SEC extends recapitalisation deadline for operators to March this year

Securities and Exchange Commission

Securities and Exchange Commission

Reiterates commitment to development of Exchanges

Again, the Securities and Exchange Commission (SEC) has announced the extension of the deadline for market operators to comply with the minimum capital requirement by three months, from the initial December 31, 2016. This means that operators have till March 31st to increase their capital base.

The extension followed a plea by stockbrokers, who had requested additional six months to enable them comply successfully. The fact that the market regulator keeps pushing forward the deadline is indicative of the extent of illiquidity in the market, which is characterised by economic meltdown and dwindling purchasing power of the masses, thereby making investment in stocks unattractive.

But full compliance of the Minimum Operating Standards (MOS) for dealing members would help the market to develop robust controls; strong governance framework and effective human capital. This will enable them achieve best-in-class operations in order to compete on a global level for the benefit of investors and the capital market.

SEC, Nigeria’s apex capital market regulator had, last year, granted an extended window of 15 months to December 30, 2016, from the initial September 30, 2015 deadline to capital market operators that failed to meet the initial recapitalisation deadline to comply with the new minimum capital requirements for their functions.

The Commission had in December 2013, announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that was initially scheduled to take off by January 1, 2015. It however extended the deadline to September 30, 2015.

A breakdown of the new recapitalisation requirements are as follows:
Broker/dealer from N70 million to N300 million – 329 per cent rise;
Broker from N40 million to N200 million – 400 per cent;
Dealer N30 million to N100 million – 233 per cent;
Issuing houses N150 million to N200 million;

Underwriter N100 million to N200 million – 100 per cent; Trustees N40 million to N300 million; Rating agencies, and portfolio and fund managers N20 million to N150 million – 650 per cent respectively;Registrar N50 million to N150 million;Corporate investment adviser unchanged at N5 million, and; Individual investment advisers N500,000 to N2 million – 300 per cent.

The new Executive Committee, Association of Stockbroking Houses of Nigeria (ASHON), led by its Chairman, Patrick Ezeagu, during a courtesy call to the Commission last week, had solicited for the grace period for the recapitalisation to be extended by six months.

But the Director General, SEC, Mounir Gwarzo, granted the Association’s request by extending the recapitalisation exercise by three months.He restated the Commission’s resolve to promote the development of Commodity Exchanges in the country, noting it is willing to support the Lagos Commodities & Futures Exchange being midwifed by ASHON.

Gwarzo insisted on the three months extension, aligning with their argument that stockbrokers carry equities in their balance sheet and prices of equities have gone down thus affecting their capital 

The Group also noted with concern the proposed amendment of Rule 56(1) – Function of Brokers (Harmonisation of Registration requirement for incidental functions). According to them:“The development will preclude brokers from providing Investment advice to their clients/Public.” 

ASHON, while acknowledging not knowing the thinking behind the proposed amendment, solicited for the reconsideration of the proposal. The call is based on the backdrop of the so called value addition provided by brokers/dealers in providing investment advice to their clients.

They argued that “a lot of stock broking houses had well established research desks that not only help to broadcast market information on a continuous basis, but also carry out in-depth analysis and provide opinions to complex financial issues to their clients.”

The Association also expressed their dismay over the Federal Government’s sole reliance and emphasis on monetary policy for macroeconomic management to the detriment of the capital market, while accepting to look at the Investment and Securities Tribunal (IST) funding proposal being championed by SEC and NSE.

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