Nigeria’s Securities and Exchange Commission (SEC)

Nigeria’s Securities and Exchange Commission (SEC) has advised investing public and public companies to verify the compliance status of their preferred operators, warning that any operator that fails to comply with the September 30, 2015 deadline for them to recapitalise will cease to operate in the Nigerian capital market.

SEC in a notice at its website on Wednesday confirmed 304 capital market operators with valid status and 188 operators with incomplete registration.

To facilitate the smooth implementation of the new minimum capital requirements for the operators, the Capital Market Committee (CMC) earlier set up committee comprising the SEC, the Nigerian Stock Exchange (NSE), the Central Securities Clearing System (CSCS), the Association of Stockbroking Houses of Nigeria (ASHON) and all other capital market trade groups.

However, SEC in the in the notice said that the current list may change because some operators are in the process of injecting additional capital, seeking reduction or reclassification of functions as well as undergoing mergers and acquisitions.

The apex capital market regulator, which has insisted on September 30 this year as recapitalisation deadline, said affected operators would only have to apply for fresh registration to operate in the Nigerian capital market.

The capital market operators include Corporate Investment Advisers, Solicitors, Reporting Accountants, Issuing Houses, Receiving Bankers, FMDQ OTC Dealers, Broker/Dealers, Registrars, Fund /Portfolio Managers, Rating Agencies, Trustees, Underwriters, Custodians, and Venture Capital Managers.

This comes on the heels of the decision by SEC to prohibit brokers from proprietary trading post- recapitalisation, saying that brokers’ proprietary accounts at the CSCS would be blocked. Rather, brokers would only be allowed to maintain investment accounts with other firms (broker or broker dealer).

This regulatory decision applies to market operators who chose to reduce their number of registered functions to recapitalise, after withdrawing SEC registered function –example Broker/Dealer to Broker or Dealer; Issuing House and Fund/Portfolio Manager to Issuing House, among others.

In the capital market, proprietary trading occurs when a trader trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments with the firm’s own money, as opposed to depositors’ money, so as to make a profit for itself.

Also, dealers are prohibited from maintaining client accounts.

SEC said dealers would be required to notify all clients to transfer their accounts to another firm (Broker or Dealer) of their choice within 14 days.

According to the commission, the operators should note that conversion/migration to any of the options is not automatic, as routine regulatory requirements must be fulfilled.

Under the revised minimum capital requirements regime, the minimum capital base for Broker/ Dealer was increased by 328.6 percent from N70 million  to N300 million, while a Broker, that currently operates with capital base of N40million, will now be required to have N200 million, an increase of 400 per cent.

Likewise, the minimum capital requirement for the Dealer has increased by 233.33 per cent from N30 million to N100 million.

Issuing Houses that arrange for a company’s shares to be sold on a stock market are required to have minimum capital of N200 million, as against the current capital base of N150 million, an increase of about 33.33 percent. Also, capital requirement for underwriters was increased by 100 per cent from N100 million to N200 million.

By Pita Ochai


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