No-one can deny the value that credit cards have. In fact, VISA and Mastercard are probably the best known brand names in the world. When looking for a new card, the best terms are usually available online, from trusted card issuers that formulate the most competitive interest rates and incentives, like Chase credit card online offers.
For millions of consumers, getting the best possible deals is essential and the Internet is where the best terms can be found. Whether buying, booking or donating, the vast majority of transactions are electronic. Of course, applying for better card deals is an important strategic financial move. The two central selling points are low interest rates and fast card approval.
This combination explains why Chase credit cards are amongst the most sought after cards online, but a variety of cardholder benefits are also available directly from the JP Morgan Chase bank too.
The Key Benefits
A credit card agreement is like any other financial agreement, with the small print and finer details the critical elements. Understandably, applicants need to know what these details actually mean and whether they force the card costs up or down. Getting a Chase credit card online, however, highlights the benefits that place them above the competition.
The programs and incentives offered are some of the most competitive available anywhere. Fast card approval is only one of the standard benefits, with a special points system for cardholders, for example, designed to drastically lower the overall cost of the card.
Users can also redeem these user points at a vast variety of places, from restaurants to theme parks, and can use the to avail of lower airfare and travel fares. So, the advantages offered by Chase credit cards affect life in practical ways.
Terms and Conditions To Look For
Of course, applicants must meet set criteria before they can avail of any financial package - and this stands true when applying for Chase credit cards online. Some of this criteria is rather straightforward, not differing much from those set for general bank loans.
For example, an applicant should have a good credit rating, and the actual credit limit on the card will be affected accordingly - poorer ratings mean lower card limits. Other criteria include proof of age (over 18), proof of US citizenship, and a proof of income. These few basic conditions are vital before even hoping for fast card approval, but there are more specific conditions that need to be considered too.
These additional issues relate to interest rates and the specific incentives that are on offer. For example, Chase credit cards are available at 0% APR as an introductory offer. This is usually offered for the first 6 months. Another common incentive is the removal of annual fees for at least the first year.
The Online Application Process
Getting a Chase credit card online comes down to meeting set criteria, but there are other factors involved. The fact is that applying online still requires details on credit scores. If the rating is too low, then the application is likely to be quickly rejected. To get fast card approval the rating needs to be pretty good, though perfect is never expected.
The whole online application process is simple however, with the necessary details entered into one or two simple screen pages, and then submitted by clicking on the relevant button on screen. And when the details provided are proven accurate, and approval is given, the Chase credit card should arrive within a few days.
Showing posts with label Benefits. Show all posts
Showing posts with label Benefits. Show all posts
Wednesday, September 12, 2012
Friday, June 22, 2012
Obtaining Approvals For Second Chance Checking Accounts Online Successfully - The Top Benefits
Creating and submitting an application for a second chance checking account online is perhaps the easiest method to get an account started. Most financial institutions today have internet websites. This way, you save yourself time from visiting the bank physically which could take a few hours depending on the crowd.
In several cases, sending in a digital application is also essentially the most practical way. Some finance institutions may have very few branches in a state. It may be a good hour's drive one-way before you get to the nearest local branch. With the high gas costs, it is definitely expensive. Plus, it also very time depleting. Furthermore, some second chance banking institutions only do business online, so the only approach to open the account is on the web, which fortunately also happens to be one of the most effective.
Prior to you starting on the online application, it could be a good suggestion to check on the benefits that you will get with the account of choice. Also read the web site and when you have any question, you may want to read the frequently asked questions section for answers. Some of your concerns may not be the same as others so if you feel that you need extra explanation on something, you can ask the customer support phone line or contact representatives via e-mail to obtain clarification. You can check the availability of ATMs near you on the list provided. Don't rush through. Take time to understand every thing that you have gone through before you click to apply.
As soon as you have understood every thing and are completely ready to apply, click on the second chance checking accounts online application link or banner. We will to go over what the typical steps needed are. Every second chance bank is different, so expect some differences amongst different banks.
In most online applications, as soon as you choose to start the application, you will be directed to a start section that lists for you several actions that will be needed for the application. The first step to come up is typically the disclosure in which you'll agree to the areas the bank may or can disclose the details you supply them. You will find boxes for you to tick 'yes' or 'no' answer which you will answer yes should you want them to use the details for their advertising or other purposes. Just click 'no' should you feel otherwise.
Right after that is carried out, you'll be required to sign electronically and agree that you have accepted to receive information and that you intend to supply your information honestly. One crucial step to remember would be to print out a copy of the disclosure and application along with your signature before submitting the application online. When you have your signature on it, it indicates you have accepted the terms and conditions. This becomes a contract.
It is best to be honest and complete in providing all needed information. The more complete your answers, the less annoyance it might be for the back and forth down the road. Arguably, having nobody to assist oneself when filling in an application could the principal drawback to most in terms of opening an account online. Nevertheless, a lot of people are able to manage it.
Last but not least, to complete the second chance checking accounts online application, you might be asked to provide 1 or 2 forms of identification, conceivably copies of your driver's licence or other recognized photo IDs. Some banks may require notarized copies to be sent over. You may be asked to mail the application to the second chance bank and wait for some time for it to be processed. As soon as the application is approved, you ought to get an email approval. There may be a couple of final steps before the second chance account is officially opened. But by and large, you would have gotten the confirmation you need - that your application has been accepted and approved.
In several cases, sending in a digital application is also essentially the most practical way. Some finance institutions may have very few branches in a state. It may be a good hour's drive one-way before you get to the nearest local branch. With the high gas costs, it is definitely expensive. Plus, it also very time depleting. Furthermore, some second chance banking institutions only do business online, so the only approach to open the account is on the web, which fortunately also happens to be one of the most effective.
Prior to you starting on the online application, it could be a good suggestion to check on the benefits that you will get with the account of choice. Also read the web site and when you have any question, you may want to read the frequently asked questions section for answers. Some of your concerns may not be the same as others so if you feel that you need extra explanation on something, you can ask the customer support phone line or contact representatives via e-mail to obtain clarification. You can check the availability of ATMs near you on the list provided. Don't rush through. Take time to understand every thing that you have gone through before you click to apply.
As soon as you have understood every thing and are completely ready to apply, click on the second chance checking accounts online application link or banner. We will to go over what the typical steps needed are. Every second chance bank is different, so expect some differences amongst different banks.
In most online applications, as soon as you choose to start the application, you will be directed to a start section that lists for you several actions that will be needed for the application. The first step to come up is typically the disclosure in which you'll agree to the areas the bank may or can disclose the details you supply them. You will find boxes for you to tick 'yes' or 'no' answer which you will answer yes should you want them to use the details for their advertising or other purposes. Just click 'no' should you feel otherwise.
Right after that is carried out, you'll be required to sign electronically and agree that you have accepted to receive information and that you intend to supply your information honestly. One crucial step to remember would be to print out a copy of the disclosure and application along with your signature before submitting the application online. When you have your signature on it, it indicates you have accepted the terms and conditions. This becomes a contract.
It is best to be honest and complete in providing all needed information. The more complete your answers, the less annoyance it might be for the back and forth down the road. Arguably, having nobody to assist oneself when filling in an application could the principal drawback to most in terms of opening an account online. Nevertheless, a lot of people are able to manage it.
Last but not least, to complete the second chance checking accounts online application, you might be asked to provide 1 or 2 forms of identification, conceivably copies of your driver's licence or other recognized photo IDs. Some banks may require notarized copies to be sent over. You may be asked to mail the application to the second chance bank and wait for some time for it to be processed. As soon as the application is approved, you ought to get an email approval. There may be a couple of final steps before the second chance account is officially opened. But by and large, you would have gotten the confirmation you need - that your application has been accepted and approved.
Sunday, May 27, 2012
Stock Investment In Nigeria: Its Process And Benefits
Introduction
Securities are created and issued by corporate bodies and governments, which are in need of funds to finance expansion or development projects. For instance, Wazobia Plc, a manufacturing concern needs to expand its facilities to accommodate present and anticipated consumer demand as well as replace aging or obsolete equipments. It is however, short of internally generated funds (retained earnings) to undertake the projects require long gestation and payback periods, money market facilities which have short tenure would be inappropriate funding sources. The company would be left with one possible option, that is, to access the capital market if it meets the requirements for entry. This could be done by issuing shares and/or debt instruments. (Securities and Exchange Commission, 1999). Thus, capital market is a segment of financial market that is responsible for mobilizing and channelling long term funds into productive investment such as fixed assets. The investments in capital market are at longer period of time, which are held for a minimum of five years.
Moreover, the term securities consist of stocks and bonds. It is not possible in
this paper to digest all aspect of securities. Therefore, this paper shall limit itself to stocks only (i.e. shares).
Theoretical Framework
Fischer and Jordan (2005) see investment as a commitment of funds made in the expectation of some positive rate of return. If the investment is properly undertaken, the return will be commensurate with the risk the investor assumes.
Similarly, an investment is the current commitment of money or other resources in the expectation of reaping future benefits. For example, an individual might purchase shares of stock anticipating that the future proceeds from the shares
will justify both the time that her money is tied up as well as the risk of the investment. You sacrifice something of value now, expecting to benefit from that sacrifice later. (Bodie, Kane, and Marcus, 1998, p. 2).
Distinction between real assets and financial assets
According to Bodie, Kane, & Marcus (1998) real assets are assets used to produce goods and services. In contrast to such real assets are financial assets, such as stocks and bonds. Such securities are no more than sheets of paper (or entries in a computer) Financial assets are claims to the income generated by real assets (or claims on income from the government). If we cannot own our own auto plant, we can still buy shares in General Motors or Toyota and, thereby, share in the income derived from the production of automobiles.
Definition of Stock
In simple terms shares is ownership in share of a corporation. According to Ahmed (2008) securities as stocks and bonds. According to him, a stock represents a share, or percentage, in a corporation's profits and assets. By purchasing stock an investor is buying a percentage of ownership in a company.
Different Types of Stock
There are two main types of stock or shares, namely; ordinary shares and preference shares. Ordinary shares according to Nwiwu, Ya'u, Ezeocha, Ezima and Uzoigwe (2007) this form that part of capital structure of the business contributed by the common stock holders .For a new company it is called venture capital but in the old companies it is called equity share capital.
Ordinary or equity shareholders ordinarily own the business, so all reserves belong to them. They have the right to votes in the company. The shares are non- redeemable even though transferable. However, they have no fixed rate of dividend since rate depends on the level of profitability, company liquidity and management discretion. On the other hand, Preference shares are the hybrid or bat of financing because they exhibit the tendencies of both equity and debt at the same time. They have a fixed percentage dividend before any dividend is paid to the ordinary shareholders.
Share Certificate
Nwaiwu (2004) when shares are allotted to the investor a note will be sent indicating the number of shares allotted. After some period a share certificate will be issued. This certificate is a security, a proof of ownership of the shares in the company. If in future the shareholder wishes to sell the shares, the share certificate must be surrendered to a stockbroker who will forward it to the company's registrar. Nigerian Investments and Securities Law Reports (2004) pointed out that securities in the market are available in either of the following two (2) forms:
i. In certificate form; and
ii. In dematerialized form
When a security is presented in a certificate form, the selling agent needs to verify the signature of the holder and the validity of the presented certificate(s) with the Registrar to the company, after which it could be deposited for sale or any other form of transfer in dematerialized form into the account of the beneficial owner held with the CSCS. Consequently, any subsequent sale or transfer of these securities can validly be undertaken without any need to revert to the Registrar. It therefore follows that securities held in the CSCS account of any holder are deemed to have undergone the necessary verification and confirmation with the Registrars and therefore the holder is rightfully accepted as the true beneficial owner of the securities reflected in his account with CSCS. Thereafter, the only proof of ownership of the said securities that is available to the beneficial owner is the CSCS statement of account issued to him.
Benefits of Investing in Shares
According to Kofa (2004) there are numerous benefits accruing to a shareholder who invests in shares. Such benefits include:
i) Return on investment by way of dividend payment (share of profit by the company on each share owned by the shareholder. This of course depends on the number of shares held by the shareholder. The dividend declared by the company's Directors must however be approved at the company's Annual General Meeting (AGM).
ii) Bonus issue, this is an additional share given to shareholders based on the number of shares owned by each shareholder free of charge at a ratio approved by the Board of Directors/Management and ratified at the company's AGM.
iii) Capital appreciation; this is an increase of share price over time. The value of company share increases due to performance and demand/supply factors. That is, for example, unit price of share purchased today at N10.00 could be N20.00 one year after, due to market forces.
iv) It can be used for security/collateral for loan purposes. Share certificates or statements are acceptable as good collateral for loans by banks and other financial institutions.
v) Pressing immediate needs could be met without seeking any bank/individual financial assistance by disposition of shares.
Risks associated with stock investment
Elakama (2004) emphasized that there are no guarantees when it comes to individual stocks. Some companies pay out dividends, but many others do not. And there is no obligation to pay out dividends even for those firms that have traditionally given them. Without dividends an investor can make money on a stock only through its appreciation in the open market. On the downside, any stock may go bankrupt, in which case your investment is worth nothing.
Similarly, Securities and Exchange Commission (1999) like other forms of investments, there are risk/cost associated with investing in the capital market. There are also obligations on issuers of securities. The risk to investors includes possible unfavourable rate of return owing to depreciation in market value and/or nonpayment of dividends. It could also involve possible loss of investment should a company go burst.
Nature of capital market
At this point, it is important to recognise the nature of capital market. Sulaiman (1999) defines capital market as a network of interrelated institutions governed by operational guidelines which permit the sale of equity and long term debt
Elements of the capital market
There are three identifiable features of a capital market. These are: the instruments; the market place; and the participants.
a) Financial instruments
Financial instruments are the investment products, created to ensure the smooth and easy transfer of funds in the capital market. These instruments, generally known as securities are financial assets, which represent either debt or ownership. The instruments have various features depending on their type between the primary and secondary markets is the fact that proceeds of sale of primary securities go to the issuer (company or government) whereas in the secondary market, proceeds go to the investor.
b) The market place
Securities and Exchange Commission (1999) the capital market is divided into two separate but closely-related segments known as the primary and secondary markets. Primary Market a forum where new shares are offered to both existing shareholders and general public for purchase. Primary market offers can either be made directly by the company to increase its paid-up capital or through privatization of Government holdings, technically called divestment of government shares. On the other hand, Secondary Market is a market where existing shares are traded (sold and bought). Trading of shares at secondary market takes place on the floor of The Nigerian stock exchange. The Stockbrokers buy and sell shares on behalf of their respective clients. Essentially, the Stockbrokers are the dealing member firms licensed by both the Nigeria Stock Exchange (NSE) and the Securities and Exchange Commission (SEC) to deal on shares and offer other services to the investing public. (Kofa, 2004, p.28).
c) Participants in the Market
Securities and Exchange Commission (1999) to facilitate the saving and investment process in any economy, financial intermediaries must exist and in good number. The financial intermediary is essentially a middleman who pools funds form savers and passes on such funds to those in need of them. An intermediary is a specialist) professional) in his line of business and thus, heavily relied upon by his clients to make good investment judgement on their behalf or provide professional advisory services to them. The capital market has a wide array of intermediaries performing various intermediation functions. They include:
i) Issuing Houses: These are institutions which assist corporate bodies and governments to raise long-term funds by packaging security issues for subscription on their behalf. The issuing house by this function plays a central role in the issuance process, and in industrial development. The issuing house as the principal agent of and adviser to the issuer has the responsibility of advising its clients on the most appropriate instrument and method of sourcing the required capital. It also has the responsibility of assembling and coordination all other specialists required in the issue process, ensuring that statutory and all other requirements are met, and that the issue is properly packaged and successfully concluded. Packaging would include pricing of the securities, preparation of the prospectus and other documents, as well as marketing and distribution of the securities.
ii) Stockbrokers/dealers: These are major players in the secondary market. Stockbrokers are the only persons permitted to transact business on the floor of a stock exchange or on the over-the-counter market. A stockbroker, therefore, stands between the seller and buyer of registered securities, making it possible for both parties to realize their desire to buy or sell securities. To act as an agent of the public or deal in his own account, a stockbroker/dealer must be registered by the statutory regulatory agency (Securities and Exchange Commission) and licensed by the stock exchange. As an agent of his client, the stockbroker is under obligations to transact business for him at the best price obtainable in the market.
iii) Investment Advisers: These are institutions/persons registered by the statutory regulatory agency to provide investment advisory services to their client for a fee. Investment advisory services are incidental to stock broking and issuing house business.
iv) Portfolio Managers: These are institutions registered by the statutory regulatory agency to manage the portfolio of clients. Portfolio management entails the receipt of funds, sometimes very large sums, to be invested by the portfolio manager. Most often, the choice of investments are left to the manger who however must send periodic investment statements, to his client. In exercising his discretion, the manager must at all times, consider the best interest of his clients. Both investments advisory and portfolio management services require extensive economic/market analyses to guide investment decisions and advice to clients.
v) Registrars: These are institutions employed by companies to keep comprehensive registers of their members (shareholders) and creditors. In addition, they arrange annual general and extra-ordinary meetings for their clients; distribute stock/share certificates, annual reports, dividend warrants and notices of shareholders' meetings. In cases of issue oversubscription, registrars dispatch surplus monies to subscribers.
vi) Trustees: These are important participants in debt issues and collective investment schemes such as unit trust. The trustee protects the interest of investors in debt instruments by monitoring and ensuring the fulfillment of the term of the trust deed.
vii) Receiving Agents: These are banks and stockbroking firms appointed by the issuing house to serve as centers for the distribution of offer applications forms, as well as for the receipt of subscriptions monies on behalf of the issuing house, for a fee.
viii) Receiving Bankers: These are banks designated by an issuer to receive proceeds of an issue on its behalf.
ix) Solicitors: These are law firms which either represent the issue or the issuer. In practice, two solicitors are required in a public issue of securities. These are the solicitor to the company (issuer) and the solicitor to the issue. The solicitor to the company among other things ensures that the memorandum and articles of association of the company are in consonance with legal requirements of a public company, and effect amendments where necessary. The solicitor would examine issue relating to the authorized capital, ensuring that it can accommodate the issue being proposed. Where a debenture stock is to be floated, the solicitor would make sure that the company has the borrowing power to do so. Generally, it is the duty of the solicitor to the company to ensure that the company complies with the provisions of the corporate law of the country (e.g. the Companies and Allied Matters Decree 1990 in Nigeria).
x) Auditors: These are the existing auditors of the company. In their capacity as the auditors, they provide historical perspective on the accounts of the company for inclusion in the prospectus.
xi) Reporting Accountants: These are firms of accountants which provide independent assessment of the accounts of the company. They review management forecast and examine the reasonableness or otherwise of such forecast. Based on their findings, the reporting accountants can recommend adjustments to the management forecast. They also prepare statement of indebtedness of the company, among other things.
Prerequisites to successful investing in stock
a) Selecting a Broker
According to Fischer and Jordan (2005) the investor's first step in establishing a satisfactory relationship with a broker is to choose a firm that is suitable for his needs and to select a representative of the firm with whom he can work. In practice separating the two choices is hard, for if one has chosen a satisfactory firm but is unhappy with the representative, it is embarrassing to shift one's account to another representative within the same firm. The brokerage firm should be a well-known and long-established institution. In selecting a firm an investor can ask for recommendations from his bank or from friends whose opinions he trusts.
b) Opening a Brokerage Account
This is an investment account, which is opened with the CSCS through a stockbroker. When this account is opened a client is issued with two numbers. The first number is called 'CSCS No.'. It is computer-generated numbers allocated to a new shareholder. It is unique to each stock-broking firm. Although a shareholder can have as many accounts as the number of stockbroking firms he uses. Furthermore, CSCS No is alphanumeric which is used if you have to fill in public offers if you desire shares allotted to you to be credited to your account.
Investors Account No. is numeric which is used internally on the floor for trading. In other word, investor's No. is the CHN represents the Clearing House Number assigned to every shareholder at the first point of entry into the CSCS system. He/She must have completed the CSCS -- R005 Shareholders Particulars Form. They are to provide the same CHN to all subsequent stockbroking firms they may have transactions with for ease of reference.
Other Prerequisites to successful investing in stock include opening a Bank Account, access to Post office Box (P. O. Box), access to Phone and active E-mail Address.
Process of acquiring shares
According to Nigerian Investments and Securities Law Report [NISLR] (2004) shares could be acquired by six (6) main modes;
1) Public offer;
2) Rights offer;
3) Bonus;
4) Nominal transfer; i.e. Transfer of share by way of gift.
5) Transmission from a dead relation or friends or collective investments or investments previously held under a corporate name for a beneficiary; and lastly
6) By purchase on the secondary market.
In general, a prospective investor who wishes to purchase shares on the secondary market is expected to approach a stockbroker such as Newdevco with a request to purchase or to invest in shares at a secondary market. In response, the stockbroker asks the prospective client which stock/shares he/she intends to purchase. Where the client has a selected stock in mind, the stockbroker executes the order according to the expressed need or interest of the client/customer. (Kofa, 2004).
Kofa (2004) added that in a situation where a client does not know which stock/share to buy, the stockbroker explains and advises the client accordingly in detail the shares to invest in. Consequently the stockbroker gives the client the necessary share transfer forms and Central Security Clearing System (CSCS) (particulars of shareholder) for completion. These documents are used to lodge the shares at Registrars Department of the company and also to open the new CSCS account for the client. The shares requested by client to be purchased are normally paid for by Bank Draft or physical clash to a stockbroker, who will in turn given an official receipt for the draft value or cash collected. Thereafter, the stockbroker purchases the shares as requested by client. Whenever the transactions are fully consummated, the stockbroker shall forward the CSCS statement of stock position to the client as evidence of ownership of such shares.
Benefits of Central Security Clearing System (CSCS)
Nigerian Stock Exchange (2008) states the benefits of CSCS to the operation of the Nigerian Stock Exchange as follows:
a) To Investors
Investors statements of stock position are issued every quarter free of charge or on demand for =N=100.00.
Use of stock position as collateral for loan facility after T + 3 settlement cycle i.e. 4 working days. In effect, a statement of stock position is obtainable from CSCS 4 days after transaction.
Investors can speculate more and take advantage of capital appreciation in their investment because of the T+3 settlement cycle.
Reduced risk of loss of certificates.
b) Quoted Companies
Huge cost associated with the production of share certificates for transaction through the secondary market has been significantly reduced.
Before CSCS, a single transaction on a certificate led to the cancellation of the certificate and the issuance of as many as ten (10) certificates depending on allotments made. This is no longer so since few shareholders request for certificates.
Indeed, of the 400,000 shareholders who use CSCS system now, only 2,200 shareholders have requested for certificates to date.
Amalgamation/consolidation of several accounts for a shareholder on the register leading to reduction of cost to the company.
c) Stockbroking Firms
Prompt Inter-member money and stock-settlement are assured.
The problems associated with delivery of shares are minimize
Increased efficiency and profit
Reduction in operational cost.
Disposal of Shares
According to Kofa (2004) a shareholder who wishes to dispose his/her shares is expected to go to a licensed stockbroker only. A Stockbroker is seen as the authorized agent approved by the government to deal in shares, especially in the purchase or sale of shares on behalf of an individual, group or company. The original hare certificates or CSCS statement will be tendered to a Stockbroker who will issue the relevant forms for completion by the shareholder and then forwarded to company Registrars for signature verification. That is, confirm the ownership of the shares in the case of share certificate. However, in the case of CSCS statement, the stockbroker verifies his client's signature. After the confirmation of signature, the share is taken to the floor of, say, the Nigerian Stock Exchange for appropriate disposal. After the disposal contract, a note shall be raised appropriately and the net proceeds is remitted to the shareholder after commissions and statutory charges are deducted as approved by the Nigerian Stock Exchange.
Recent Development in the Nigerian Capital Market
There are two recent developments in the Nigerian Capital Market. First, is the launching the e-dividend payment system which would subsequently solve the problem of unclaimed dividends by the Securities and Exchange Commission (SEC).
According to Olamijulo (2008) the e-dividends payment system refers to the payment of dividend due to shareholders through electronic means into the shareholders' nominated bank accounts. It implies same day clearance for dividend payment. He added that the system would enable shareholders receive their dividends on the same day, thereafter a confirmation letter of the dividend payment would be dispatched by the registrar. The e-dividend payment system would minimise cases of unclaimed dividends, eliminate dividend loss in transit, the forfeiture of dividends in the future and enhance the ability of shareholders to immediately access and utilize the proceeds of their investments.
Secondly, is the launching of e-allotment which will be fully operational from January 1, 2009. Ahmed, (2008) reported that the system is aimed at enabling the achievement of a certificate-less system in the Nigeria capital market.
E-allotment of shares as it is known is a process of direct credit of approved allotment on offers to the CSCS account of shareholders, as against the conventional issuance of share certificates. It is a process which will aid the achievement of certificateless transaction in the Nigerian capital market. (UBA Registrars, 2008)
The e-allotment is introduced as a result of postal services delays, and "the need to reduce costs in printing and dispatch of share certificates as well as to enable all investors in public offers speedily allotted shares."
Conclusions and Recommendations
It can be concluded that in Nigeria, the only obstacle to stock investment is the low level of investors' enlightenment on the benefits of the entire system, which has greatly affected the acceptance level negatively. Therefore, it is recommended that the regulatory agencies like the Nigerian Stock Exchange and Securities and Exchange Commission should continue to enlighten Nigerian especially, using major Nigerian languages on the gains of stock investment.
Securities are created and issued by corporate bodies and governments, which are in need of funds to finance expansion or development projects. For instance, Wazobia Plc, a manufacturing concern needs to expand its facilities to accommodate present and anticipated consumer demand as well as replace aging or obsolete equipments. It is however, short of internally generated funds (retained earnings) to undertake the projects require long gestation and payback periods, money market facilities which have short tenure would be inappropriate funding sources. The company would be left with one possible option, that is, to access the capital market if it meets the requirements for entry. This could be done by issuing shares and/or debt instruments. (Securities and Exchange Commission, 1999). Thus, capital market is a segment of financial market that is responsible for mobilizing and channelling long term funds into productive investment such as fixed assets. The investments in capital market are at longer period of time, which are held for a minimum of five years.
Moreover, the term securities consist of stocks and bonds. It is not possible in
this paper to digest all aspect of securities. Therefore, this paper shall limit itself to stocks only (i.e. shares).
Theoretical Framework
Fischer and Jordan (2005) see investment as a commitment of funds made in the expectation of some positive rate of return. If the investment is properly undertaken, the return will be commensurate with the risk the investor assumes.
Similarly, an investment is the current commitment of money or other resources in the expectation of reaping future benefits. For example, an individual might purchase shares of stock anticipating that the future proceeds from the shares
will justify both the time that her money is tied up as well as the risk of the investment. You sacrifice something of value now, expecting to benefit from that sacrifice later. (Bodie, Kane, and Marcus, 1998, p. 2).
Distinction between real assets and financial assets
According to Bodie, Kane, & Marcus (1998) real assets are assets used to produce goods and services. In contrast to such real assets are financial assets, such as stocks and bonds. Such securities are no more than sheets of paper (or entries in a computer) Financial assets are claims to the income generated by real assets (or claims on income from the government). If we cannot own our own auto plant, we can still buy shares in General Motors or Toyota and, thereby, share in the income derived from the production of automobiles.
Definition of Stock
In simple terms shares is ownership in share of a corporation. According to Ahmed (2008) securities as stocks and bonds. According to him, a stock represents a share, or percentage, in a corporation's profits and assets. By purchasing stock an investor is buying a percentage of ownership in a company.
Different Types of Stock
There are two main types of stock or shares, namely; ordinary shares and preference shares. Ordinary shares according to Nwiwu, Ya'u, Ezeocha, Ezima and Uzoigwe (2007) this form that part of capital structure of the business contributed by the common stock holders .For a new company it is called venture capital but in the old companies it is called equity share capital.
Ordinary or equity shareholders ordinarily own the business, so all reserves belong to them. They have the right to votes in the company. The shares are non- redeemable even though transferable. However, they have no fixed rate of dividend since rate depends on the level of profitability, company liquidity and management discretion. On the other hand, Preference shares are the hybrid or bat of financing because they exhibit the tendencies of both equity and debt at the same time. They have a fixed percentage dividend before any dividend is paid to the ordinary shareholders.
Share Certificate
Nwaiwu (2004) when shares are allotted to the investor a note will be sent indicating the number of shares allotted. After some period a share certificate will be issued. This certificate is a security, a proof of ownership of the shares in the company. If in future the shareholder wishes to sell the shares, the share certificate must be surrendered to a stockbroker who will forward it to the company's registrar. Nigerian Investments and Securities Law Reports (2004) pointed out that securities in the market are available in either of the following two (2) forms:
i. In certificate form; and
ii. In dematerialized form
When a security is presented in a certificate form, the selling agent needs to verify the signature of the holder and the validity of the presented certificate(s) with the Registrar to the company, after which it could be deposited for sale or any other form of transfer in dematerialized form into the account of the beneficial owner held with the CSCS. Consequently, any subsequent sale or transfer of these securities can validly be undertaken without any need to revert to the Registrar. It therefore follows that securities held in the CSCS account of any holder are deemed to have undergone the necessary verification and confirmation with the Registrars and therefore the holder is rightfully accepted as the true beneficial owner of the securities reflected in his account with CSCS. Thereafter, the only proof of ownership of the said securities that is available to the beneficial owner is the CSCS statement of account issued to him.
Benefits of Investing in Shares
According to Kofa (2004) there are numerous benefits accruing to a shareholder who invests in shares. Such benefits include:
i) Return on investment by way of dividend payment (share of profit by the company on each share owned by the shareholder. This of course depends on the number of shares held by the shareholder. The dividend declared by the company's Directors must however be approved at the company's Annual General Meeting (AGM).
ii) Bonus issue, this is an additional share given to shareholders based on the number of shares owned by each shareholder free of charge at a ratio approved by the Board of Directors/Management and ratified at the company's AGM.
iii) Capital appreciation; this is an increase of share price over time. The value of company share increases due to performance and demand/supply factors. That is, for example, unit price of share purchased today at N10.00 could be N20.00 one year after, due to market forces.
iv) It can be used for security/collateral for loan purposes. Share certificates or statements are acceptable as good collateral for loans by banks and other financial institutions.
v) Pressing immediate needs could be met without seeking any bank/individual financial assistance by disposition of shares.
Risks associated with stock investment
Elakama (2004) emphasized that there are no guarantees when it comes to individual stocks. Some companies pay out dividends, but many others do not. And there is no obligation to pay out dividends even for those firms that have traditionally given them. Without dividends an investor can make money on a stock only through its appreciation in the open market. On the downside, any stock may go bankrupt, in which case your investment is worth nothing.
Similarly, Securities and Exchange Commission (1999) like other forms of investments, there are risk/cost associated with investing in the capital market. There are also obligations on issuers of securities. The risk to investors includes possible unfavourable rate of return owing to depreciation in market value and/or nonpayment of dividends. It could also involve possible loss of investment should a company go burst.
Nature of capital market
At this point, it is important to recognise the nature of capital market. Sulaiman (1999) defines capital market as a network of interrelated institutions governed by operational guidelines which permit the sale of equity and long term debt
Elements of the capital market
There are three identifiable features of a capital market. These are: the instruments; the market place; and the participants.
a) Financial instruments
Financial instruments are the investment products, created to ensure the smooth and easy transfer of funds in the capital market. These instruments, generally known as securities are financial assets, which represent either debt or ownership. The instruments have various features depending on their type between the primary and secondary markets is the fact that proceeds of sale of primary securities go to the issuer (company or government) whereas in the secondary market, proceeds go to the investor.
b) The market place
Securities and Exchange Commission (1999) the capital market is divided into two separate but closely-related segments known as the primary and secondary markets. Primary Market a forum where new shares are offered to both existing shareholders and general public for purchase. Primary market offers can either be made directly by the company to increase its paid-up capital or through privatization of Government holdings, technically called divestment of government shares. On the other hand, Secondary Market is a market where existing shares are traded (sold and bought). Trading of shares at secondary market takes place on the floor of The Nigerian stock exchange. The Stockbrokers buy and sell shares on behalf of their respective clients. Essentially, the Stockbrokers are the dealing member firms licensed by both the Nigeria Stock Exchange (NSE) and the Securities and Exchange Commission (SEC) to deal on shares and offer other services to the investing public. (Kofa, 2004, p.28).
c) Participants in the Market
Securities and Exchange Commission (1999) to facilitate the saving and investment process in any economy, financial intermediaries must exist and in good number. The financial intermediary is essentially a middleman who pools funds form savers and passes on such funds to those in need of them. An intermediary is a specialist) professional) in his line of business and thus, heavily relied upon by his clients to make good investment judgement on their behalf or provide professional advisory services to them. The capital market has a wide array of intermediaries performing various intermediation functions. They include:
i) Issuing Houses: These are institutions which assist corporate bodies and governments to raise long-term funds by packaging security issues for subscription on their behalf. The issuing house by this function plays a central role in the issuance process, and in industrial development. The issuing house as the principal agent of and adviser to the issuer has the responsibility of advising its clients on the most appropriate instrument and method of sourcing the required capital. It also has the responsibility of assembling and coordination all other specialists required in the issue process, ensuring that statutory and all other requirements are met, and that the issue is properly packaged and successfully concluded. Packaging would include pricing of the securities, preparation of the prospectus and other documents, as well as marketing and distribution of the securities.
ii) Stockbrokers/dealers: These are major players in the secondary market. Stockbrokers are the only persons permitted to transact business on the floor of a stock exchange or on the over-the-counter market. A stockbroker, therefore, stands between the seller and buyer of registered securities, making it possible for both parties to realize their desire to buy or sell securities. To act as an agent of the public or deal in his own account, a stockbroker/dealer must be registered by the statutory regulatory agency (Securities and Exchange Commission) and licensed by the stock exchange. As an agent of his client, the stockbroker is under obligations to transact business for him at the best price obtainable in the market.
iii) Investment Advisers: These are institutions/persons registered by the statutory regulatory agency to provide investment advisory services to their client for a fee. Investment advisory services are incidental to stock broking and issuing house business.
iv) Portfolio Managers: These are institutions registered by the statutory regulatory agency to manage the portfolio of clients. Portfolio management entails the receipt of funds, sometimes very large sums, to be invested by the portfolio manager. Most often, the choice of investments are left to the manger who however must send periodic investment statements, to his client. In exercising his discretion, the manager must at all times, consider the best interest of his clients. Both investments advisory and portfolio management services require extensive economic/market analyses to guide investment decisions and advice to clients.
v) Registrars: These are institutions employed by companies to keep comprehensive registers of their members (shareholders) and creditors. In addition, they arrange annual general and extra-ordinary meetings for their clients; distribute stock/share certificates, annual reports, dividend warrants and notices of shareholders' meetings. In cases of issue oversubscription, registrars dispatch surplus monies to subscribers.
vi) Trustees: These are important participants in debt issues and collective investment schemes such as unit trust. The trustee protects the interest of investors in debt instruments by monitoring and ensuring the fulfillment of the term of the trust deed.
vii) Receiving Agents: These are banks and stockbroking firms appointed by the issuing house to serve as centers for the distribution of offer applications forms, as well as for the receipt of subscriptions monies on behalf of the issuing house, for a fee.
viii) Receiving Bankers: These are banks designated by an issuer to receive proceeds of an issue on its behalf.
ix) Solicitors: These are law firms which either represent the issue or the issuer. In practice, two solicitors are required in a public issue of securities. These are the solicitor to the company (issuer) and the solicitor to the issue. The solicitor to the company among other things ensures that the memorandum and articles of association of the company are in consonance with legal requirements of a public company, and effect amendments where necessary. The solicitor would examine issue relating to the authorized capital, ensuring that it can accommodate the issue being proposed. Where a debenture stock is to be floated, the solicitor would make sure that the company has the borrowing power to do so. Generally, it is the duty of the solicitor to the company to ensure that the company complies with the provisions of the corporate law of the country (e.g. the Companies and Allied Matters Decree 1990 in Nigeria).
x) Auditors: These are the existing auditors of the company. In their capacity as the auditors, they provide historical perspective on the accounts of the company for inclusion in the prospectus.
xi) Reporting Accountants: These are firms of accountants which provide independent assessment of the accounts of the company. They review management forecast and examine the reasonableness or otherwise of such forecast. Based on their findings, the reporting accountants can recommend adjustments to the management forecast. They also prepare statement of indebtedness of the company, among other things.
Prerequisites to successful investing in stock
a) Selecting a Broker
According to Fischer and Jordan (2005) the investor's first step in establishing a satisfactory relationship with a broker is to choose a firm that is suitable for his needs and to select a representative of the firm with whom he can work. In practice separating the two choices is hard, for if one has chosen a satisfactory firm but is unhappy with the representative, it is embarrassing to shift one's account to another representative within the same firm. The brokerage firm should be a well-known and long-established institution. In selecting a firm an investor can ask for recommendations from his bank or from friends whose opinions he trusts.
b) Opening a Brokerage Account
This is an investment account, which is opened with the CSCS through a stockbroker. When this account is opened a client is issued with two numbers. The first number is called 'CSCS No.'. It is computer-generated numbers allocated to a new shareholder. It is unique to each stock-broking firm. Although a shareholder can have as many accounts as the number of stockbroking firms he uses. Furthermore, CSCS No is alphanumeric which is used if you have to fill in public offers if you desire shares allotted to you to be credited to your account.
Investors Account No. is numeric which is used internally on the floor for trading. In other word, investor's No. is the CHN represents the Clearing House Number assigned to every shareholder at the first point of entry into the CSCS system. He/She must have completed the CSCS -- R005 Shareholders Particulars Form. They are to provide the same CHN to all subsequent stockbroking firms they may have transactions with for ease of reference.
Other Prerequisites to successful investing in stock include opening a Bank Account, access to Post office Box (P. O. Box), access to Phone and active E-mail Address.
Process of acquiring shares
According to Nigerian Investments and Securities Law Report [NISLR] (2004) shares could be acquired by six (6) main modes;
1) Public offer;
2) Rights offer;
3) Bonus;
4) Nominal transfer; i.e. Transfer of share by way of gift.
5) Transmission from a dead relation or friends or collective investments or investments previously held under a corporate name for a beneficiary; and lastly
6) By purchase on the secondary market.
In general, a prospective investor who wishes to purchase shares on the secondary market is expected to approach a stockbroker such as Newdevco with a request to purchase or to invest in shares at a secondary market. In response, the stockbroker asks the prospective client which stock/shares he/she intends to purchase. Where the client has a selected stock in mind, the stockbroker executes the order according to the expressed need or interest of the client/customer. (Kofa, 2004).
Kofa (2004) added that in a situation where a client does not know which stock/share to buy, the stockbroker explains and advises the client accordingly in detail the shares to invest in. Consequently the stockbroker gives the client the necessary share transfer forms and Central Security Clearing System (CSCS) (particulars of shareholder) for completion. These documents are used to lodge the shares at Registrars Department of the company and also to open the new CSCS account for the client. The shares requested by client to be purchased are normally paid for by Bank Draft or physical clash to a stockbroker, who will in turn given an official receipt for the draft value or cash collected. Thereafter, the stockbroker purchases the shares as requested by client. Whenever the transactions are fully consummated, the stockbroker shall forward the CSCS statement of stock position to the client as evidence of ownership of such shares.
Benefits of Central Security Clearing System (CSCS)
Nigerian Stock Exchange (2008) states the benefits of CSCS to the operation of the Nigerian Stock Exchange as follows:
a) To Investors
Investors statements of stock position are issued every quarter free of charge or on demand for =N=100.00.
Use of stock position as collateral for loan facility after T + 3 settlement cycle i.e. 4 working days. In effect, a statement of stock position is obtainable from CSCS 4 days after transaction.
Investors can speculate more and take advantage of capital appreciation in their investment because of the T+3 settlement cycle.
Reduced risk of loss of certificates.
b) Quoted Companies
Huge cost associated with the production of share certificates for transaction through the secondary market has been significantly reduced.
Before CSCS, a single transaction on a certificate led to the cancellation of the certificate and the issuance of as many as ten (10) certificates depending on allotments made. This is no longer so since few shareholders request for certificates.
Indeed, of the 400,000 shareholders who use CSCS system now, only 2,200 shareholders have requested for certificates to date.
Amalgamation/consolidation of several accounts for a shareholder on the register leading to reduction of cost to the company.
c) Stockbroking Firms
Prompt Inter-member money and stock-settlement are assured.
The problems associated with delivery of shares are minimize
Increased efficiency and profit
Reduction in operational cost.
Disposal of Shares
According to Kofa (2004) a shareholder who wishes to dispose his/her shares is expected to go to a licensed stockbroker only. A Stockbroker is seen as the authorized agent approved by the government to deal in shares, especially in the purchase or sale of shares on behalf of an individual, group or company. The original hare certificates or CSCS statement will be tendered to a Stockbroker who will issue the relevant forms for completion by the shareholder and then forwarded to company Registrars for signature verification. That is, confirm the ownership of the shares in the case of share certificate. However, in the case of CSCS statement, the stockbroker verifies his client's signature. After the confirmation of signature, the share is taken to the floor of, say, the Nigerian Stock Exchange for appropriate disposal. After the disposal contract, a note shall be raised appropriately and the net proceeds is remitted to the shareholder after commissions and statutory charges are deducted as approved by the Nigerian Stock Exchange.
Recent Development in the Nigerian Capital Market
There are two recent developments in the Nigerian Capital Market. First, is the launching the e-dividend payment system which would subsequently solve the problem of unclaimed dividends by the Securities and Exchange Commission (SEC).
According to Olamijulo (2008) the e-dividends payment system refers to the payment of dividend due to shareholders through electronic means into the shareholders' nominated bank accounts. It implies same day clearance for dividend payment. He added that the system would enable shareholders receive their dividends on the same day, thereafter a confirmation letter of the dividend payment would be dispatched by the registrar. The e-dividend payment system would minimise cases of unclaimed dividends, eliminate dividend loss in transit, the forfeiture of dividends in the future and enhance the ability of shareholders to immediately access and utilize the proceeds of their investments.
Secondly, is the launching of e-allotment which will be fully operational from January 1, 2009. Ahmed, (2008) reported that the system is aimed at enabling the achievement of a certificate-less system in the Nigeria capital market.
E-allotment of shares as it is known is a process of direct credit of approved allotment on offers to the CSCS account of shareholders, as against the conventional issuance of share certificates. It is a process which will aid the achievement of certificateless transaction in the Nigerian capital market. (UBA Registrars, 2008)
The e-allotment is introduced as a result of postal services delays, and "the need to reduce costs in printing and dispatch of share certificates as well as to enable all investors in public offers speedily allotted shares."
Conclusions and Recommendations
It can be concluded that in Nigeria, the only obstacle to stock investment is the low level of investors' enlightenment on the benefits of the entire system, which has greatly affected the acceptance level negatively. Therefore, it is recommended that the regulatory agencies like the Nigerian Stock Exchange and Securities and Exchange Commission should continue to enlighten Nigerian especially, using major Nigerian languages on the gains of stock investment.
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