How to guide against stock brokers’ sharp practices

If you give an order to your broker to buy a particular stock and he claims to buy at a price higher than 5 percent the previous day’s closing price, then you need to be curious because no stock is allowed to rise above or fall below 5 percent. On a daily basis, stocks oscillate within 10 percent range (5 percent upper and 5 percent lower bound), according to the Nigerian Stock Exchange trading rule.

The trouble with investors is that many do not take the pains to confirm his broker‘s transaction price. Really, there are mid prices between the opening and closing prices. And it is possible that the price at which your stock broker traded your stock is different from the day’s closing price. Therefore, it is important to ascertain this.
Avoid depositing cash with your broker to buy shares for you. It could be an opportunity for a fraudulent stock broker to misuse the money. A good and sincere broker would advise you to pay your money for stock investment into a dedicated account and require you to present the bank deposit teller.

The investment house should open an account for you with the Central Securities and Clearing System (CSCS) if you are investing through them for the first time. This normally should not take more than 5 days. In completing the relevant account opening form, ensure you clearly state your contact especially your mobile telephone number. The account opening automatically links you to the trading engine and trade alert facility such that once any transaction takes place in your stock; your mobile telephone triggers you. If the transaction is unauthorized , you can abort the transaction.

It is also very important to clearly indicate your next of kins as this allows him or her to effect share transmission in the event of death. The crisis that rocks families after the demise of the investor underscores the need for specification of the next of kin.
After giving order to your investment adviser, ensure that your instruction is on record. This is important because it enables you to monitor if your order was executed on the agreed date.

There are instances of staff of stock broking firms using the money entrusted with the firm to speculate on stocks for short term capital gains.
You should insist that your broker print your CSCS statement of account and your stock position. Beside the trade alert system, there is telephone service at the CSCS which gives you independent opportunity to get correct stock position.