INTERNAL CONTROL MANUAL FOR

STOCKBROKING FIRMS

INTRODUCTION.

Internal control is defined as the whole system of

controls, financial or otherwise, established by the
management in order to carry on the business of
the organization in an orderly and efficient manner,
ensure adherence to management’s policies,
safeguard the assets and secure as far as possible
the completeness and accuracy of the records.
The main aims and objectives of a documented
control process manuals is to prevent fraud from
occurring right from initiation and would save the
company management a whole lot of resources in
trying to detect and/ or effect corrective actions
which normally cost a sizeable fortune.
We wish to emphasize also that the company
management should not under any circumstances
override laid down controls because it will
undermine and make nonsense the whole essence
of control procedure.

In a capital market oriented organization such as

yours and with the division of functional units as
follows:
1.Finance, Accounts and Administration.
2.Stock broking

3.Capital Market
4.Marketing
5.Branch Operation
6.Internal Audit

We have recommended a well fashioned internal

control process for each of the functions of these
functional units.

Moreover, these recommendations have been

classified into two namely general and specific
recommendations.

We hereby recommend that all officers of the

company be acquainted with this manual to
remove all bottlenecks encountered during the
performance of their work and place the company
in good stead.

This could be done through the convening of a mini

Management retreat that will involve all staff.
GENERAL RECOMMENDATIONS.

• Each unit should be headed by fully qualified

professionals with requisite experience.
• The Internal Audit/ Control unit should be
strengthened with at least one more staff.
• The Internal Control unit should be given free
hand and necessary moral support to carry out
its oversight functions.
• The Internal Control unit should send a control
staff to audit branches at intervals of three
months.
• All visitors must sign the movement register at
the reception indicating clearly officer being
sought for.
• The company filling system should be
centralized.
• All transaction files should be kept in securely
locked cabinets and controlled by the Internal
Audit department.
• Access to these files should be signed for on
collection and inspected when returning by
control.
• All incoming mails must pass through the office
of the Managing Director’s Secretary.
• All incoming mails must be serially recorded in
a register meant for such purpose daily.
• Such mails must be passed to the Managing
Director within 24 hours of receipt.
• The Managing Director would in turn minutes
on the mails to the relevant in house officer for
prompt actions.
• The Managing Director’s Secretary must
ensure that all minuted mails get to the
relevant officer within 24 hours.
• All visitors to the Managing Director must fill
the visitor form at the reception.
• The receptionist must pass properly completed
forms to the Managing director’s Secretary at
intervals of 5 minutes.
• The Managing Director’s Secretary should in
turn pass the visitors’ forms to the MD also at
interval of 5 minutes.
• All company visitors and clients should not be
kept more than 30 minutes in the company
premises.
• All MD’s incoming calls through the company
land line should be screened by the Secretary
before been passed to the MD.
• The MD’s office should be securely locked
whenever he is not in the company premises.
• The MD’s Secretary should monitor movement
to / fro MD office during work hours.

SPECIFIC RECOMMENDATIONS.

1. FINANCE , ACCOUNTs AND ADMIN

CASH AND CHEQUE SYSTEM.

A. All cash and cheques must be recorded and
properly accounted for.
B. Receipt must be issued for all cash and cheque
collection.
C. Cash and cheques received should be banked
with minimum delay.
D. All unbanked cash and cheques due to late
receipt must be kept in a safe, securely locked
in the company premises.
E. There should be weekly reconciliation of bank
accounts, which must be signed by the head of
finance and passed to the Internal Control
Department for scrutiny.
F. Internet banking facility should be subscribed
for all bank accounts to verify all cheque
lodgments.
G. All vouchers must be verified by the Internal
Audit Department before being keyed in to the
system.
H. All transaction vouchers must be validated and
keyed in to the system within 48 hours of
conclusion of transaction.
I. An approved voucher, passed by the Internal
Control Department, must support all
cheque payments.
J. All cash and cheques payment vouchers must
be stamped ‘PAID’. Evidence of which must be
shown to the Internal Control Department.
K. Cash payments can be made up to N50,
000=but anything higher must be paid by
cheque.
L. All company’s payments should be centralized.
M. Cheque payments of N250, 000 and above
should be accompanied by confirmation letter.
N. On no accounts must cash received be spent
before being banked.
O. Payments above N 10,000=must secure the
prior approval of the Group Managing
Director.
P. Petty cash float should be handled by an
account officer and controlled by the Head of
Finance.
Q. All payment and receipt vouchers must be
properly filled serially, updated and passed to
 the Internal Audit Department weekly to
confirm compliance.
R. All I.O.U’s must be approved by the Head of
Finance.
S. All security documents such as cheque books,
payment vouchers e.t.c must be kept in safe
custody.

PAYROLL SYSTEM.
A. Detailed list of staff must be
maintained in a register by the admin
department.

B. The register must be updated

periodically as the need may arise to
cater for retiring and new employees.
C. All staff should open salary accounts
with one of the company’s bankers.

D. On no account should salaries or

wages be paid by cash except on a
 special circumstance(s) and must be
authorized by the Head of Finance.

E. Monthly payroll should be prepared by

the admin department.

F. The monthly payroll should be

prepared using a customized payroll
software system, unless the existing
accounting software has facility for
such.

G. The payroll should be crossed checked

by the Internal Control Department.

H. The cross checked payroll should be

countersigned by the Head of Finance
and Accounts before being passed to
the Managing Director for final
approval.
I. Hard copies of the monthly payroll must
be maintained and kept by the Internal
Control Department.

PURCHASE SYSTEM.
A. All order forms must be authorized
and approved before purchases are
made.
B. The goods inward must be properly
examined by responsible officers for
quality, quantity, condition and terms of
supply.
C. The goods received notes must be
completed, evidence of which must be
showed to the internal control
department before filling.
D. There should be comparison of goods
received notes with purchase orders for
correctness.
E. There should be regular reconciliation
of suppliers accounts with purchases
ledger.
F. Statement of suppliers’ reconciliation
should be scrutinized at intervals by the
control department.
G. Goods received must be put into store
recognized for such purpose and must
be entered into the stock record.
H. The store officer and another senior
officer must sign for all receipts and
issuance out of store.
I. All payment vouchers must be
accompanied by purchase order,
supplier invoice and goods received
notes.
J. All payment for purchases must be
cross checked and passed by the
internal control department.
 THE INVESTMENTS SYSTEM
A. Acquisition of all forms of investments
must be Authorized and approved by
relevant persons.
B. Disposal of investments must go
through the same process
C. Disposal of investments must be done
at the right Value i.e, if not, close to the
market value.
D. On no Account should the company
investment be pledged as security
without relevant authorization and
approval.
E. The share certificate; property deeds
and other documents of title must be
kept safe custody and in the company
name.
F. The head of Finance should maintain a
detailed investment register.
G. There should be quarterly review of t
he investment registrar by the Internal
 Control Department for accuracy and
validity
H. There should be comparison of
contract notes with purchase /sales
instructions
I. There should be proper accounting for
bonus and right issues, capital
repayments and dividends.
J. A monthly schedule of investments
should be submitted to the Internal
Control Department to monitor
movements.
K. There should be a periodic review of
investments to adjust for any diminution
in value.

FIXED ASSESTS SYSTEM.

A. Purchase of fixed assets must be

authorized and approved by responsible
officers.
B. All fixed assets purchase must be
accompanied by sufficient supporting
documents to solidify ownership
Sales, scrapping and transfer of fixed
assets must pass through the authorized
and approval process.
C. Proper books of accounting records
must be maintained for the organization
fixed assets.
D. The Administrative dept should take
custody of the company fixed assets.
E. The Head of Admin should take
inventories of company fixed assets
monthly and pass the result to the
Internal Control Department.
F. All company’s utility bills should be
promptly settled to avoid operation
disruptions.
G. “On no account should the company
fixed assets be put into un-authorized
usage.
H. Correct amounts of depreciation
should be charged on fixed assets.
 I. Income producing assets should be
properly monitored and accounted for by
the Head of Finance.
J. Write down on the value of any assets
should be justified, authorized and
approved by the relevant officers.
K. Access to fixed assets should be by
authorized officers.

MANAGEMENT ACCOUNTS.
A. Source documents must be prepared for all
accounting transactions.
B. The source documents must be cross
checked by a responsible officer.
C. All source documents must be validated by the
internal control department before being keyed
in to the system.
D. All bank accounts must be properly
reconciled at the end of each month.
E. All clients’ accounts must be updated at the
end of each transaction and properly
reconciled.
F. Monthly financials must be prepared on or
before the 10th day of the following month.
G. Relevant schedules must be prepared
along the monthly financial reports.
H. The Head of Accounts must sign off on the
monthly financial reports.
I. Financial reports must be checked by the
internal control department for scrutiny before
being passed to The Managing Director.
J. All actions stated above must be concluded
latest on the 15th day of the following month.

STATUTORY RETURNS TO GOVT AGENCIES.

A. Correct amount of P.A.Y.E should be
deducted from employees’ monthly pay.
B. Deducted P.A.Y.E must be remitted to the
Jurisdiction of the relevant State Internal
Revenue Service on or before the 10th day of
the following month of payment of salaries and
wages.
C. P.A.Y.E computations must be
crosschecked and passed by the Internal
Control Department before remittance.
D. Yearly statutory returns to the relevant State
Internal Revenue Service should be made on or
before the 30th day of the first month of the
New Year.
E. All other statutory returns to Government
agencies and regulatory authorities should be
done at most two days earlier to deadline.
 2. STOCK BROKING.
ACCOUNT OPENING.
A. All prospective clients must fill CSCS and
stock broking account opening forms.
B. The prospective clients must provide as
much as possible all information required on
the account opening forms.
C. All completed account opening forms must be
screened and cleared by the internal control
department before submission to CSCS.
D. All cleared prospective accounts must be
submitted to the CSCS within 48 hours of
clearance by the control department.
E.The officer in charge must do necessary follow
up and get the new account details within 48
hours of submission to CSCS.
F. The responsible officer must perfect the in
house entry details of the new accounts within
24 hours of collection from the CSCS.

SHARE CERTIFICATE PROCESSING.

A. All share certificate collected must be
scripted and the script receipt given to the
client on the spot.

B. The certificate verification fees must

accompany all share certificates.
C. Cash receipt must be issued for all cash
collected from clients for share verification.
D. Detailed register of share certificates
received from clients must be kept and
updated daily.
E.A weekly schedule of script and cash receipt
should be prepared by a responsible officer
and submitted to the internal control
department for scrutiny.
F. Certificate Deposit Form (CDF) must be
prepared and signed for all daily collection of
share certificate within 24 hours of collection.
G. Share certificates collection from branches
must be given same attention as that of the
head office.
 H. Branches clients share certificate must be
serially processed branch by branch and
separate schedules prepared for each branches
I. The Head of Stock broking must cross check all
completed CDF.
J. All processed CDF must be submitted to the
Registrar within 48 hours.
K.Follow up visits and fact finding missions
should be done every fortnight on the
submitted share certificates.
L. Information dissemination software should be
procured to send message to clients, including
branches clients.
M. Clients must be notified on any issues on their
share certificates within 24 hours of the receipt
of such information from the Registrar.
N. Any share certificates irregulars that
concerns branch should be directed to such
branch heads within 48 hours of receipt of such
information from the Registrar.

BUY / SELL OF EXISTING SHARES.

A. All clients buy and sell mandates must
be properly documented.

B. Clients buy instructions must be

passed to the Finance and Accounts
Department to indicate the credit balance
on the clients accounts.

C. The clients stock broking account

number must be indicated clearly on the
purchase mandate form.

D. The internal control department must

cross check the details above before
being passed to higher authority for final
approval.

E. All completed purchase mandates

must be carried out within 24 hours of
completion.
F. A daily schedule of completed and
approved purchase mandates must be
prepared before commencement of
trading.

G. Such schedules must be initialed by the

preparer, checked by the head of stock
broking and passed to the internal control
department before submission to
approving authority.

H. On no accounts should shares be

bought over and above the credit balance
on clients account.

I. All clients’ sale mandates must be cross-

checked in the CSCS for availability.
J. A daily schedule of confirmed sale
mandates must be prepared before
commencement of trading.

K. Such schedules must be initialed by the

preparer, checked by the head of stock
broking and passed to the Internal
Control Department for further check
before submission to approving authority.

L. All confirmed sales mandates must be

jobbed and carried out within 24 hours.

M. Cheques for sales of shares must be given

to clients if requested within the time
limit permitted by the rules of Regulatory
Authorities.
N. Other clients’ instructions other than
issuance of cheque must be carried out
within 48 hours of sales of shares.

O. Monthly accounts and stock position

should be given to clients if requested
for.

P. Such statements must be cross

checked by a senior officer before
forwarding to clients.

Q. The internal control department

should carry out monthly sampling checks
on clients’ accounts for accuracy and
completeness.

R. Branches buy and sell instructions

must be given utmost attention as that of
head office.
PUBLIC OFFERS/ PRIVATE PLACEMENTS
A. All completed offer forms must be serially
and alphabetically collated.
B. A detailed schedule of all applicants must be
prepared within one week of official closure of
all offers.
C. A bank account should be dedicated for all
public offers.
D. Applications must be keyed into the system
immediately they are received.
E.There should be proper applicant by applicant
reconciliation of monies received for all offers.
F. The total value of units applied for must equal
the credit balance in the bank account for all
offers.
G. Applications from branches must be
incorporated into the head office schedule
using the same template.
H. Application from branches must be
received 2 days after the official closure for all
offers.
 I. The internal control department must ensure
that detailed checks are carried out on all
primary market transactions’.
J. The finance and accounts department must
ensure that the company has value for all
payment instruments other than cash before
remittance of offer proceeds to receiving
agents.
K.The offer proceeds and applicants details
should be remitted to receiving agents a day
before deadline.

OTHER SUNDRY ACTIVITIES.

A. Returns to regulatory authorities should not be

delayed under any guise.
B. Such returns must be submitted by a
responsible officer and must be properly
acknowledged by recipients.
C. A well arranged and separate register must
be maintained for each regulatory authority.
 D. A responsible officer should be dedicated
towards clients’ complaints from both head
office and branch offices.
E.Clients’ complaints must be given prompt
attention by dedicated officer.
F. All clients’ complaints must be addressed and
resolved within 3 days of receipt of such
complaints.
G. All branches complaints must be treated
the same as that of the head office.
H. Branches complaints must be addressed
and resolved within 5 working days.

3. CAPITAL MARKET.
PORTFOLIO MANAGEMENTS.

A. Prospective clients’ must pass through the

company’s account opening procedures.
B. The management should expressly set out
the minimum amounts accepted by the
organization.
 C. The minimum tenor should be for six
months with option of rollover as the case may
be.
D. A written agreement must be signed and
sealed by both parties to the transaction.
E.The relevant in house section(s) must be
carried along with the transaction.
F. The funds must be invested within 24 hours of
completion of the above procedures.
G. Periodic statements of accounts should be
rendered to portfolio management clients’.

LOANS—TERM AND MARGIN LOANS.

A. All loan requests must be made by written

application.
B. Loans application received must be
recorded in a register dedicated for such
purpose.
C. Adequate physical and verifiable collateral
must be made available by borrower before
disbursement of loans other than share
purchase loans.
D. The risk analysis of all loans must be
carried out by the relevant in house
department before approval.
E.The control department must clear all
applications before approval by the approving
authority.
F. Loan applicants must provide at least a
guarantor in addition to collateral before
disbursement.
G. The value of collateral must be at least
20% higher than the loan amounts i.e. 120%.
H. Joint custodian accounts should be opened
with the CSCS for all Margin trading facilities.
I. A responsible officer should be a joint signatory
together with margin trading clients to the
custodian accounts.
J. Intending clients for margin trading should be
required to open with at least N1, 000,000 in
cash or N1, 500,000 in stocks.
K.The company should provide a maximum of
200% as additional contribution or as the
Management deem fit.
L. Margin trading stocks should be systematically
spread across sectors.
M. Applicants must sign and complete the
offer letter and other documents before
disbursement.
N. All loans should have a maximum tenor of
one year including rollover.
O. Register of existing loans must be
maintained and updated by a responsible
officer.

P.Margin applications from branches should be

forwarded to the head office with minimum
delay.
Q. Processed branch margin trading should be
handled as head office account.
R. Loans other than margin loan should
require an equity contribution of at least 10%.
S. There should be a quarterly review of loans
files by the Head of Internal control.
T.The rate of interest should be competitive
while bearing in mind the opportunity cost of
funds.
U. The head of units should brief clients on
quarterly basis the state of their stocks.
V. Margin trading clients should be given at
least 10 days notice when the facility is about
to expire.
W. On no account should margin facility take
more than 15% of the shareholder funds of the
organization.
X. Accounting software to monitor all loans
should be procured to enhance loan
administration.
Y. The head of unit must send quarterly loans
report to the control department and copy the
Managing Director.

4. MARKETING.
A. All marketing staff should prepare a weekly
call plan every Friday of the preceding week.
B. The weekly plan should indicate among others,
daily clients to be visited, nature of business
and volume expected.
C. Marketing staff should report back to the
office after daily outings to process clients’
requests with minimum delay.
D. New clients’ account opening should be
forwarded to the relevant in house department
within 24 hours of collection.
E.The marketing department should carry out
periodic review of clients’ service protocols and
improve where necessary.
F. All marketing staff must ensure that their
clients’ instructions are carried out by the
relevant in house department.
G. The company should operate a target
driven strategy for marketing staff.
H. Marketing staff with impressive performance
should be encouraged with incentive e.g
commission on target achieved.
I. There should be weekly tracking of marketing
staff budget performance by the Internal
Control Department.

5. BRANCH OPERATION.

A. Each branch should be headed by experienced

and qualified personnel.
B. A well planned incentive schemes should
be designed for branches.
C. There should be a documented code of
conduct that clearly specifies the mode of
operation for branches.
D. Branch operations must be uniform with
that of the head office.
E.Head office and branch correspondences
should be sent through one of the reliable
courier service providers, taking into
consideration the availability at branches.
F. Each branch must keep and maintain a
detailed register of their clients’.
G. A quarterly database of branches clients
should be sent to the head office.
H. There should be a periodic retreat and
orientation for branch personnel to intimate
them of any new changes in the company
modus operandi.
I. The head office process manuals should be
replicated in all branches.
J. Branches clients’ purchases and sales
mandates must be electronically sent to the
head office same day.
K.All branches client’s complaint that cannot be
handled by branches must get to the head
office within 24 hours.
L. There should be proper clients’ accounts
reconciliation when the need arise.
M. Bank accounts maintained by branches
should be monitored weekly by the heads of
branches.
N. Monthly bank reconciliation statements should
be sent to head office on or before the 10th day
of the following month.
O. There should be a responsible officer in charge
of branch operation in the head office.
P.The officer must ensure branches clients’
accounts are funded before purchases are
made.
Q. The officer must ensure that branches
cheques are dispatched with minimum delay.
R. Branches must send monthly return of
activities to the designated officer in the head
office on or before the 10th day of the following
month.
S.A copy of the monthly report must be
submitted to the Internal Control units for
scrutiny.
T.A Control officer by rotation should pay visit to
branches every quarter to verify monthly
returns.
U. Head office designated officer must
forward branch mails to the relevant in house
department within 24 hours of the receipt of
such mails.
V. Designated officer must pass the necessary
feedback to the concerned branches within 72
hours of forwarding to the relevant in house
department.
W. There should be a systematic succession
plans for all staff branches.
X. All branches expense should be processed
and paid by the head office.
Y.Branches should not under any circumstances
spend out of clients’ money for branch
expenses before being banked.
Z. Feedbacks on irregular certificates from
branches must be dispatched to clients within
48 hours of receipt from head office.
AA.
All branch staff should also open salary
account as the head office staff.
5. INTERNAL AUDIT/ CONTROL.

A. The unit should be involved in the day to day

running of the organization.
B. The Internal Control Department should
report directly to the Managing Director and /or
Board of Directors as applicable.
C. The unit must ensure that all officers
adhere strictly by laid down control policies.
D. The units should carry out periodic review
of general operating environment and
recommend improvement where necessary to
management.

E.The control unit must carry out random review

of clients’ accounts at least every two months.
F. Other transaction processing files must be
reviewed at random at least once a month by a
control staff.
G. The head of department should carry out
surprise investigation into any selected area of
the company operation.
H. The head should also carry out audit
investigation into any areas of activities at the
prompt of the management from time to time.
I. The head of units must be involved in all
investigation into past and present clients’
transaction investigation.
J. The units must ensure that all statutory returns
are rendered as and when due.
K.The units must produce ad-hoc reports to
Management on any exceptions noted in the
course of the work.
L. A monthly/quarterly audit report should be
prepared and discussed with management.