New Capital Base: capital market operators want deadline extended to December 2015

Nigerian Stock Exchange

The capital market operators in the Nigerian Stock Exchange, NSE on Thursday requested the Securities and Exchange Commission, SEC, to give them a one-year extension to its recapitalisation deadline.

The president, Association of Stockbroking Houses of Nigeria, ASHON, Emeka Madubuike, said the need for a review of the deadline from December 31, 2014 to December 31, 2015, was in the interest of the stock market.

Mr. Madubuike said the review of the deadline had become necessary in view of the ongoing uncertainties in the country’s economy, which had hampered market growth and development.

The ASHON president said that insistence on the December 31, 2014 deadline by SEC would increase the market uncertainties and make things more difficult for operators and the economy.

He said the brokers needed time to pursue the options of mergers and acquisitions if need be to meet the requirments for the recapitalisation policy.

The immediate past president of ASHON, Rasheed Yussuf, also supported the proposal for the extension of the deadline for the recapitalisation, saying that in view of the ongoing political uncertainties in the countty, the regulators should be worried by the persistent fall of equities on the stock market.

“SEC should extend the deadline to give room for 2015 elections to be over, and for the market to be a little stabilised,” Mr. Yussuf said. “When you create more uncertainties, you create bigger problems, and once the capital market is unsettled, the whole sector will be unsettled.”

The former ASHON chief said the Commission should not be talking of recapitalization, with the developments in the nation’s capital market.

SEC had recently announced the decision to raise the minimum capital requirements for capital market operators under a new minimum capital structure expected to come into effect by January 1, 2015.

The capital market regulator said under the new arrangement, the minimum capital base for brokers/dealers had been increased by 329 per cent from the existing N70 million to N300 million.

When the policy takes off as planned, a stock broking firm currently operating with capital base of N40 million would be required to have N200 million, representing an increase of 400 per cent. The minimum capital base for dealers would increase by 233 per cent from N30 million to N100 million.

Also, issuing houses, which facilitate new issues in the primary market, would now be required to have a minimum capital base of N200 million, as against the current capital base of N150 million.

The capital requirement for underwriters would also double from N100 million to N200 million, while registrars would now have a minimum capital base of N150 million, as against the current requirement of N50 million.

While the minimum capital base for corporate investment adviser remained unchanged at N5 million, individual investment advisers would have to raise their capital bases by 400 per cent, from N500,000 to N2 million.

Also, dealing members of the exchange are contending with minimum operating standards recently introduced for all the three classes of dealing members, including brokers and dealers.

The new standards address the five broad areas of manpower and equipment, organisational structure and governance, effective processes, global competitiveness; and technology.

The new standards are also expected to take off on January 1, 2015, just as the new capital requirements by SEC. (NAN)


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