Brokers challenge SEC on new minimum capital requirement for operators

Brokers say they were not consulted by SEC

Some capital market operators have challenged the Securities and Exchange Commission, SEC, to prove that the new minimum capital requirements for operators were based on market consultations.

Some of the brokers in Lagos, on Monday, maintained that they were not consulted by SEC.

A source close to the Association of Stockbroking Houses of Nigeria, ASHON, said that the new capital requirement was a clear departure from earlier agreement reached between SEC and operators two years ago.

He said that the commission and market operators agreed that the recapitalisation should be risk based with less emphasis on money.

He said that they agreed that the Nigerian Stock Exchange, NSE, should provide specifications on office standards, human capital and the technology to be deployed by the operators.

According to him, the new capital requirements do not reflect the reality of the market and can overheat the system.

“Over-capitalisation is very dangerous for the market because too much funds will be chasing few stocks and can lead to what happened in 2008,” he said.

The operator said that the brokers decided not to make the recapitalisation an issue in order not to overheat the system.

He said the new capital requirement would be detrimental to retail investors because brokers would make better money trading for themselves instead of buying and selling on behalf of investors.

The Managing Director, APT Securities and Funds in Lagos, Garba Kurfi, however, said that there were consultations, but brokers expected lower capitalisation.

Mr. Kurfi also urged brokers to embrace mergers and acquisitions to meet the minimum capital requirement as announced by SEC.

SEC, had on December 31, 2013, said that the new minimum capital requirements were the outcome of extensive consultations with stakeholders within and beyond the nation’s bourse.

The commission said that the new capital regime was the outcome of a process which commenced in 2010 with the setting up of a technical committee chaired by its former Executive Commissioner (Operations).

The committee, SEC said, featured representatives of the capital market industry trade groups such as ASHON and the Chartered Institute of stockbrokers (CIS).

The new minimum capital regime was recently announced after a board meeting of SEC on September, 2013.

The SEC, on December 19, issued new minimum capital requirements for capital market operators with December 31, 2014 as the deadline.

A breakdown of the new capital requirement showed that broker/dealer now requires a minimum capital of N300 million, an increase of 328.57 per cent over the current minimum capital base of N70 million.

A broker is now required to increase its capital to a minimum of N200 million from N40 million, while a dealer’s minimum capital now stands at N100 million from N30 million.

A issuing house now requires minimum capital of N200 million from N150 million, while underwriters are now expected to have N200 million as working capital from N100 million.

A registrar should have a minimum capital of N150 million from N50 million.

Trustees capital requirement has been raised to N300 million from N40 million, while a rating agency is to have a minimum of N20 million to N150 million.


NEVER MISS A THING AGAIN! Subscribe to our newsletter

* indicates required


Now available on

  Premium Times Android mobile applicationPremium Times iOS mobile applicationPremium Times blackberry mobile applicationPremium Times windows mobile application

TEXT AD: To place a text-based advert here. Call Willie - +2347088095401

All rights reserved. This material and any other material on this platform may not be reproduced, published, broadcast, written or distributed in full or in part, without written permission from PREMIUM TIMES.