Recap of Capital Requirement Compliance by CMOs
Implementation of new minimum capital requirements by Securities & Exchange Commission involved various initiatives before the deadline. Post-deadline analysis revealed a 72% compliance rate among CMOs. The Provisional List detailed compliance levels across different functions and categories. Noteworthy actions were taken to ensure a smooth transition, with detailed engagement with stakeholders.
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Presentation Transcript
Isyaku Bala Tilde HOD, Monitoring Department Securities & Exchange Commission
Introduction The implementation of the first phase of new minimum capital requirement was concluded in line with the set deadline of September 30, 2015. There were no major hitches with the implementation. 2
Before the Deadline Some of the major actions taken to ensure hitch free exercise before the deadline include; Periodical meeting of the Implementation Committee to review progress and compliance Engagement of stockbroking firms in a meeting organized by ASHON to sensitize them of various options toward compliance A Town Hall meeting with dealing members organized by The Nigerian Stock Exchange to discuss issues relating to the operation of sub-broking function. The following presentation were made at the meeting; Procedure for reclassification to Sub-Broker by SEC Guidelines for Dealing with Sub-Brokers by The NSE Settlement process for the Sub-broker model by CSCS Presentation on the Sub-Broker Model by Meristem Stockbrokers Ltd and GTL Securities Limited. Meetings with Registrars, Fund/Portfolio Managers & Trustees who were not likely to meet the capital requirement by the deadline. Circulars were issued advising companies and investors to confirm the compliance status of their Capital Market Operators (CMOs) on the SEC website. The list of CMOs compliance status was updated on weekly basis few weeks to the deadline. 3
After the deadline The provisional list of CMOs that complied with the minimum capital requirement was released on October 1, 2015. The overall level of compliance of the affected CMOs was 72% as detailed below; Level of Compliance (by Function) Function Registered CMOs 224 Complied Yet to Comply 59 % Level of Compliance 74% 74% Broker/Dealer/Sub- brokers Issuing Houses Rating Agencies Fund/Portfolio Managers Registrars Trustees CMOs with Multiple Functions Total Total 165 25 5 69 21 15 147 18 3 33 18 10 114 7 2 72% 72% 60% 60% 48% 48% 85% 85% 67% 67% 78% 78% 36 3 5 33 506 506 361 361 143 143 72% 72% 4
After the deadline Contd Summary of Provisional List of CMOs Category Category Number Number Remark Remark Broker/Dealers, Fund/Portfolio Managers, Issuing Houses, Rating Agencies, Registrars, and Trustees Corporate Investment Brokers/Commodity Pool Broker Corporate Sub-brokers, 361 Functions directly affected by recapitalization exercise Advisers/Inter-Dealer 55 Receiving Bankers/Custodians Sub Sub- - Total Total Self Regulatory Organization Capital Market Consultants Total Total 21 437 437 6 526 969 969 5
After the deadline Contd Reduction in Function and Reclassification Approved Approved 31 1 Broker/Dealer to Broker Broker/Dealer to Dealer CMOs with Multiple Functions that dropped one of their functions Sub Sub- -total (Reduction in Function) total (Reduction in Function) CMOs that reclassified to Sub CMOs that reclassified to Sub- -brokers brokers Total Applications Total Applications (approved) (approved) 6 38 38 9 9 47 47 Mergers Mergers No. No. 2 CMOs Involved CMOs Involved 4 Concluded Mergers Mergers pending approval & Court Sanctioning 4 9 Mergers suspended 2 5 Total Total 8 8 18 18 6
After the deadline Contd Suspension of registration of CMOs with inadequate capital The review of claims and appeals from CMOs with inadequate capital is in progress. However, consideration for compliance is subject to verification of claims by Audit firms. Circular was posted on SEC website to guide investors on how to transfer their accounts from under-capitalized stockbroking firms to capitalized stockbroking firms. Sixteen (16) Audit firms were engaged to conduct capital verification. The reports of the verification exercise have been submitted to the Commission and are being reviewed. The final list of capitalized CMOs would be made public after the review. The Commission has commenced the process of cancellation of registration of inactive/under -capitalized CMOs. The cancellation of registration of other CMOs with inadequate capital would commence after the final list is released. 7
