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Tag: demutualisation

  • NSE begins final stages of demutualisation

    The Nigerian Stock Exchange (NSE) has started working on the final stages of its conversion from a not-for-profit limited by guarantee entity into a profit-making, shareholders-owned public limited liability company. The conversion is technically known as demutualisation.

    NSE Chief Executive Officer, Mr Oscar Onyema, confirmed that the Demutualisation Act, which was signed into law by President Muhammadu Buhari, has been gazzetted and forms the legal background for the demutualisation process.

    According to him, the Exchange has gone farther than it had ever been in the conversion process and has started working on the final stages of the process.

    He said the Exchange was committed, not only to early completion of the process, but to ensure that the conversion enhances its success story.

    While the NSE was initially incorporated under the Companies Ordinance of 1958 on September 15, 1960 as a private company limited by guarantee with a share capital, it was re-registered as a company limited by guarantee without a share capital in 1990 upon the enactment of the Companies & Allied Matters Act, Cap C20, 2004, (CAMA), which replaced the Companies Ordinance (1958). CAMA had required all companies limited by guarantee that had a share capital to be converted to companies limited by guarantee without share capital, thus the Exchange’s Memorandum of Association was duly altered and the NSE has since been a not-for-profit corporate legal entity without a shareholding structure.

    The demutualisation process was launched in 2002 with the approval-in-principle of the conversion by the council of the Exchange. Members of the Exchange in March 2017 passed crucial resolutions that authorised the council and management to proceed with the process leading up to the demutualisation of the Exchange.

    The members of the Exchange also ratified and approved the engagement of financial advisers, legal advisers, tax advisers and any other adviser that may be required for the demutualisation while mandating the council and management “to do all such things and exercise all such powers as may be necessary or incidental to achieving the objective” of demutualisation, subject to applicable laws and regulations and obtaining the approvals of members and the relevant regulatory authorities.

    Out of the 27 African Stock Exchanges under the aegis of African Securities Exchanges Association (ASEA), seven stock exchanges including Johannesburg, Nairobi, Mauritius, Seychelles, Rwandan, Casablanca stock exchanges and BRVM have been demutualised.

    Academic research on the effect of demutualisation on the financial performance of 20 demutualised exchanges between 1996 and 2008, suggested that the return on equity increased by an average five per cent to 20 per cent, with the average net profit margin increasing by 14 per cent to 30 per cent.

    Demutualisation has also contributed positively to stock market performance. On the back of strong macro-economic performance, improved regulation and other factors, the Johannesburg Stock Exchange (JSE) All Share Index has grown by 280 per cent since its demutualisation in 2005 to reach 53,817.31 points as at the end of April 2017. Following demutualisation, a number of stock exchanges had re-positioned their markets, building alliances or consolidating within and across borders in order to enhance their attractiveness. For example, in 2006, the Australian Stock Exchange merged with the Sydney Futures Exchange to form the Australian Securities Exchange (ASX). In 2007, the New York Stock Exchange (NYSE) merged with Euronext to form NYSE Euronext, creating the world’s largest stock exchange with revenues of $4.5 billion.

    The approved rules on demutualisation by Securities and Exchange Commission (SEC) simply defined demutualisation as “the process through which a member owned organisation becomes a shareholder owned company”. The demutualisation framework approved by SEC stresses that the process of demutualisation of the Securities Exchange should include an exchange of membership rights in the Securities Exchange for ownership of shares in the demutualised Securities Exchange.

    According to an informed source on the demutualisation process, after valuation of the Exchange, determination of members who are qualified for shareholdings and the appropriate number of shares receivable by each member, the primary allotment of shares would be done to current members of the Exchange, thus formally converting the Exchange from its current members-owned status to shareholders-owned status.

    The SEC’s rules on demutualisation allow the Exchange to give equity interest to a strategic investor subject to establishment of the facts that the strategic investor has technical expertise through previous experience in managing other Exchanges and the aggregate number of shares to be offered to the strategic investors shall not be more than 30 per cent of issued and fully paid up capital of the securities exchange.

    However, if the Exchange is in dire need of funds, it could issue a higher number of shares subject to approval of the Commission.

    The rules indicate that stockbrokers, who constitute the largest members of the NSE, may have to sell down their shareholdings within a period of five years in the demutualised Exchange.

    The rules indicated that the aggregate equity interests of members of any specific stakeholder group such as stockbrokers and broker-dealer in the demutualised securities exchange should not exceed 20 per cent.

    The rules also retained the provision that no individual or entity must directly or in directly own more than five per cent of the issued shares or voting rights in a demutualised securities exchange.

    The rules, made pursuant to Section 313 of the Investments and Securities Act (ISA) 2007, describe “related entities and persons” as a person or entity that is related to the entity or person that owns the equity or the voting rights.

    The rules stipulate that the securities exchange should initiate a process for determining the accurate list of members of the Exchange prior to the commencement of demutualisation.

    “The stakeholder groups, who are shareholders of the Securities Exchange, shall with effect from the date of demutualisation, shall reduce their cumulative shareholding in the demutualised Securities Exchange to no more  than 20 per cent within five years,” according to the rules.

    As part of preconditions for demutualisation, a securities exchange shall, prior to demutualisation, submit the names and profiles of members of its committee on demutualisation, a valuation report, the draft Memorandum and Articles of Association of the Securities Exchange, the proposed rules of the demutualised Securities Exchange, the proposed allotment and the basis of the proposed allotment of shares to the initial shareholders of the Securities Exchange, a list of the directors proposed as the Board of the Securities Exchange, an implementation plan stating the process to be adopted for effecting the demutualisation of the Exchange, including but not limited to the treatment of the rights and liabilities of the existing members of the Exchange and the proposed plan for the independent management of the commercial and regulatory functions of the demutualised Securities Exchange and timelines for implementation of necessary structures to ensure the functional treatment of commercial and regulatory functions for a “No Objection” clearance by SEC.

     

     

  • NSE launches intense lobby for demutualisation

    NSE launches intense lobby for demutualisation

    Ahead of next week’s extraordinary general meeting, authorities at the Nigerian Stock Exchange (NSE) have embarked on intense lobby of its members to support the longstanding proposal to convert the Exchange into a public limited liability company, otherwise known as demutualisation.
    While the NSE was initially incorporated under the Companies Ordinance of 1958 on September 15, 1960 as a private company limited by guarantee with a share capital, it was re-registered as a company limited by guarantee without a share capital in 1990 upon the enactment of the Companies & Allied Matters Act, Cap C20, 2004, (CAMA), which replaced the Companies Ordinance (1958). CAMA had required all companies limited by guarantee that had a share capital to be converted to companies limited by guarantee without share capital, thus the Exchange’s Memorandum of Association was duly altered and the NSE has since been a not-for-profit corporate legal entity without a shareholding structure.
    The process of converting the Exchange from the not-for-profit limited by guarantee entity into a profit-making, shareholders-owned public limited liability company was launched in 2002 with the approval-in-principle of the conversion by the council of the Exchange.
    However, attempts to secure the necessary resolutions of the members of the Exchange to formalise existing arrangements and quicken the pace of demutualisation at the Exchange’s annual general meeting last June ran into trouble as members of the Exchange forced the council to step down the resolutions.
    The Exchange has fixed March 30, 2017 for an extraordinary general meeting (EGM) to represent the resolutions and jumpstart the process of demutualisation. At the EGM scheduled for the Exchange in Lagos, members of the Exchange, largely stockbrokers, are expected to consider and if thought fit pass three special resolutions that are expected to enliven again the process of demutualisation.
    The EGM is expected to authorise the national council and management of the Exchange “to proceed with the process leading up to the demutualisation of the Exchange” as well as ratify the “engagement of financial advisers, legal advisers, tax advisers and any other adviser that may be required for the demutualisation of the Exchange”.
    Members of the Exchange are also expected to empower the council and management of the NSE “to do all such things and exercise all such powers as may be necessary or incidental to achieving the demutualisation objective subject to applicable laws and regulations and obtaining the approvals of members and the relevant regulatory authorities.
    Several members of the Exchange, who are expected to vote on the demutualisation next week, confirmed that they had received communications from the Exchange explaining the rationales and the need for the members to support the demutualisation resolutions.
    They noted that the communications conveyed the intent of council and management of the Exchange that members will approve the demutualization as well as give necessary authorisations for the process to proceed.
    In a major undertone, the council and management of the Exchange assured members that once the broad authorisations have been received, the specific terms of the demutualisation – which will be the basis on which the Exchange will be demutualised – will be proposed for the approval of the members once these have been determined. The lack of specific details, such as the approved list of members of the Exchange and their status, was a major point of disagreement that scuttled the June 2016 votes.
    The council and management of the Exchange stated that the exact processes that will be adopted for the demutualisation of the Exchange is still the subject of discussion and will be presented to members of the Exchange for approval once determined.
    The council and management of the Exchange urged members to support the proposed demutualisation noting that it will bring confer several advantages on the Exchange.
    “The specific terms of the demutualization that will determine the rights of members – as shareholders of the for-profit entity – are presently undetermined. These terms are the subject of the respective processes that are being undertaken by both the council of the NSE and the executive management.
    “The members of the Exchange are – at this stage of the process – required to approve the demutualisation of the Exchange; and ratify the actions taken by both the council and the executive management in connection therewith.
    “The demutualisation process implemented by the executive management of the NSE, will be subject to the final approval of the members of the Exchange; and the prior approval of the SEC.
    Given the magnitude of this undertaking, and its anticipated affirmative and very progressive impact on the economy, there is significant justification for the endorsement of the proposed demutualization by the exchange’s stakeholders, most especially the members,” the council and management stated.
    According to the value propositions presented by the council and management, demutualisation provides an opportunity for the Exchange to embark on capital raising; enabling both domestic and foreign institutional investment; thus create value and liquidity option for existing members which ultimately maximises shareholder returns; in the new ownership structure.
    Also, a demutualised NSE will afford participating organizations, listed companies, institutional and retail investors the opportunity to become shareholders; creating greater and flexible options.
    Besides, there will be improved corporate governance. While the demutualised NSE will continue to provide similar services as had been available under the mutual exchange structure, there would be a comprehensive review of the governance structure with shareholders having an opportunity of representation on the board of directors.
    “A demutualised NSE will have better flexibility and efficiency and be better able to respond to global competition and technological advances; given the potential that increased resources to invest presents,” the Exchange noted.
    Demutualisation is also expected to enhance the competitiveness of the Exchange with technological improvements that ensure improved efficiency and effectiveness in service delivery to trading shareholder-brokers.
    The council and management of the Exchange stressed the need to align the Exchange with its global peers noting that the NSE is currently one of the eight mutual exchanges out of the 63 members of the World Federation of Exchanges (WFE).
    According to the propositions, there would be opportunity to raise capital from new shareholders and a broader and more strategic shareholder pool, with significant improvement in the visibility of the Exchange in global markets.
    “In addition, improved trading facilities and the participation of institutional investors as shareholders will maximise economies of scale and scope; increase accessibility and market reach,” one of the propositions stated.

  • Stock Exchange, stockbroking chiefs to meet over

    Stock Exchange, stockbroking chiefs to meet over

    The management of the Nigerian Stock Exchange (NSE) and chief executives of stockbroking firms are expected to discuss the way to jump-start the demutualisation after the National Council of the NSE backed down from proposed resolutions on demutualisation at the annual general meeting of the Exchange.

    Demutualisation is the conversion of the Exchange from its current status of members-owned limited by guarantee entity to a private public limited liability company based on shareholdings.

    Stockbrokers are the largest group of the current member-owners of the Exchange and are expected to influence crucial decisions in the demutualisation process.

    At the annual general meeting on Thursday, the council of the NSE stepped down proposed resolutions on demutualisation after feelers indicated that stockbrokers were largely against the resolutions.

    Sources in the know said the Exchange has made overtures to stockbroking chiefs and sought for common platform to discuss and resolve their concerns. One of the major issues for resolution is the determination of the number of ordinary members of the Exchange. The membership of the Exchange consists of dealing members, mostly stockbroking firms, and ordinary members, that included influential private sector personalities.

    The NSE had included two special resolutions on demutualisation in the agenda for the annual general meeting; firstly to authorise the council and management of the Exchange to commence the demutualisation process and secondly, to empower the council and management to take all necessary steps to realise the demutualisation agenda.

    President, Nigerian Stock Exchange (NSE), Mr. Aigboje Aig-Imoukhuede, said the resolutions on demutualisation were stepped down because of the need for further consultation.

    Stockbrokers, who form the majority of member-owners of the NSE, said the decision to further engage in consultation was in the best interest of the market noting that while they wholeheartedly support the demutualisation, there are issues that require further engagement with key stakeholders.

    President, Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, said stockbrokers were fully in support of the demutualisation but there is the need to fine-tune some aspects of the process.

    “We need to have more engagement on the demutualisation to ensure that by the time we are taking off, we are taking off properly,” president, Association of Stockbroking Houses of Nigeria (ASHON), Mr. Emeka Madubuike said.

    Madubuike, who noted that stockbrokers want to accelerate the process of demutualisation, said an extra ordinary general meeting could be convened at the shortest possible time to jump-start the demutualisation process.

    The demutualisation process will involve allocation of ordinary shares to existing member-owners of the NSE, possible sale of shares to a strategic core investor, listing of the NSE on its own floor and secondary disposal of shares to the general investing public.

    After valuation of the Exchange, determination of members who are qualified for shareholdings and the appropriate number of shares receivable by each member, the primary allotment of shares would be done to current members of the Exchange, thus converting the Exchange from its current members-owned status to shareholders-owned status.

    Both the Securities and Exchange Commission (SEC) and the NSE had designated demutualisation of the NSE as one of the top agenda for the capital market this year.  At the meeting were immediate past president of the council, Alhaji Aliko Dangote, President Dangote Group; Dr. Oba Otudeko, Chairman, Honeywell Flourmills Plc; Dr. Raymond Obieri, Mallam Balama Mahu, Mr. Goddy Ibru, and Alhaji Aliko Mohammed, and the incumbent president, Mr. Aigboje Aig-Imoukhuede.

    The NSE had last October appointed a consortium of Rand Merchant Bank (RMB) and Chapel Hill Denham (CHD) as financial advisers on the proposed demutualisation of the Exchange. RMB is the corporate and investment banking arm of FirstRand, one of Africa’s largest listed financial services groups while Chapel Hill Denham is a leading Nigerian investment bank.

    Securities and Exchange Commission’s (SEC) rules on demutualisation allow the Exchange to give equity interest to a strategic investor subject to establishment of the facts that the strategic investor has technical expertise through previous experience in managing other Exchanges and the aggregate number of shares to be offered to the strategic investors shall not be more than 30 per cent of issued and fully paid up capital of the securities exchange.

    However, if the Exchange is in dire need of funds, it could issue a higher number of shares subject to approval of the Commission.

    The rules indicate that stockbrokers, who constitute the largest members of the NSE, may have to sell down their shareholdings within a period of five year in the demutualised Exchange.

    The rules indicated that the aggregate equity interests of members of any specific stakeholder group such as stockbrokers and broker-dealer in the demutualised securities exchange should not exceed 20 per cent.

    The rules also retained the provision that no individual or entity must directly or in directly own more than five per cent of the issued shares or voting rights in a demutualised securities exchange.

    The rules, made pursuant to section 313 of the Investments and Securities Act (ISA) 2007, describe “related entities and persons” as a person or entity that is related to the entity or person that owns the equity or the voting rights.

    The rules stipulate that the securities exchange should initiate a process for determining the accurate list of members of the Exchange prior to the commencement of demutualisation.

  • NSE opts for further consultation on demutualisation

    NSE opts for further consultation on demutualisation

    The council of the Nigerian Stock Exchange (NSE) yesterday stepped down proposed resolutions on demutualisation with a view to further engage with key stakeholders on the ways and processes for the smooth conversion of the Exchange from member-owned entity into a company based on shareholdings.

    At the annual general meeting yesterday in Lagos, president, Nigerian Stock Exchange (NSE), Mr. Aigboje Aig-Imoukhuede, said the resolutions on demutualisation were stepped down because of the need for further consultation.

    Stockbrokers, who form the majority of member-owners of the NSE, said the decision to further engage in consultation was in the best interest of the market noting that while they wholeheartedly support the demutualisation, there are issues that require further engagement with key stakeholders.

    President, Chartered Institute of Stockbrokers (CIS), Mr. Oluwaseyi Abe, said stockbrokers were fully in support of the demutualisation but there is the need to fine-tune some aspects of the process.

    “We need to have more engagement on the demutualisation to ensure that by the time we are taking off, we are taking off properly,” president, Association of Stockbroking Houses of Nigeria (ASHON), Mr. Emeka Madubuike said.

    Madubuike, who noted that stockbrokers want to accelerate the process of demutualisation, said an extra ordinary general meeting could be convened at the shortest possible time to jump-start the demutualisation process.

    The NSE had included two special resolutions on demutualisation in the agenda for the annual general meeting; firstly to authorise the council and management of the Exchange to commence the demutualisation process and secondly, to empower the council and management to take all necessary steps to realise the demutualisation agenda.

    The demutualisation process will involve allocation of ordinary shares to existing member-owners of the NSE, possible sale of shares to a strategic core investor, listing of the NSE on its own floor and secondary disposal of shares to the general investing public.

    After valuation of the Exchange, determination of members who are qualified for shareholdings and the appropriate number of shares receivable by each member, the primary allotment of shares would be done to current members of the Exchange, thus formally converting the Exchange from its current members-owned status to shareholders-owned status.

  • Demutualisation: Financial advisers, stakeholders mull sale

    Secondary disposal of shares in the planned demutualisation of the Nigerian Stock Exchange (NSE) might be undertaken through a combination of share offering methods, according to sources close to the ongoing demutualisation process.

    The NSE in October announced the appointment of a consortium of Rand Merchant Bank (RMB) and Chapel Hill Denham (CHD) as financial advisers on the proposed demutualisation of the Exchange. RMB is the corporate and investment banking arm of FirstRand, one of Africa’s largest listed financial services groups, while Chapel Hill Denham is a leading Nigerian investment bank. The new Minister of Finance, Mrs Kemi Adeosun, once worked at Chapel Hill Denham.

    The sources said there were considerations for the use of private placement, listing by introduction or initial public offering (IPO) for the disposal of residual shares of the Stock Exchange after the initial allotments to the current members of the Exchange.

    The approved rules on demutualisation by Securities and Exchange Commission (SEC) simply defined demutualisation as “the process through which a member owned organization becomes a shareholder owned company”. The demutualisation framework approved by SEC stresses that the process of demutualization of the Securities Exchange should include an exchange of membership rights in the Securities Exchange for ownership of shares in the demutualised Securities Exchange.

    According to the sources, after valuation of the Exchange, determination of members, who are qualified for shareholdings and the appropriate number of shares receivable by each member, the primary allotment of shares would be done to current members of the Exchange, thus formally converting the Exchange from its current members-owned status to shareholders-owned status.

    The sources said initial drafts indicated that further disposal of shares would be done by a combination of private placement and listing by introduction or initial public offering (IPO). Under private placement, the ordinary shares of the Exchange, which are widely expected to be denominated in nominal value of 50 kobo, would be offered to some strategic high networth private investors. In listing by introduction, the entire issued shares of the Exchange would be listed on its own floor, having been introduced by a stockbroker, and the members of the investing public can then purchase the warehoused shares through secondary market transactions. Under IPO, the Exchange would issue new shares to the general investing public and subsequently list the subscribed shares on its floor for secondary trading.

    Chief Executive Officer, Nigerian Stock Exchange, Mr. Oscar Onyema, had said Exchange was committed to adopting the most transparent approach to the valuation, allotment and disposal of shares in line global best practices, assuring that the Exchange would ensure that the interests of all members are protected in the demutualisation exercise.

    The SEC’s rules on demutualisation indicate that stockbrokers, who constitute the largest members of the NSE, may have to sell down their shareholdings within a period of five years in the demutualised Exchange.

    The rules indicated that the aggregate equity interests of members of any specific stakeholder group such as stockbrokers and broker-dealer in the demutualised securities exchange should not exceed 20 per cent.

    The rules also retained the provision that no individual or entity must directly or in directly own more than five per cent of the issued shares or voting rights in a demutualised securities exchange.

    The rules, made pursuant to section 313 of the Investments and Securities Act (ISA) 2007, describe “related entities and persons” as a person or entity that is related to the entity or person that owns the equity or the voting rights.

    The rules stipulate that the securities exchange should initiate a process for determining the accurate list of members of the Exchange prior to the commencement of demutualisation.

    “The stakeholder groups, who are shareholders of the Securities Exchange shall with effect from the date of demutualisation shall reduce theircumulative shareholding in the demutualised Securities Exchange to no more  than 20 per cent within five years,” according to the rules.

    The rules allow the Exchange to give equity interest to a strategic investor subject to establishment of the facts that the strategic investor has technical expertise through previous experience in managing other Exchanges. Also, the aggregate number of shares to be offered to the strategic investors shall not be more than 30 per cent of issued and fully paid up capital of the securities exchange.

    However, if the Exchange is in dire need of funds, it could issue a higher number of shares subject to approval of the Commission.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

  • Stock Exchange appoints financial advisers for demutualisation

    The Nigerian Stock Exchange (NSE) yesterday announced the appointment of a consortium of Rand Merchant Bank (RMB) and Chapel Hill Denham (CHD) as financial advisers on the proposed demutualisation of the Exchange.

    Chief Executive Officer, Nigerian Stock Exchange, Mr. Oscar Onyema,  said the appointment affirms the Exchange’s commitment to achieving its demutualisation in a methodical and transparent fashion.

    “This step is pivotal to a professional and successful conversion of the Exchange from a member-owned mutual organization to shareholder-owned public limited liability company that aligns with global best practices,” Onyema said.

    He reiterated the commitment of the Exchange to ensuring that the interests of all members are protected in the demutualisation exercise.

    He outlined that the management of the Exchange has implemented a number of initiatives to strengthen and improve governance adding that the demutualisation process will contribute to the sustenance and enhancement of governance at the Exchange.

    Onyema said the NSE employed a very rigorous and extensive selection process, commencing with a request for proposal (RFP) process on March 11, 2014, which invited qualified financial consortia to submit expressions of interest (EOI).  As part of the EOI, potential financial advisors (FAs) were required to express their interests as a consortium of one international and one Nigerian investment bank, where at least one party of the consortium had participated in the demutualization of a securities exchange as lead adviser.

    According to him, the qualifying consortia were sent the RFP and 13 proposals were received by deadline date. These proposals were reviewed extensively and scored based on technical and financial considerations by NSE. After a round of presentations, only three consortia progressed to the final stage which was aimed at picking the most competent consortium and extracting the best value for NSE.

    Chief executive officer, Rand Merchant Bank Nigeria and Regional Head for West Africa, Mr. Michael Larbie, said the bank was delighted to be assisting the NSE with the demutualisation.

  • ‘Demutualisation central to NSE, stockbrokers’ value creation’

    ‘Demutualisation central to NSE, stockbrokers’ value creation’

    The Nigerian Stock Exchange (NSE) and its dealing members are working to realize the demutualisation of the Exchange to unlock values for the dealing members and widen the economic benefits of the Exchange to the general citizenry.

    President, Nigerian Stock Exchange (NSE), Mr. Aigboje Aig-Imoukhuede, at the annual general meeting of the Exchange in Lagos, said that the dealing members and the larger capital market committee are working towards the demutualisation of the Exchange.

    According to him, it is only the realization of demutualisation that all stakeholders can deeply participate in the creation of wealth within the NSE as an economic entity.

    Chief executives of stockbroking firms also met on Saturday to discuss the demutualisation of the Exchange among other issues.

    Aig-Imoukhuede said the priority of the council and management of the Exchange this year is to deepen the market in terms of issues and participation while also creating an enabling environment that is attractive to investors.

    “We are working with government in the area of economic policy, to ensure that the government is aware that the financial markets are critical to the successful implementation of government policy,” Aig-Imoukhuede said.

    He noted that the NSE as an institution had in 2014 recorded impressive growth along key financial indices with total assets rising by over 30 per cent while net assets grew by 29 per cent.

    He pointed out that the growth in net assets was driven by a consistent rise in trading revenue and other income. The NSE recorded an operating surplus of N3.95 billion, representing a significant increase of 21 per cent from 2013 and closed the year with accumulated funds of N17.49 billion.

    “We achieved record revenues, thanks to a focused business model and the completion of several strategic initiatives. These initiatives have strengthened and improved the functioning of our market, leading to significant gains in profitability and efficiency,” Aig-Imoukhuede said.

    But the stock market generally was down in 2014. With average return of -16.14 per cent, quoted equities lost a whooping N1.75 trillion during the year.  Aggregate market value of all quoted equities closed 2014 at N11.477 trillion as against its opening value of N13.226 trillion.

    Chief executive officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema said the outlook for the Nigerian capital market remains positive in spite of the current headwinds.

    “We will continue to deliver on our strategic commitments, drive operational excellence and create value for the exchange and our various stakeholders,” Onyema said.

     

  • Demutualisation: SEC may defer new capitalisation deadline

    Demutualisation: SEC may defer new capitalisation deadline

    The Securities and Exchange Commission (SEC) might consider a deferral of the September 2015 deadline for the implementation of the new minimum capital requirements for capital market operators to enable stockbrokers and dealers accommodate their shareholdings in the proposed demutualisation of the Nigerian Stock Exchange (NSE) in their valuations.

    SEC, last weekend, released draft rules on the demutualisation of the NSE, a member-owned, limited by guarantee self-regulatory organisation (SRO), under which the membership rights of stockbrokers, dealers and other members will be converted into shareholdings in a demutualised Exchange.

    Sources in the know said the apex capital market regulator has indicated it might consider a deferral to allow stockbrokers and dealers at the NSE determine the actual values of their membership rights and use such as part of their valuation in any capitalisation measurement.

    The draft rules on the demutualisation, among others, require that a demutualising securities exchange should initiate a process for determining the accurate list of members of the Exchange and the process of demutualisation should include an exchange of membership rights for ownership of shares.

    According to the rules, application for demutualisation must include a valuation report of the securities exchange, the proposed authorised and paid-up share capital of the demutualised securities exchange with the number of shares to be issued, the names of members of the Securities Exchange proposed to be the initial shareholders of the demutualised Securities Exchange and the number of shares to be allotted to each shareholder.

    The rules stipulate that the trading participants who are shareholders of the securities exchange shall with effect from the date of demutualisation reduce their cumulative shareholdings in the demutualised securities exchange to not more than 10 per cent within five years.

    A large segment of the stockbroking community had kicked against the timeline for recapitalisation arguing that the proposed demutualisation should be done before the recapitalisation to give a more realistic valuation of the stockbroking firms.

    Sources said SEC is favourably disposed to the inclusion of the determined stockbrokers’ holdings in the NSE as part of the valuation of each stockbroking firm.

    The board of SEC had extended the deadline for compliance with the new minimum capital requirements for various capital market functions from December 31, 2014 to September 30, 2015. As at the last count, 262 capital market operators had met their various capital requirements.

    SEC had in December 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. Minimum capital base for broker/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.

     

     

     

  • SEC hands off demutualisation of NSE

    The Securities and Exchange Commission (SEC) under a new board and reconstituted management would not exert any influence on the demutualisation of the Nigerian Stock Exchange (NSE). It will leave the crucial decision on the future management of the Exchange in the hands of stockbrokers and members.

    Chairman, Securities and Exchange Commission (SEC), Dr Suleyman Ndanusa, said the Commission would not play any role in the demutualisation or otherwise of the Exchange beyond its statutory roles of setting guidelines and operating rules for capital market activities.

    In what represented a major shift in approach to the vexed issue, Ndanusa said members of the NSE would be the ones to decide on the necessity or otherwise of demutualisation and the modality and timeline for such decision.

    He said SEC’s main role would be to set the guidelines, which the Commission is ready to do at anytime.

    Demutualisation is the process by which a member-owned entity is converted into a joint stock company or public limited liability company. It will allow the shares of the NSE to be quoted on its floor and widely available to all interested investors. The Exchange is currently a limited by Guarantee Company owned by its members including capital market operators and entrepreneurs.

    Stockbrokers, who are members and owners of the NSE, had sustained a dogged struggle against what they described as undue influence of SEC management in the initial momentum to demutualise the NSE.

    SEC had on September 22, 2011 inaugurated a Demutualisation Committee to jump-start the dragging process of demutualisation of the NSE.

    2The committee was expected to review the process of the demutualisation, the timeline and approach for the demutualisation and necessary changes preceding the conversion among other recommendations that would lead to successful conversion of the Exchange.

    Stockbrokers and other stakeholders had decried what they described as attempt by SEC to railroad the NSE into demutualisation without due process and involvement of its members and owners.

    At the public hearing of the House of Representatives’ad hoc committee on capital market and institutions, stakeholders had called for a review of the demutualisation process being pushed by SEC, alleging that it had ulterior motives other than the development of the stock market.

    In one of the position papers made available to The Nation, Managing Director, Maximum Investments and Securities Plc, Mazi Okechukwu Unegbu, said members of the NSE should be the one to decide the propriety and pace of demutualisation of the Exchange. SEC, he said, should concern itself with providing level-playing regulations.

    According to him, the approach to the demutualisation of the NSE raised suspicion and all stakeholders should be wary of consequences of a rushed process.

    “One is of the view that the centre of this issue is the control of the heart of the NSE.This is because prior to 2008, the NSE was seen as a money making venture. That is why those who only had rumours of the operations of the capital market became overnight experts,” Unegbu said.

    He pointed out that the process of demutualisation should pass through a process duly initiated and ran by members of the NSE since broker dealers with seats on the Exchange are also its owners, with all the voting rights conferred by ownership.

    According to him, the crux of the issue is that the process of demutualisation should be initiated and concluded by members of the exchange and the role of the regulator will be to set the rules rather than pushing for the process.

    “It is, in fact, theoretical and practically sound for the regulator not to jump into the arena. It is not a member of the exchange and should not through proxy own or seen to teleguide the operations of the exchange,” Unegbu, a former president of the Chartered Institute of Bankers of Nigeria (CIBN), said.