SEC’s continuous extension of CMOs recapitalization: Any end in sight?

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Nkiruka Nnorom writes in this report that the recapitalisation of capital market operators has dragged for too long and should be brought to a close.

One of the key focus of the incumbent Director General of the Securities and Exchange Commission, SEC, Mr. Mounir Gwarzo, on assumption of office in 2015 was to bring the recapitalisation of Capital Market Operators, CMOs, to conclusion. The recapitalisation exercise pre-dates his tenure as the DG of SEC having taken off in 2013 when Ms Arunma Oteh was the DG at the Commission.

SEC had argued at the commencement of the exercise that the exercise, which was part of steps to make the Nigerian capital market world class, was aimed at improving the baseline infrastructure of the CMOs, and improve their market access and service delivery. The exercise would also help them to comply fully with the New Minimum Operating standard set by SEC, which was aimed at helping the market develop robust controls; strong governance framework and effective human capital.

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•Mounir Gwarzo, DG, SEC

It was also meant to enable the operators achieve best-in-class operations in order to compete on a global level for the benefit of investors and the capital market, though it was initially met with opposition from the operators who argued that they were only custodians of clients’ money and as such did not need increase in their capital base.

 New capital requirement

The Board of the SEC had 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 SEC 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. Individual investment advisers were required to operate with a 300 per cent hike in capital base from N500,000 to N2 million.

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Unending recapitalisa-tion deadlines

However, more than three years after, the exercise is still lingering as the Commission has for one reason or the other extended the deadline. The deadline has now been shifted for third time since it took off, first deadline being December 31, 2014. At the expiration of the timeline, another deadline of September 30, 2015 was given, and yet another extension by 15 months to December 30, 2016, was given to operators that failed to meet the second deadline. This was after the apex regulator released detailed list of operators that had met the requirement last year, showing that out of 449 CMOs, 384 had fully complied.

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