2 Documents For Stock Exchange Transactions

Buying stocks from the secondary market involves some behind-the-scene documentation, that’s what this article aims to address

Since the Stock Exchange Market is a secondary market, the transfer of stocks from a seller to a buyer will pass through the statutory process as stipulated by the regulatory agency.

This is why it’s advised to deal with a certified broker when you’re making an entry in buying and selling of stocks in Nigeria.

The two documents that would be prepared to facilitate transactions are:

1. Contact note
2. Transfer form

What Is Contract Note?

In stocks trading, the contract note is a document sent by a broker to his client to confirm a purchase on behalf of their client.

Details of the contract note are:

• Sales of shares
• Broker’s commission
• Date of payment
• The applicable stamp duty

What Is Transfer Form?

The transfer form is a document for transferring ownership of shares. This document is prepared after the settlement of payments.

The seller of the shares must sign the form to authorise the removal of his name from the share registration records of the company.

For instance, Mrs Saiz purchased MTN Nigeria shares in 2021 but decides to sell it due to reasons best known to her.

She must sign the transfer form. It should be noted that this process has been digitalised, meaning you don’t have to wait for days to sell or buy stocks at the stock market.

The broker who acts on behalf of the seller will send the form to the company’s registrar.

The transfer form will be sent along with the share certificate of the seller. As such, a new certificate would be issued to the new shareholder.

In case you’ve done the necessary background checks on which company to buy shares, you can check our guide on how to purchase stocks in Nigeria.

Sources:

Longe, O.A. (August 2008): Essential Commerce. Tonad Publishers Limited, Ogun, Nigeria