Mixed reactions trail SEC’s new capital requirement for Market operators

Some capital market operators on Thursday expressed mixed reactions to the new capital requirements for operators released by the Securities and Exchange Commission (SEC).

Some of them in an interview with the News Agency of Nigeria (NAN) in Lagos described the prescribed new capital requirement as outrageous.

They described the action of SEC as “the height of regulatory indifference to the nation’s financial and investment climate”.

NAN reports that SEC, had on Thursday, Dec. 19, issued a new capital requirement for capital market operators with Dec. 31, 2014 as deadline for operators to recapitalise.

A breakdown of the new capital requirement obtained by NAN showed that broker/dealer now requires a minimum capital N300 million or an increase of 328.57 per cent compared with the initial capital of N70 million.

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

Issuing house operational capital requirement also rose to N200 million from N150 million, underwriters are now expected to have N200 million as working capital from N100 million.

Under the new capital requirements frame work, a registrar’s operational capital has been reviewed up to N150 million from N50 million.

Reacting to the new capital requirements, the Association of Stockbroking Houses of Nigeria (ASHON) described it as a rude shock and a setback to gains recorded so far in the industry.

ASHON Prseident, Mr Emeka Madubuike, said the new capital requirement, if implemented by SEC, would distort the overall policy geared towards earning confidence of both the operators and investors.

“We believe that the market is still undergoing demutualisation programme and it should be allowed to run its course.

“The timing for the upward review of operational capital of operators is not appropriate because the market is still emerging from the pangs of global financial meltdown

“As major stakeholders, we felt highly insulted and marginalised in the whole exercise because we were not consulted,” Madubuike said in a telephone interview.

Madubuike, who is also the Managing Director of Compass Securities Ltd in Lagos, said also that members had met on the issue and would make their position known on Friday.

Mr Harrison Owoh, the Managing Director, HJ Trust & Investment Ltd., however, said that the new capital requirement would make the nation’s bourse very strong and competitive.

Owoh said that the development would encourage mergers and acquisitions among capital market operators and boost innovations and competitiveness.

He urged smaller firms to embrace mergers and acquisition to avoid liquidation and minimise job losses. (NAN)