By Yakubu LAAH InvestAdvocate
Lagos (INVESTADVOCATE)-The Association of Stock broking Houses of Nigeria (ASHON) has written a letter to Nigeria’s Securities and Exchange Commission (SEC) over the new capital requirement imposed by then latter.
InvestAdvocate gathered that ASHON sent out the letter last week to the commission seeking a resolution to the matter.
A source name (withheld) close to InvestAdvocate said that ASHON and other stakeholders were not consulted before the new minimum capital requirement for operators in the Nigerian Capital Market (NCM) was issued by SEC.
‘’SEC did not consult us or any of the stakeholders before coming out with new capital requirement, it was a one sided thing’’ the source said.
Emeka Madubuike, the Chairman of ASHON in a telephone interview with InvestAdvocate confirmed that ASHON has sent out a letter to the Commission seeking a resolution to the issue.
‘’The details of the letter we crave your indulgence not to discuss it in the press for now, but we are requesting audience with the SEC management, which we know they will grant us for us to discuss some of the issues we raised in the letter. We have a very fundamental reservation that we believe the issue will be resolved by the time we meet with the management of SEC one on one’’ Madubuike said.
In a swift reaction to the development, the ASHON chairman had said that the new capital requirement, if implemented by SEC, would distort the overall policy geared towards earning confidence of both the operators and investors.
He said the timing for the upward review of operational capital of capital market operators is not appropriate because the market is still emerging from the effects of global financial meltdown
Madubuike had affirmed that ASHON is not against any recapitalization exercise; but said certain other things need to be put in place before embarking on such policy
SEC in the third week of December 2013 reviewed upward the minimum capital requirement for operators in the NCM as broker/dealers are now expected to shore up their capital base to N300 million from N70 million.
SEC said this is in line with the Amendment to schedule I of the rules and regulations (5 December 2013) is in pursuant to Section 314 (6) of the Investments and Securities Act 2007, which the following amendments were made by the Commission.
The new minimum capital requirements for other Capital Market Operators are: brokers from N40 million to N200 million, dealers from N30 million to N100 million, issuing houses from N150 million to N200 million and underwriters from N100 million to N200 million.
Others are registrars from N50 million to N150 million, trustees N40 million to N300 million, rating agencies from N20 million to N150 million, while that of corporate investment advisers still stands at N5.0 million.
Individual investment advisers are to shore up their capital base from N500,000 to N2.0 million, while fund/portfolio managers are to increase theirs from N20 million to N150 million.
InvestAdvocate contacted Obi Adindu, Communications Adviser to the Director General (DG) of SEC on the purported letter to SEC by ASHON.
According to Adindu, it goes beyond writing letters and its imperative for the market to have a new capital baseline.
‘’This goes beyond writing letters, the imperative is for this market to have a new capital baseline, it’s not an issue for political discussion, ASHON has written a letter and addressed the media and are saying all kinds of things that border on irresponsibility, they talked about timing, that it is not appropriate for this migration, they said the national assembly will not allow it. They said that the Board of SEC was not carried along,’’ Adindu said.
He said the statement announcing the new capital regime boldly stated that the board of the SEC acted in exercise of the power conferred on it with the Amendment to Schedule I of the Rules and Regulation (5 Dec 2013) pursuant to Section 313(6) of the Investments and Securities Act 2007,
Adindu further affirmed that some of the capital market operator have inadequate capital and others zero capital.
‘’People would prefer owning 5% of something to 100% of nothing. This is one of the measures of recovering this market from where it was some few years ago, the next logical step is recapitalise to make the capital market operators stronger. It’s an inevitable logical step and a measure to sustain the current market recovery,’’ he said.
