Stockbroker–Client Agreement (Nigeria)

A Stockbroker–Client Agreement in Nigeria sets out the rights, duties and consideration binding the parties to it.

Section 38 of the Investments and Securities Act 2007 prohibits any person from acting as a securities dealer or stockbroker in Nigeria without registration with the SEC. Registered stockbrokers are members of the Nigerian Exchange Group (NGX) under the NGX Rules and must hold a dealing licence issued by the SEC. The SEC Rules and Regulations 2013 (as amended) impose specific requirements on the content of client agreements, including the duty of disclosure, conflicts of interest management, order execution policy, and the handling of client assets held in segregated accounts.

A Stockbroker–Client Agreement defines the scope of the stockbroker's authority to act on the client's instructions, the fee and commission structure (regulated by the NGX and SEC fee schedules), the client's Central Securities Clearing System (CSCS) account details (CSCS Limited administers the clearing and settlement system for all Nigerian Exchange transactions), and the settlement cycle applicable to Nigerian Exchange transactions — currently T+3 (trade date plus three business days) under the NGX Settlement Rules.

The Central Bank of Nigeria (CBN) and the SEC have joint oversight responsibilities under the Financial Sector Regulation Coordinating Committee (FSRCC) framework, and stockbrokers must comply with Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) requirements under the Money Laundering (Prevention and Prohibition) Act 2022 when onboarding clients.

The legal framework governing the Stockbroker–Client Agreement (Nigeria) in Nigeria draws on several key statutes and regulatory bodies. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Parties executing a Stockbroker–Client Agreement (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Investments and Securities Act 2007 sets the foundational requirements.

A Stockbroker–Client Agreement is required in Nigeria whenever an individual or institution wishes to trade securities on the Nigerian Exchange Group through a registered stockbroker.

A Stockbroker–Client Agreement is required when an individual investor opens a new trading account with a SEC-registered stockbroker to buy or sell shares, bonds, or other securities listed on the Nigerian Exchange Group (NGX), as the ISA 2007 and SEC Rules mandate a written agreement before any client transactions are executed.

A Stockbroker–Client Agreement is needed when an institutional investor — such as a pension fund administrator regulated by the National Pension Commission (PenCom), a collective investment scheme registered with the SEC, or a bank proprietary trading desk — engages a stockbroker for securities execution services and the parties need a formal agreement governing order types, settlement, reporting, and fee arrangements.

A Stockbroker–Client Agreement is required when a foreign investor participates in the Nigerian capital market through a SEC-registered local custodian or broker-dealer under the SEC's Foreign Portfolio Investment (FPI) framework and the NGX's foreign investor participation rules, which require documented investment mandates and client agreements.

A Stockbroker–Client Agreement is needed when an existing agreement between a stockbroker and client requires renewal, revision, or replacement following a change in the stockbroker's fee schedule, services offered, regulatory requirements, or following an amendment to the SEC Rules and Regulations or the NGX Rules that affects the terms of the existing agreement.

A Stockbroker–Client Agreement is required when a corporate entity opens a securities trading account for employee share ownership plan (ESOP) management, treasury investment activities, or employee welfare fund management and needs a formal documented mandate governing the stockbroker's authority.

Parties in Nigeria should prepare a Stockbroker–Client Agreement (Nigeria) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A valid Stockbroker–Client Agreement under the Investments and Securities Act 2007 and SEC Rules must contain the following essential elements.

Parties' Details: Full legal names, addresses, SEC registration numbers, and Tax Identification Numbers (TINs) of both the stockbroker firm (including its NGX dealing licence number) and the client. For corporate clients, the CAC RC number under the Companies and Allied Matters Act 2020 and details of the authorised signatory must be included.

Client Account Details: The client's CSCS (Central Securities Clearing System) account number, bank account details for dividend and settlement payments, and the client's BVN (Bank Verification Number) as required by the Central Bank of Nigeria (CBN) and the Nigeria Financial Intelligence Unit (NFIU) for AML compliance.

Scope of Authority: A clear statement of whether the stockbroker is authorised to execute transactions on a discretionary basis (on the stockbroker's professional judgment) or a non-discretionary basis (strictly on the client's specific written or oral instructions). Most retail agreements in Nigeria are non-discretionary.

Fees and Commission: The stockbroker's commission rates in accordance with the SEC-prescribed maximum brokerage commission schedule under the ISA 2007 (currently 1.35% of transaction value for equity trades under the NGX fee schedule), the SEC transaction levy, the VAT at 7.5% under the Value Added Tax Act 1993 (as amended by the Finance Act 2020), and any other charges.

Order Execution Policy: The broker's order execution policy, including the markets on which orders will be executed, the order types accepted (market orders, limit orders, stop orders), order validity periods, and the broker's obligation to seek best execution for the client under SEC Rules and NGX Trading Rules.

Segregation of Client Assets: Confirmation that client funds and securities are held in segregated accounts, separate from the broker's own assets, as required by Section 161 of the Investments and Securities Act 2007 and the SEC's Guidelines on Segregation of Client Assets.

Dispute Resolution: A clause designating the SEC Investments and Securities Tribunal (IST) established under Section 274 of the ISA 2007 as the primary forum for disputes between the stockbroker and the client arising from the agreement, with recourse to the Federal High Court on questions of law.

Additional compliance elements for a Stockbroker–Client Agreement (Nigeria) used in Nigeria include: Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Forms-legal.com provides this template as a starting point for Nigeria-compliant documentation.