06 December 2015, Lagos – The Nigerian Stock Exchange has disclosed that two months after the curtains were drawn on the recapitalisation of capital market operators, not less than 13 dealing members of the exchange are operating with insufficient shareholders’ funds.
The information which was made available on the exchange’s website showed that the 13 firms with inadequate shareholders’ funds were among 53 firms deemed to have fallen short of the requirement to operate as dealing members of the bourse.
The NSE disclosed this in its Brokers Track report designed to help reduce contravention of market rules to its barest minimum while doing all within its means to restore confidence.
The list of the 13 firms with inadequate shareholders’ funds but which are still active on the floor of the exchange include Covenant Securities & Asset Management Limited; Cradle Trust Finance & Securities Limited, Excel Securities Limited, Finbank Securities & Assets Management Limited, First Stockbrokers Limited, Mercov Securities Limited, Redasel Investments Limited, Resano Securities Limited, Stanwal Securities Limited, Summa Guaranty & Trust Company Limited, UIDC Securities Limited, and Yuderb Investment & Securities Limited.
The list included that of the other 30 companies listed in this category but which have been inactive for about a period of six months or thereabout.
Other dealing members listed include the 30 inactive ones and some of them are Aims Asset Management Limited, Allbond Investment Limited, Anchorage Securities & Finance Ltd, Bytofel Trust & Securities Limited, Cadington Securities Limited, CEB Securities Limited; Consolidated Investment Limited, Dakal Services Limited, Davandy Finance & Securities Limited, Decanon Investment Limited, Emi Capital Resources Limited, Empire Securities Limited, First Alstate Securities Limited, GMT Securities & Asset Management Limited, Gombe Securities Limited, Kakawa Asset Management Limited and LB Securities Limited, among others.
According to NSE, an inactive firm is a firm that has been suspended for a period of more than six months by SEC or has not recorded any activity for a period of three or more months without being suspended.
The recapitalisation programme for capital market operators undertaken by the Securities and Exchange Commission (SEC) over a period of two years effectively ended on September 30, 2015 after a nine-month extension from December 31, 2014. Under the recapitalization programme, dealing members of the Exchange who are primarily broker/dealers were mandated to shore up their operating capital from N70 million to N300 million either by injection of fresh fund or mergers and acquisition. Those firms that were not able to meet the new capital requirement were offered the window of reclassifying their operations by taking licensing in line with their capital base.
The recapitalisation programme was expected to have shored liquidity in the capital market and help to prop up demand.
However, two months after the conclusion of the exercise the market is yet to feel the impact of improved liquidity. This has made market watchers to query the process by which majority of the operators met the recapitalization deadline.
Meanwhile, reports have it that about 97 per cent of Capital Market Operators (CMOs) have complied with the Securities and Exchange Commission (SEC) new minimum capital requirement.
The final list of CMOs that met the deadline represents 437 out of the total 449 registered capital market operators published after the necessary capital verification that was conducted on September 30, 2015 deadline.
The commission on its website listed four operators processing merger applications approvals and court sanctioning.
Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Mr Emeka Madubuike, was quoted as saying that; the level of stockbroking firms compliance was high.
The board of the SEC in 2013 announced new minimum capital requirements for all categories of market operators in pursuant to Section 313(6) of the Investments and Securities Act (ISA) 2007.
The apex regulator of the nation’s capital market increased minimum capital base for broker/dealer by 329 per cent from the existing N70 million to N300 million. A broking firm, which operated with capital base of N40 million, now has N200 million, representing an increase of 400 per cent.
The minimum capital for corporate investment advisers was however retained at N5 million, unlike individual investment advisers who would only operate with a 300 per cent hike in capital base from N500,000 to N2 million.
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