SEC grants capital market operators new deadline for mergers, acquisitions
By Kehinde Ibrahim, Lagos
Securities and Exchange Commission, SEC, said it has granted an extension on the notification of intention by Capital Market Operators, CMOs, considering reclassification of function, reduction of functions or merger/acquisition till August 31, 2015, as regards the ongoing recapitalisation exercise.
“CMOs should note that conversion/migration to any of the options is not automatic as routine regulatory requirements must be fulfilled,” SEC said in a circular.
The Commission had earlier given a July 31, 2015 deadline to operators willing to become sub-brokers or reduce their registered functions in view of the new minimum capital requirement were included in the initial notice.
According to the apex capital market regulator, in the new notice stated it that market operators who wants conversion/migration to any of the options was not automatic as routine regulatory requirements must be fulfilled.
SEC reviewed the procedures on the various options to ensure a seamless and less rigorous exercise.
A review of these procedures shows that for migration from broker/dealer to sub-broker, the broker/dealer should file a letter of application and complete a form together with a recommendation letter from a sponsoring broker/dealer.
Also, the letter should contain an undertaking that the sponsoring broker/dealer would be held responsible for losses or liabilities arising from the action (or inaction) of the sub-broker.
According to SEC’s review of procedures, apart from the letter, a copy of the agreement with the sponsoring broker/dealer specifying the rights and obligations of the sub-broker and the broker/dealer is required as well as evidence of a minimum paid-up capital of N5 million.
The commission says approval of the application by it would be granted within five (5) working days contingent upon filing of complete documentation.
In the same vein, the Nigerian Stock Exchange (NSE) is also expected to issue letters of approval for the process, after which the Central Securities Clearing System (CSCS) would set up and migrate the sub-broker to its sponsoring broker/dealer.
“Affected CMOs are expected to comply immediately with the above procedures.
Please be reminded that CMOs that fail to take any of these options and have not complied with the new minimum capital requirement by the deadline would automatically be deregistered by October 2, 2015 and would have to apply for fresh registration to operate in the capital market,” SEC added.
Nigeria’s SEC had in December 2013 announced new capital requirement for market operators, setting the deadline for compliance at December 31, 2014.
Under the new guideline, the capital requirement for broker/dealers was increased from N70 million to N300 million. That of brokers was raised to N200 million from N40 million, while that of dealers was increased to N100 million from N30 million.
Also the minimum capital requirement for registrars was increased to N150 million from N50 million, while the requirement for trustees was hiked to N300 million from N40 million.
The minimum capital requirement for issuing houses was increased from N150 million to N200 million, while that of underwriters was raised from N100 million to N200 million.
Rating agencies minimum capital requirement was increased to N150 million from N20 million.


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