Some stockbrokers in Nigeria’s capital market may have saved their businesses from going under and kept their employees off the unemployment queues, ahead of the nine months extension given by the Securities and Exchange Commission (SEC) for them and other market operators to recapitalise.
BusinessDay learnt that some stockbrokers who could not get suitors ahead of the earlier deadline (December 31, 2014) when the regulator approved Mergers & Acquisitions (M&A) window opened, resorted to restructuring their businesses, using available capital.
Top on the decisions were the options to change their business models and type of transaction they could execute. Stockbrokers who act as brokers/dealers have had their new capital requirements increased in excess of 300% as indicated by the Securities and Exchange Commission (SEC) board guidelines.
Though some other stockbrokers now have an opportunity to rethink the direction of their business, as the Board of the Securities and Exchange Commission extended the deadline for compliance with the new minimum capital requirements by nine months, to September 30 2015.
The SEC board made this decision at its meeting held December 22, 2014 where it reviewed the status report on the level of compliance by capital market operators, with the new minimum capital requirement which before now had a compliance deadline of December 31, 2014.
“The board expressed satisfaction with the efforts made by all operators, particularly those who have complied with the new requirements. The board however took cognisance of the effect of the global economic situation and approved an extension of the deadline for compliance with the new minimum capital requirements by nine months, to September 30 2015,” SEC said yesterday.
According to the SEC, “The list of capital market operators who have so far complied is now available on the Commission’s website via the following link (CMOs New Minimum Capital Requirement) and will be updated regularly. We commend the commitment of all stakeholders to building a world class capital market that enables prosperous and peaceful nation.”
The new capital requirement for broker/dealers is N300million from N70 million; for brokers only, the new capital requirement is N200 million from N40 million; while for dealers, it was increased from N30 million to N100 million.
Until recently at the Nigerian Stock Exchange (NSE), many companies engaged in both broker and dealer operations, making them broker-dealers.
“Instead of remaining as broker/dealers, what most of us have done is to choose either of them –that is to remain as a broker only or as a dealer only,” a market source said.
A broker’s primary service is to buy and sell stocks on an exchange for members of the investing public who wish to own part of a company. A stock market dealer trades equities under its own name. The business itself maintains stock holdings that are not in the name of any client.
The dealer may actually be a client of another broker, so as to trade these stocks for its own account. Analysts say that stockbrokers decision to restructure their businesses may not be unconnected with the position of SEC that considerations that led to the minimum capital requirement have not changed; adding that CEOs of likely to be affected firms may have weighed the implications on their jobs and their operating licences.
“The exercise is in the medium and long term interest of the capital market. Look at it from the point of investor protection, risk management, and need for our capital market to be globally competitive,” a source at SEC said.
The minimum capital requirement for Issuing House was increased from N150 million to N200 million; while that of Underwriter was increased from N100 million to N200 million.
For a Registrar in the Nigerian capital market, the minimum capital requirement is now N150 million, from N50 million; while for those in the Trustees business, the capital requirement was raised to N300million, from N40 million.
Furthermore, the minimum capital requirement for Rating Agency was increased from N20 million to N150 million; while the capital requirement for Corporate Investment Adviser remains at N5 million.
From an initial capital requirement of N500,000 every Individual Investment Adviser is expected to have at least N2million as capital, by the end of the deadline; while Fund/Portfolio Manager’s minimum capital requirement was raised from N20 million to N150 million.
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