Recapitalisation: ASHON warns banks against bypassing stockbrokers

As the recapitalisation process takes shape, the Association of Securities Dealing Houses of Nigeria (ASHON) has warned Deposit Money Banks (DMBs) to desist from bypassing stockbrokers as receiving agents and comply with market rules to forestall abuse of processes capable of causing infractions in the exercise.

The association revealed yesterday in Lagos, that some banks have devised means of bypassing stockbrokers as receiving agents in a desperate move to mobilise funds to comply with the new capital requirement as directed by the Central Bank of Nigeria (CBN).

According to the association, any abuse of process or failure on the part of the banks to deal with registered stockbrokers in the entire process of recapitalisation may lead to market infractions as witnessed in the 2005 exercise where stockbrokers were wrongly blamed for infractions committed by banks.

Specifically, the chairman of the association, Sam Onukwue, disclosed that these banks have handed over the shareholders’ registers to staff, including drivers and receptionists to issue and receive share subscription forms to investors thereby bypassing stockbroking firms, who are the registered receiving agents.

He said the completed offer forms are passed directly to the bank, its branches and subsidiaries (including registrars). In addition, he pointed out that the banks have opened unapproved dedicated portals as a marketing strategy to mine investors’ information and constrain them to domicile their accounts with their subsidiaries instead of stockbrokers, thereby denying the stockbrokers opportunities for fair marketing.

Onukwue pointed out that this act is at variance with the acceptable procedure where stockbrokers have the primary duty to market shares and offer investment advice to investors, adding that it can introduce infractions to the recapitalisation exercise.

“The ongoing unorthodox channels of share subscription deny investors the opportunity of making appropriate investment decisions in line with their investment objectives, risk tolerance, time horizon, and source of funds amongst others.

“We also fear the likelihood of abuse of the process, as in the 2005 bank recapitalisation where stockbrokers were wrongly blamed for infractions committed by banks,” he stated.

Therefore, he urged issuers and investors to deal directly with trading licence holders, who are members of ASHON to avail sound professional advice ahead of any share subscription.

He added that these firms are duly registered and regulated by the Securities and Exchange Commission (SEC) and licensed by recognised securities market platforms.

“The list of recognised trading license holders or dealing -member firms is available on the website of SEC and the Nigerian Exchange Limited (NGX),” he stated.

Recall that the CBN, on March 28, 2024, issued a circular announcing a new recapitalisation policy for commercial, merchant, and non-interest banks in Nigeria, effective from April 1, 2026. This means that banks in Nigeria have now been given 24 months (April 1, 2024, to March 31, 2026) to raise the required funds.

The recapitalisation plan set by the CBN requires a minimum capital of N500 billion, N200 billion, and N50 billion for commercial banks with international, national, and regional licenses respectively.