SEC unveils post-capitalisation guidelines for firms

The Securities and Exchange Commission (SEC) has introduced guidelines for investors that wishes to move account from an under-capitalised broker/dealer to a broker/bealer or broker that has complied with the minimum capital requirement (capitalised firm).
Besides, the commission also urged investors to verify the status of their preferred Capital Market Operator (CMO).

SEC explained that some guidelines should be adhered to by investors, target firms and the Central Securities Clearing System (CSCS) where an investor wishes to move his stock account from an under-capitalised broker/dealer to a broker/dealer or broker that has complied with the minimum capital requirement (capitalised firm).

According to the commission, where the broker/dealer has not met the new minimum capital requirement, the investor should approach a capitalised broker/dealer or broker for engagement adding that the investor should undergo a Know Your Customer (KYC) process with the new firm.

It explained that that the broker/dealer or Broker should open a CSCS account for the investor using the investor’s existing Clearing House Number (CHN) from his former Brokerage Firm while the  investor should give a mandate to the target firm to transfer his/her account from the under-capitalised firm to the target firm (capitalised firm).

SEC added that the investor should submit evidence of purchase of the shares such as contract notes, receipts of purchase, dividend stubs or confirmation of holdings from the registrar’s office, signed by the managing director of the registrar firm to the target firm while the target firm (capitalised firm) should initiate inter-member transfer request.
“The Managing Director of the Target firm (capitalised firm) shall go to the CSCS to sign off the indemnity form while the CSCS shall process the request and notify the Broker/Dealer or Broker through the CSCS website”, SEC explained.

The Commission had recently published the list of 384 capital market operators (CMOs) it said complied with the new minimum capital market requirements for the industry.

The list published on the official website of the SEC showed that after a proper capital verification of the filings, 36 operators were either mobilizing to inject additional capital, processing their reclassification or reduction of function.
Twelve others are processing their applications for mergers and acquisitions.

The commission had set September 30, 2015 as deadline for compliance with the new directive by all operators.
Any operator that could not meet the deadline automatically ceases operation in the market.

The capital market regulator had also increased the minimum capital base for broker/dealer by 329 per cent from the existing N70 million to N300 million, while the minimum capital base for dealer was increased by 233 percent from N30 million to N100 million.
Issuing houses facilitating new issues in the primary market now have minimum capital base of N200 million, as against the previous N150 million, while the capital requirement for underwriter was also doubled from N100 million to N200 million.
A registrar now has a capital base of N150 million, as against the previous requirement of N50 million, while the minimum capital base for corporate investment advisers remained unchanged at N5million.