the dashboard and enter the dates for which you want the statement to be generated.

Q. How do I reset my password?

    A. Please click on the FORGOT PASSWORD button, provide the required details to your security questions and a new password will be sent to your email address on our database. Alternatively, you can send an email to info@kinleysecurities.com for assistance.

 

What is NASD Plc?
NASD Plc is a Securities Exchange registered by the Securities and Exchange Commission [“SEC”] to operate a formal Over-The-Counter [“OTC”] market in Nigeria. The acronym NASD was derived from the company’s origin -the “National Association of Securities Dealers”.

What service does NASD Plc. Provide?
NASD Plc. provides trading platforms where all instruments not listed on a traditional exchange, registered by the Securities and Exchange Commission, can be traded through licensed stockbroking houses. It also provides: – a regulated marketplace for OTC transactions; – an avenue for shareholders to trade shares of unlisted public companies; – a centralised source of information and price discovery on unlisted public companies.

What is the ownership structure of NASD?
NASD is currently owned by fifty-nine (59) capital market operators in Nigeria and has an authorised Share Capital of N500 Million. Being a public company however, the shares are freely transferable to any interested investor and may be bought on the OTC market when available.

What is the NASD OTC platform?
The NASD OTC platform is an electronic inter-dealer quotation system that displays historical price data, current price quotes, and market depth information on all long term securities registered by the Securities and Exchange Commission but not listed on any other exchange in Nigeria. The platform provides an avenue for securities to be traded without the issuer being listed thereby providing more transparency and ultimately liquidity to the shareholder and the capital market in general.

NASD facilitates internet trading, what security is in place to protect the integrity of the deals?
NASD platform has encrypted login access, security certificates, clustering and replication of environment for continuous market availability.

Who regulates the NASD OTC market?
The NASD Securities Exchange is regulated by the Commission and it is also a Self-Regulatory Organization [“SRO”].
 Who are the operators in the NASD OTC market?
» Broker/Dealers registered with NASD introduce securities and make market (either buy or sell).
» Accredited Issuing Houses are licensed with NASD to provide financial and Investment advice to Issuers about participating on the OTC market.
» 6 Settlement banks act on behalf of the Broker/ Dealers to ensure that all deals are settled and paid for on the appropriate transaction date.
» Central Securities Clearing System [“CSCS”] is the central depository for NASD OTC market and ensures completion of delivery of transactions A list of all participants is available on our website

What are the official trading hours on the NASD OTC market?
Trades can be executed on NASD OTC market between the hours of 9.30 a.m. and 3.30 p.m. on weekdays (with the exception of public holidays)

What rules guiding transaction on NASD OTC market?
The rules and regulations of the NASD OTC market are designed to protect investors, regulate the activities of Participating Institutions and create an orderly environment for efficient trading of unquoted securities. The full rules of the market can be obtained from our website at this link

What are the benefits of participating in the NASD OTC market?
» Transparency in trade which enhances investors’ confidence
» A centralized platform for price discovery
» A source of long-term funding for companies
» Access to broad range of asset classes » Access to specialized market data
» Innovation of new and unique investment solutions
» Increased corporate visibility which brings economies and savings.
» Improved investor / Shareholder relations

How will NASD monitor trade activity on the OTC market?
NASD’s administrative control facility carries out surveillance on market activities. Trader activity is actively monitored both on and off the trading platform.

Are there penalties for defaulting participating institutions?
The integrity of the market is critical to the continued growth of OTC market in Nigeria. Defaulters will face sanctions, fines and/or suspension from trading as may be imposed by the NASD Disciplinary Committee.

How are trade disputes settled by NASD?
NASD has established a Disciplinary Committee to handle disputes on the market and have put in place rules and regulations guiding market activity. Investors can submit complaints or report any market infraction directly to NASD or via email to [email protected]. The Disciplinary Committee shall investigate the complaints, give both sides an opportunity to be heard and make a decision on the issue.

What is the difference between transfer and trading?
Transfer and trading refers to the same thing, the two words both mean change of ownership of a share certificate.

What securities are tradable on NASD OTC market?
All unlisted securities of public companies registered with Securities and Exchange Commission are tradable on NASD OTC Market.

What is a public unlisted equity?
A public unlisted stock is a unit of share of a public limited company [“Plc”] that is not quoted on the board of any registered exchange in Nigeria. It is often referred to as share.

What if the security of a public company is not registered with Security and Exchange Commission?
Section 54 (1) of the Investment and Securities Act states that “All securities of public companies and all Investments of a collective investment scheme shall be registered with the Commission under the terms and conditions contained herein”. Accordingly, NASD will not trade the securities of public companies that are not registered with the Commission. Such securities contravene investment laws, attract penalties and may expose the investor to undue risk. The issuer of such securities should immediately register the securities with the Commission. Once the Commission has registered the securities, they can then be traded on the NASD OTC market.

Can securities listed on other exchanges be traded on NASD OTC market?
Equities listed on any registered exchange in Nigeria will not be traded on NASD.
 
What happens when a security that was trading on the OTC market gets listed on another exchange?
By default all securities of public companies not quoted on another exchange qualify to be traded on the NASD OTC market. Once a security has been approved for listing on another exchange, that exchange will inform NASD in writing that the security in question is about to be listed. Upon receipt of this written notification, NASD will stop trading in that security and remove it from the NASD platform.

Where can I get a list of all the traded securities on NASD OTC market?
A comprehensive list of all the securities trading on the NASD OTC market is available on our website under the menu “Market > Securities Trading” Section. How do I get financial records of companies that are trading on NASD OTC market? Where such information is available online, NASD will provide a direct link to the financial accounts and statements on the issuer’s website.

How Are Prices Of Securities Determined On The NASD OTC Market?
Prices are determined by demand and supply. Investors are advised to select Brokers who can analyse the company’s financials and advise on appropriate bid and offer values for securities of interest. Where bids exceed offers, the price of the security may rise and where offers exceed bids, the price may be expected to fall to a level where a deal may be struck.

How will trade on NASD OTC market be settled?
All trades will be settled through Central Securities Clearing System [“CSCS”] on T+3 basis (that is, Transaction date plus three days).

Where can I get the Pricelist of securities trading on NASD OTC market?
You can get the Pricelist of securities trading on NASD OTC market from our website under the heading “Daily Market Summary”. View price list here

How can I buy or sell unlisted securities on NASD OTC market?
To buy or sell shares on NASD OTC market, potential investors should contact one of our licensed stockbrokers. Our Stockbroker list has being categorized into two namely Broker/Dealer Firms and Broker Firms and a comprehensive list is available here. Stockbrokers will also be happy to provide you with other available information on unlisted shares.

Will price movements be restricted to a daily percentage on stocks?
Yes. NASD operates a 15% +/- price bands as prices will be determined solely by the forces of demand and supply.

How can investors monitor price movements on NASD OTC Market?
Price movements are documented in the market index. Daily movements are also available on the market ticker on our website. The Daily Market summary allows the public see volumes traded and the deal prices.
Does NASD act as a central counter party?
No, NASD is an organised market that provides a platform where all unquoted securities can be traded between sellers and buyers on behalf of the investors. All trades on the platform are executed by NASD licensed Participating Institutions.

Does NASD invest directly in instruments traded on its platform?
No. NASD Plc is a neutral operator in the financial markets. It only provides platforms for trades to be established.

Is there a free float requirment on the NASD OTC market?
There is a 10% free float requirement for admitted companies. No such requirement exists for companies whose securities are merely admitted to trade.

How does NASD reflect corporate actions on securities that are trading on the OTC market?
As soon as NASD becomes aware of the information, it will announce the corporate actions of securities trading on the OTC Market on the website. As an OTC market, we do not intervene in valuation and pricing but shall make all information necessary for appropriate pricing available to the public.

Can securities traded on NASD OTC platform be used as collateral?
Yes. Lenders will be pleased to learn that OTC trading stocks qualify for lien arrangements. NASD provides universally acceptable prices as a reference while the CSCS will hold dematerialised shares according to the terms of the borrower / lender agreement. For a full list of NASD OTC licensed stockbrokers who can structure your lien arrangement please navigate to: Market > Participating Institution > Broker/Dealer Firms on our website.

How can I verify my share certificate?
i. You will instruct a licensed Stockbroker to verify his signature and open a depository account at CSCS.
ii. The stockbroker will attach the certificate with a duly signed transfer form and send to the Company’s Registrar for verification.
iii. The Registrar will verify the signature securing the certificate and confirm the investors holding. Once verified, the registrar will send a book entry of the investors holding to the depository account held in CSCS iv. CSCS will credit the Investor’s account with units of shares verified and the broker can offer to sell the amount credited at the start of the next trading day.

What is dematerialization?
This is a process in which physical share certificates are converted into electronic format and domiciled with a registered depository. CSCS is currently the only company that provides depository services to the Nigerian capital market. Share certificates must be converted into electronic form before they can be traded on the NASD OTC market.

Do I need to open a seperate CSCS account for NASD OTC market?
Yes, you need to open a CSCS account for transactions on NASD OTC Market. Simply contact your Stockbroker and a new account will be opened on your behalf with CSCS.

To whom do I take my share certificates for dematerialisation?
Take your share certificates to a stockbroker who will present them for verification and subsequent dematerialisation.

Why do I need to sign in two places on the NASD transfer form?
You need to sign in the two places to cover both verification and dematerialisation of the certificate into your CSCS account.

If I have not received my share certificate from the issuer what should I do?
Your Stockbroker should contact the Registrar and obtain your certificate for you.

Can investors still obtain a certificate if so desired?
Yes. Although the dematerialisation process is set up to provide greater security and easy access, Investors may approach the Registrars and request for a physical certificate. Instruments Tradable

What is an Exchange Traded Fund (‘ETF’)?

An Exchange Traded Fund is an investment vehicle that tracks an index, a basket of assets, or a commodity, but trades like regular shares on a stock exchange.

How is an ETF different from other investment vehicles such as mutual funds?

• 
  Other than the offer period, the ETF has no minimum investment
• 
  The ETF will trade continuously throughout the trading hours unlike mutual funds that trade based on closing prices
• 
  The total expense ratio of the ETF is lower than conventional mutual Funds

Which Index would the ETF track?
The ETF will track the performance of the NSE 30 Index

Is the ETF Risk Free?
No. The ETF is exposed to similar risks as the underlying securities.

How can l track my investment in the ETF?
The ETF will be listed on the Exchange Traded Fund Board of the Nigerian Stock Exchange and the units will be credited to the CSCS accounts of individual investors.

What is the total commission charged when stocks are bought and sold?
The ETF units will trade like normal shares. Thus, the regulatory charges remain the same but the brokerage fee will depend on your
specific broker

How long will it take to credit my CSCS account when I buy the ETF?
The normal transaction cycle is T+3

Will the ETF declare dividends like other mutual funds?
No.

How will dividends paid by the underlying securities be treated?
They will be distributed net of fees to investors quarterly

How often will the ETF be rebalanced?
The ETF will be rebalanced every time the underlying index is rebalanced. The NSE 30 Index is expected to be rebalanced quarterly.

When will trading on the ETF be possible on the Floor of the Exchange?
The ETF will be listed on 08 December 2014 and trading will commence immediately.

Can the Fund manager exercise discretion over any of the underlying stocks dues to discrepancies in valuation or corporate
governance?
No. The ETF is a passive vehicle and will only seek to replicate the NSE 30 Index. Securities will only be added or removed when they are added or removed from the underlying Index.

How can an investor invest in the ETF after the offer period?
The investor can approach his/her broker to purchase from the floor of the exchange from existing investors or approach the authorized dealer to create new units. The authorized dealer will publish two-way quotes online/real -time based on the depth of the market.