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Recapitalisation: Market operators lobby for 2016 implementation date

By on September 8, 2015

Some capital market operators are trying to persuade the Securities and Exchange Commission (SEC) to  further extend the recapitalisation deadline from September 30, 2015  to December  2016, citing  persistent bearish state of the stock market.

SEC,  had in  December, 2013 announced an  increase  in minimum capital requirements  for capital market functions under a new capital structure and gave operators  December 31, 2014 as deadline.

However, the operators pushed for an extension of the deadline, insisting that the bearish nature of the market in 2014 would affect their ability to comply. Considering the prevailing market and economic situation, SEC extended the deadline to September 30, 2015.

Speaking in an interview with THISDAY, the Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Mr. Emeka Madubuike  said  all factors that affect the capital market have been going down and have therefore affected  the capacity of operators to comply with the  recapitalisation.

“Over and above all of these, some of our members who invested capital, have seen their capital eroded as a result of declining prices. The situation is like something that is beyond the control of everybody. On the basis of all of these, we are not saying the policy should not be implemented but we are saying that this is not the right time to implement it,” he said.

Madubuike explained that one of the factors that is affecting the market is the lack of economy team to drive due to absence of ministers, saying that going by the pronouncement of the government, the minister would be appointed at the end of this month.

“But even at that, nothing tangible will happen this year again because before the ministers settle down to business, the year is gone. We will begin to see real positive developments next year. That is why we believe the right time to implement this recapitalisation policy will be end of 2016,” Madubuike said.

Director General of SEC, Mounir Gwarzo had told THISDAY in an interview that there was no going back on the September 30, 2015, deadline.
He said: “At the last CMC meeting we informed the market that we will keep to our deadline and the market agreed. So, SEC is not going to move away from that deadline. September 30, 2015 is sacrosanct. We are ready to support the market wherever they require our assistance. Two months ago, we came out with a directive that anyone who wants to step down any of their functions,  say if you are a broker dealer, you want to step down to focus only on being a broker or dealer with a lower minimum requirement, we are ready to accept that.  And  we told them to quickly file their applications so that they will be able to step down to a lower capital base.

“We equally said that we are ready to support them with any merger and acquisition that they want to go into even to the point of looking at some of the fees and charges that are supposed to be paid for merger and acquisition. We have gone this extra mile so that we can be able to provide them with the necessary incentives. But the issue of the deadline,
September 30, is sacrosanct. We are not going to move away from it. The market has to comply with that.”

Over  15 stockbroking firms were said to have applied to  SEC  either  to merge or reclassify their businesses in response to the commission’s directive to firms, which may be considering a reclassification  to notify the commission  not later than July 31.

The commission had increased the  minimum capital requirement capital base for broker and dealer to N300 million, N70 million.

The broker, which currently operates with capital base of N40 million, would now be required to have N200 million, representing an increase of 400 per cent while minimum capital base for the dealer increased by 233 per cent from N30 million to N100 million.

Also, Issuing Houses, which facilitate new issues in the primary market, would now be required to have minimum capital base of N200 million as against the current capital base of N150 million. The capital requirement for underwriter also doubled from N100 , million to N200 million.

 

[ThisDay]