SEC Mulls Re­cap­i­tal­i­sa­tion for Stock­broking Firms

THISDAY - - FRONT PAGE - Obinna Chima and Goddy Egene

The Se­cu­ri­ties and Ex­change Com­mis­sion (SEC) is con­sid­er­ing jack­ing up the min­i­mum cap­i­tal re­quire­ment for stock broking com­pa­nies, its Act­ing Di­rec­tor Gen­eral,

SEC, Ms. Mary Uduk, has said.

She told re­porters yes­ter­day in Lagos that cap­i­tal mar­ket oper­a­tors should start pre­par­ing for an­other round of in­dus­try re­cap­i­tal­i­sa­tion.

She, how­ever, did not dis­close when the re­cap­i­tal­i­sa­tion would be­gin and the struc­ture it would take.

The last time SEC in­creased the min­i­mum cap­i­tal re­quire­ment for oper­a­tors was in Septem­ber 2013 with a dead­line of De­cem­ber 2014.

How­ever, the dead­line was then ex­tended to Septem­ber 30, 2015, fol­low­ing pres­sure and protest by some stock­bro­kers.

The apex cap­i­tal mar­ket reg­u­la­tor had then in­creased the min­i­mum cap­i­tal base for bro­kers/deal­ers from N70 mil­lion to N300 mil­lion.

Also, the min­i­mum cap­i­tal for bro­ker only was raised from N40 mil­lion to N200 mil­lion, while the min­i­mum cap­i­tal base for deal­ers was in­creased from N30 mil­lion to N100 mil­lion.

Re­spond­ing to a ques­tion on the need for re­cap­i­tal­i­sa­tion in the in­dus­try, Uduk said: “A num­ber of other sec­tors are re­cap­i­tal­is­ing. For in­stance, the Cen­tral Bank of Nige­ria (CBN) has in­di­cated that the banks should start think­ing about re­cap­i­tal­is­ing and we are also telling the cap­i­tal mar­ket oper­a­tors to start think­ing

about it be­cause sooner or later, it would have to hap­pen.”

Also, the Act­ing Com­mis­sioner, Le­gal and En­force­ment, SEC, Mr. Regi­nald Karawusa, said stronger and bet­ter re­cap­i­talised firms would be beneficial to the cap­i­tal mar­ket.

“If we have say 20 or 50 big firms play­ing, as op­posed to the about 255 firms we have now, I think the mar­ket will be bet­ter.

“We want strong and well-cap­i­talised firms. It is some­thing that should hap­pen, as op­posed to the sit­u­a­tion we have now,” he added.

Ear­lier in her pre­sen­ta­tion, Uduk had said the 2020 outlook for the com­mis­sion took into ac­count ini­tia­tives such as reg­u­la­tory regime, in­for­ma­tion tech­nol­ogy, fi­nan­cial tech­nol­ogy, master plan ex­e­cu­tion and en­force­ment.

Un­der the reg­u­la­tory regime, she said: “The com­mis­sion will con­tinue to im­ple­ment risk-based su­per­vi­sion, to en­sure our mon­i­tor­ing ef­fort is more ef­fi­cient. The upgrade of iden­tity man­age­ment on in­vestor ac­counts will in­clude Bank Ver­i­fi­ca­tion Num­bers and ver­i­fi­ca­tions against the Nige­rian In­ter­bank Set­tle­ment Sys­tems Limited (NIBSS) BVN val­i­da­tion por­tal.

“As part of its im­ple­men­ta­tion in 2020, the com­mis­sion will be driv­ing a har­monised reg­u­la­tory agenda by work­ing with other reg­u­la­tory agen­cies to cre­ate clear and spe­cific li­cens­ing regimes for dif­fer­ent fin­tech busi­nesses in Nige­ria. We will also seek to op­er­a­tionalise the frame­work for the reg­u­la­tion of crypto-cur­ren­cies, vir­tual fi­nan­cial as­sets, ICOs and crowd-fund­ing.”

She added that the com­mis­sion would, this year, com­plete the cap­i­tal mar­ket master plan review it started last year as well as con­tinue to co­or­di­nate the fed­eral gov­ern­ment’s work group as­sign­ment on the Na­tional Sav­ings Strat­egy, among oth­ers.

“The fo­cus of the com­mis­sion en­force­ment pro­gramme in 2020 as with pre­vi­ous years will be the pro­tec­tion of in­vestors with par­tic­u­lar at­ten­tion to re­tail and un­so­phis­ti­cated in­vestors in the Nige­rian cap­i­tal mar­ket.

“In 2019, the com­mis­sion wit­nessed an up­surge in the ac­tiv­i­ties of Ponzi scheme in Nige­ria. The com­mis­sion went af­ter many of the pro­mot­ers and direc­tors of such scheme, se­cur­ing a con­vic­tion last year and many oth­ers are presently be­ing pros­e­cuted. We will con­tinue to com­bat Ponzi scheme this year.

“We in­tend to con­tinue lever­ag­ing on the Me­moranda of Un­der­stand­ing that were signed be­tween the com­mis­sion and key stake­hold­ers like the Nige­ria Fi­nan­cial In­tel­li­gence Unit (NFIU) and the Eco­nomic and Fi­nan­cial Crimes Com­mis­sion (EFCC) to strengthen our abil­ity to do this.

“The com­mis­sion will con­tinue to adopt a ze­ro­tol­er­ance policy on un­eth­i­cal prac­tices by the cap­i­tal mar­ket with a view to pro­mot­ing a cul­ture of com­pli­ance and en­hanced re­port­ing. We will adopt a more proac­tive in­spec­tion and mar­ket sur­veil­lance regime to nip un­eth­i­cal prac­tices and mis­con­duct in the bud. We shall be re­fer­ring more cases of in­frac­tions for hear­ing be­fore the SEC Ad­min­is­tra­tive Pro­ceed­ings Com­mit­tee. "Fur­ther­more, we shall be re­fer­ring more mat­ters for crim­i­nal prose­cu­tion to the of­fice of the At­tor­ney – Gen­eral of the Fed­er­a­tion in line with the pro­vi­sions of Sec­tion 304 of the In­vest­ments and Se­cu­ri­ties Act 2007.

“Going for­ward into the year 2020, we ex­pect the equities seg­ment to ben­e­fit from var­i­ous gov­ern­ment ini­tia­tives tar­geted at im­prov­ing the coun­try’s business en­vi­ron­ment as well as ef­forts to lower in­ter­est rate and in­crease liq­uid­ity through in­crease in loan to de­posit ra­tio," he stated.

Some mar­ket oper­a­tors had said they were ex­pect­ing the an­nounce­ment of a re­cap­i­tal­i­sa­tion, given the rules 57 and 58, that were in­tro­duced by the SEC ef­fec­tive Jan­uary 2020.

The rules re­quire all stock­broking firms, on monthly ba­sis, to com­pute and file with the com­mis­sion and the Nige­rian Stock Ex­change (NSE) their net liq­uid cap­i­tal po­si­tion not later than five days af­ter end of the month.

Af­ter im­put­ing the re­quire­ments on the report, it will show com­pli­ance or non-com­pli­ance.

An op­er­a­tor who spoke off the record said with this, the reg­u­la­tor would be able to know broking firms that are in good or bad shape.

“Some of us sus­pect that SEC may, at the end of the day, use these rules to de­ter­mine the way for­ward for stock­broking firms and other oper­a­tors in the mar­ket be­cause we have over 200 stock­broking firms and less than five per cent con­trol over 80 per cent of the trad­ing ac­tiv­i­ties in the mar­ket.

“So, some of us are ex­pect­ing that a re­cap­i­tal­i­sa­tion process may take place. What we do not know is the time,” the bro­ker said.

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