Stockbroking firms decry N1billion capital base

While much is yet to be heard of the proposed minimum capital base of N1 billion for stockbroking firms, some market operators said they believe that the Securities and Exchange Commission (SEC) has ‘soft pedalled’ on the issue.

The Nigerian Stock Exchange had earlier this year said that all stockbroking firms must meet the initial minimum capital base of N70 million required by the SEC, the capital market regulator.

Rilwan Belo-Osagie, managing director/chief executive officer of First Securities Discount House (FSDH) Group, said too much capital base may put pressure on a company’s performances.

“I think the proposed N1 billion share capital for stockbroking firm is an overkill because there is a danger in having too much capital in your business,” Mr Belo- Osagie said yesterday at the company’s 19th Pre-Annual General Meeting.

“When you have too much capital, it puts pressure on your returns and it can force you to take more risk,” he added.

He said one major challenge that financial institutions are presently facing is risk management.

“As an institution, we should ask how much risk are you willing to take; how do you dimension that risk; and what measures are being put in place to mitigate that risk? I think management of risk is one of the biggest challenges we all face,” he said.

He said about five years ago, what financial institutions had to manage was credit risk, “but now, because we are dealing with a lot of long term risk asset, other risks too have to be managed; such as interest risk and market risk.”

However, he said management of reputation is also important because “we are finding it extremely important to know what reputation does a financial situation has today,” adding that the issue of reputation also touches on corporate governance, which financial regulators have stressed.

Arunma Oteh, director general of SEC, at a chief executive officer breakfast forum in Lagos last week, said that corporate governance is key at restoring investors’ confidence in the market.

“Corporate governance, rather than being a cost, is a competitive tool of true advantage to nations, firms and investors,” Ms Oteh said, adding that besides the proven fact that well governed companies perform better than their peers, “corporate governance immunises nations and companies from the vagaries of financial crises.”

She said it also engenders accountability, transparency, and responsibility, and thereby creates better shareholder value.

She used the medium to call on private companies to consider listing their shares on the Stock Exchange, given the inherent benefits of improved national and corporate profile, increased visibility, and enhanced capital resource availability.

Meanwhile, Ese Onosode, CEO FSDH Securities Limited, said earlier in the year there was a strong possibility of the SEC increasing the capital base of stockbroking firms to N1 billion, “but because we have regulators who seem to feel the pulse of both the operators and the investors, I think they have soft pedalled on that particular issue.”

Mr Onosode said he believed the commission has been able to realise that increasing capital base does not necessarily translate to the world-class capital market which is its main objective.

Source : 234next

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