More than 50% broking firms may not meet up with recapitalization
There is indication that more than 50 per cent of stock broking firms operating in Nigerian capital market may not meet up with the recapitalisation exercise in the industry.
The Securities and Exchange Commission (SEC) SEC had given capital market operators till December 31, 2014 to comply with the new capital base.
The new capital requirement for broker/dealers is N300million from N70 million; for brokers only, the new capital requirement is N200 million from N40 million; while for dealers, it was increased from N30 million to N100 million.
However, the commission extended the deadline by nine months to September 30, 2015.
According to findings by Daily Trust, only 102 market operators playing the role of broker/dealer were able to comply with the new minimum capital requirement before the SEC extended.
The leadership of the stockbroking community had insisted on extending the recapitalization exercise deadline to enable them meet with the SEC management on how best brokers could comply with the requirement.
But many of them insisted that brokers did not need such huge money to do their business.
Some stockbrokers who could not meet the earlier deadline of December 31, 2014 when the regulator approved Mergers and Acquisitions (M&A) window opened, resorted to restructuring their businesses, using available capital.
They changed their business models while the stockbrokers who act as brokers/dealers have had their new capital requirements increased in excess of 300 per cent as indicated by SEC board guidelines.
Until recently at the Nigerian Stock Exchange (NSE), many companies engaged in both broker and dealer operations, making them brokerdealers.
The business of broker’s is to buy and sell stocks on an exchange for members of the investing public wishing to own part of a company. A stock market dealer trades equities under its own name. The business itself maintains stock holdings that are not in the name of any client.
The dealer may actually be a client of another broker, so as to trade these stocks for its own account.