Securities and Exchange Commission (SEC) and Nigerian Stock Exchange (NSE) may delist and reclassify no fewer than 100 capital market operators in the first week of October.
The action would follow the conclusion of the capital market regulators exit procedures for insufficiently capitalised operators.
The Nation learnt that the market regulators would undertake a final review of the compliance status of all capital market operators on September 30 and effect deregistration and reclassification of the operators on October 2.
The capital market will wake up on October 5 with the list of compliant operators and renewed status of each operator, according to the sources.
SEC, the capital market regulator, will trigger the deregistration and reclassification, prompting the NSE to automatically deregister or reclassify operators in line with SEC’s master list.
Existing rules at the NSE make it mandatory for it to replicate SEC’s regulatory enforcement actions including suspension, revocation and reclassification.
As lobby intensifies by operators, SEC has insisted that it will not grant further extension of the September 30 deadline for compliance with new minimum capital requirements for capital market operators.
ItsDirector-General, Mounir Gwarzo, said any further extension would damage the integrity of the market.
SEC last week extended the deadline for the notification of any possible changes in the status of any operator as a result of the new minimum capital requirement to August 31.
Operators are expected to write the Commission on possible reclassification of function, reduction of functions or merger and acquisition while the Commission has also provided template for orderly reclassification of functions.
Already, the NSE has launched its final expulsion process for stockbroking firms deemed to be inactive. The National Council of the NSE, late last month held inquiry for the first batch of stockbroking firms deemed to be inactive and in line for expulsion, unless they present substantial evidence to show otherwise.
The first batch of stockbroking firms included 15 firms, which failed to activate their dealing licences.
The 15 firms included Al-Pina Investment & Trust Co. Limited, BBL Asset Management Limited, Integrated & Allied Securities Limited, Standard Chartered Securities Limited, Translux Services Limited, Afro-Arab Investment Limited, Barakat Investment Limited, Bosson Capital Assets Limited, Dealers Assets Management Limited and Enabell Capital & Investment Limited.
Others are First Express Limited, KFF Worldwide Solutions Limited, Kingdom Securities Limited, Silver & Gold Securities Limited and Williamson Capital Management Limited.
A reliable NSE source had said the hearing was part of the expulsion process to ensure that the it complies with extant rules that provide for fair hearing to dealing members. The 15 firms are the first batch of what may be a long-running expulsion process.
The inquiry was sequel to a new rule on the revocation of dealing licences and expulsion of inactive stockbroking firms, which came into effect on June 29 this year.
The new rule and amendments on revocation of dealing licences was earlier approved by SEC last February, but the NSE had delayed the implementation.
The Nation had then reported exclusively that the NSE might commence the process of revocation of dealing licences and expulsion of not less than 88 stockbroking firms, about one-third of the total number of registered stockbroking firms on Nigeria’s only stock exchange.
This re-examination process of dealership might be the largest-ever cleansing of the Augean stable at the stock market. The total number of previously revoked licences stood at 13.
The Nation’s check indicated that the NSE had already determined 88 out of the 308 stockbroking firms on its dealing members’ list as inactive. A status report on dealing members indicated that out of 308 existing stockbroking licences, 220 were active while 88 were inactive.
A breakdown of the inactive licences included 50 operationally inactive firms, 20 inactive dealing firms deregistered by SEC and 18 licences that had been dormant and were not activated since issuance. All these fall within the purview of revocation and expulsion due to inactivity.
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.
