The Securities and Exchange Commission (SEC) on Tuesday drew a critical line to demarcate capital market firms that might meet the September 30, 2015 deadline for the new minimum capital requirements for capital market operators following the expiration of the extended deadline for preliminary status review.
SEC had given all capital market operators seeking to undertake mergers and acquisitions or any reclassification of their functions a deadline of July 31 to formalize such arrangement and file the necessary information with the apex capital market regulator. The Commission later extended the deadline to August 31, 2015.
A source at SEC said the apex capital market regulator will not grant any further extension to neither the August 31 deadline nor the final deadline of September 30, 2015.
In a July-4 circular to all capital market firms, the apex capital market regulator directed all capital market operators which might have opted for mergers, acquisitions or any other form of business combination as a vehicle to meet the new minimum capital requirements to file their notifications with the Commission not later than July 31, 2015.
The directive also applies to capital market operators proposing reclassification or reduction of their registered functions, including those seeking to downsize from stockbroker to sub-broker, broker-dealer to either broker or dealer and from multiple functions to a single function among others.
The directive, according to a source at the Commission, is part of the compliance and enforcement process as the apex capital market regulator prepares to enforce the September 30, 2015 deadline for the new minimum capital requirements for capital market operators.
The Nation recently reported that some capital market operators were considering mergers and acquisitions as viable alternative plan to stave off the threat of liquidation.
Reliable market sources had said there have been intense discussions around consolidation, a reference to mergers and acquisitions, in recent months as the new management of the apex capital market regulator insisted it would not rescind earlier decisions on the new minimum capital base.
Sources said while some stockbrokers and other operators were considering raising funds through special placements, most deficient operators have started preliminary discussions on mergers and acquisitions. The Nigerian Stock Exchange (NSE) also recently released guidelines on the operations of sub-brokers.
SEC had late 2013 announced major increases in minimum capital requirements for capital market functions under a new minimum capital structure that was initially scheduled to take off by January 1, 2015. It however extended the deadline to September 30, 2015.
Minimum capital base for broker and dealer was increased by 329 per cent from the existing N70 million to N300 million. Broker, which currently operates with capital base of N40 million, will now be required to have N200 million, representing an increase of 400 per cent. Minimum capital base for dealer increased by 233 per cent from N30 million to N100 million.
Also, issuing houses, which facilitate new issues in the primary market, will 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. Trustees, rating agencies and portfolio and fund managers had their minimum capital base increased by 650 per cent each from N40 million, N20 million and N20 million to N300 million, N150 million and N150 million respectively. A Registrar will now have a minimum capital base of N150 million as against the current requirement of N50 million. While the minimum capital base for corporate investment adviser remained unchanged at N5 million, individual investment advisers will have to increase their capital base by 300 per cent from N500,000 to N2 million.
The Nation had also reported that the apex capital market regulator would not consider any further extension of the September 30, 2015 deadline for all capital market operators to comply with the new minimum capital requirements for their functions.
The apex capital market regulator had stated that all capital market operators who are yet to comply with the new minimum capital requirement must do so before the deadline of September 30, 2015.