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SEC extends recapitalisation deadline for market operators

By BusinessNews Staff on December 31, 2014

The Securities and Exchange Commission has extended the deadline for the recapitalisation of capital market operators by nine months to September 30, 2015.

The commission made this known in a notice on Monday, citing recent economic developments as the reason for the decision to shift the deadline from December 31, 2014.

SEC explained that the decision was taken after its Board met on December 22 to review the status report on the level of compliance with the new minimum capital requirement.

SEC, which said its Board expressed satisfaction with the efforts made by all operators, particularly those who had complied with the new requirements, noted that 262 capital market operators had so far met the new capital requirement.

They comprise issuing houses, brokers/dealers, corporate investment advisers, fund managers and underwriters.

While it commended the commitment of all stakeholders to building a world-class capital market for the country, the regulator said, “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.”

The decision followed sustained clamour by operators for the extension of the deadline, which was announced in December 2013.

Under the new guideline, the capital requirement for brokers/dealers was increased from N70m to N300m. That of brokers was raised to N200m from N40m, while that of dealers was hiked to N100m from N30m.

The minimum capital requirement for issuing houses was increased from N150m to N200m, while that of underwriters was raised from N100m to N200m. Registrars saw their minimum capital requirement increased to N150m from N50m, while the requirement for trustees was increased to N300m from N40m. Rating agencies were not left out as their minimum capital requirement was increased to N150m from N20m.

However, as the deadline approached, most of the operators called for an extension, stressing that insisting on the deadline and withdrawing the licences of those who fail to meet the deadline would throw the market into crises, especially as it had performed poorly this year.

The reasons cited for the demand included the dwindling prices of crude oil and the impact on the economy, especially the forced devaluation of the naira and the hike in interest rates.

The operators, who also argued that the new capital requirements was a major increase on the old ones, also pointed out the fact that equities had depreciated significantly in value as investor sentiments had been negative for most of the year due to political and economic concerns.

This, they explained, meant that people were not ready to invest in the market. Rather, foreign portfolio investors, who dominate the market, were pulling out their investment.

A stockbroker, who asked not to be named had said, “The situation in the market is not positive at the moment. A portfolio that had not eroded much before now has now eroded by more than 25 per cent. So, if by June you had N300m, now you have about N240m.

“Insisting on the December 31 deadline will not do any other thing to the market other than to kill it vis-à-vis the state of the economy. We have a situation where the government is introducing austerity measures to alleviate the hardship expected.”

Reacting to the extension of the deadline, the President, Association of Stockbroking Houses of Nigeria, Mr. Emeka Madubuike, who had earlier confirmed that member firms were seeking an extension of the deadline, thanked the commission for reconsidering its position.

[Punch]

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