The leadership of the stockbroking community comprising the Chartered Institute of Stockbrokers (CIS) and Association of Stockbroking Houses of Nigeria (ASHON) is to meet with the management of the Securities and Exchange Commission (SEC) over the new minimum capital requirements for capital market operators.
SEC had, in pursuant to Section 313(6) of the Investments and Securities Act (ISA) 2007 introduced a new capital base that raised the share capital for broker/dealer by about 389 per cent.
The commission has also set December 31, 2014 as deadline for existing operators to comply with the new minimum capital requirements.
Reacting to the new capital base, President of CIS, Mr. Ariyo Olushekun and Chairman of ASHON, Mr. Emeka Madubuike at a joint press conference last Friday, said while brokers are not against an increase in share capital, there are some grey areas in the new capital structure. They therefore said, both bodies will meet the management of SEC with the hope of resolving those issues.
For instance, Olushekun said the new capital structure is faulty with apparent deficiency as it relates to investor protection and risk management.
“The focus of minimum capital structure should be how to address risks which stakeholders are exposed to. That is why we say there is apparent deficiency in the structure,” he said.
Speaking in the same vein, Madubuike said the brokers are not against any recapitalisation programme, stressing, however, that certain things need to be taken into consideration before its introduction.
“We have relationship with board and management of SEC and this has benefitted the market and I think we should continue to play along those lines. We have done a letter to SEC telling that we need to look at this policy again. Risk-based regulatory framework was not well advanced in the new capital structure, investor protection and confidence are not adequately advanced too. The brokers, however, believe that the issues would be resolved when both the regulators and operators meet,” Madubuike said.
According to the new capital requirement, Broker/Dealer share capital has been increased from N70 million to N300million, while for broker only, the capital requirement has been increased from N40 million to N200 million. Dealer is now required to have a capitalisation of N100 million as against N30 million.
To operate as an issue house in the market, N200 million is required up from N150 million, just the capital requirement for an Underwriter has been increased from N100 million to N200 million.
For a Registrar, the minimum capital requirement is now N150 million, from N50 million just as Trustees are required to have N300 million instead of the existing N40 million.
The minimum capital requirement for Rating Agency has been increased from N20 million to N150 million, while Corporate Investment Adviser will have N5 million as share capital which was unchanged.
Anyone operating as an individual investment adviser has to provide N2 million as capital, up from N500, 000. On the other hand, fund/portfolio manager is required to have a minimum capital of N150 million, up from N20 million.