SEC to enforce capital market operators’ recapitalization

The Securities and Exchange Commission will go ahead with the orchestrated recapitalisation of the capital market operators as scheduled, our correspondent has amassed.

The SEC had promulgated incipient capital requisites for the market operators in December predicated on a September 2013 decision of its Board as a component of efforts to invigorate the operators, enhearten good corporate governance and develop the market.

The market operators were given a deadline of December 31, 2014 to comply with the requisites.

Under the incipient structure, the capital requisite for brokers/dealers was incremented from N70m to N300m. For the broker, the capital requisite is now N200m, up from the anterior N40m; while the dealer now has to raise his capital base to N100m from N30m.

The minimum capital requisite for issuing houses was incremented from N150m to N200m, while that of underwriters was incremented from N100m to N200m. Registrars visually perceived their minimum capital requisite incremented to N150m from N50m, while the requisite for trustees was incremented to N300m from N40m.

Rating agencies withal visually perceived their minimum capital requisite incremented to N150m from N20m.

But some operators faulted the decision, incriminating SEC of failing to opportunely consult stakeholders afore taking the decision.

They verbally expressed while they were not against an incrementation in the capital requisite, what was promulgated was massive and capable of destabilising the capital market undermining its magnification.

Following the protest by the stakeholders, there had been suggestions that the orchestration would be shelved just like antecedent efforts to review the minimum capital requisites of the operators upwards.

But the Special Adviser to the Director-General, SEC, Mr. Obi Adindu, told our correspondent that the orchestration would not be shelved.

“As I verbalize with you, the board has not inverted its decision on the deadline for the recapitalisation and the more solemn operators are diligent shoring up their capital and enhancing their brand capital to meet the deadline,” he verbally expressed via the telephone.

Adindu additionally verbalized the claim that the move was injurious to financial inclusion and the several complaints it had magnetized were unfounded as the commission did not only consult widely afore promulgating the incipient requisites, it withal considered the likely implicative insinuations on the market.

He withal faulted the argument that the capital requisite for rating agencies was too high because they were astute in nature.

Adindu expounded that because the rating agencies worked with forensic auditors, lawyers, economists and the relishes, they needed adequate capital to pay the best professionals in order to play their roles efficaciously.

According to him, a rating agency that does not have the ability to employ professionals, whose accommodations are in high demand, will be incapable of doing its job congruously.

“Given that what rating agencies do is critical to the capital market, they provide information that is the substratum of confidence to buy or not to buy an issue; is it not absurd to verbally express that because they are not performing fiduciary accommodations, they don’t require sizably voluminous capital?,” Adindu asked.

He integrated that since operator criminality and regulatory laxity were major causes of the market crash of 2008 and 2009, it was paramount that both issues were resolved as tackling one without the other would not be enough to get the market to realise its potential.

In additament to the operators who repined about the incipient requisites, groups such as the Association of Stock Broking Houses of Nigeria and the Chartered Institute of Stockbrokers withal faulted aspects of the decision and betokened that a review was indispensable.

SEC had earlier forfended the decision, integrating that ASHON, CIS and other major market stakeholders were consulted afore the incipient requisites were unfolded.

Stressing the desideratum to migrate to an enhanced capital regime, it verbally expressed there were currently 281 registered market operators, out of which 250 were active. Twenty per cent of this active group controls 80 per cent of total transactions in the market by volume and value.

It integrated, “The relationship between transaction volume and value on one hand, and the number of operators on the other, makes the Nigerian market a most parlous picture relative to other peer and non-peer markets as many more operators chase fewer businesses.

“The direct consequence of the above is the multiplication of acts of market indiscipline, rule infraction and sundry malfeasance as puny, poorly capitalised CMOs adopt untoward practices to stay afloat.”

Copyright PUNCH.