The Securities and Exchange Commission has extended the notification deadline for capital market operators that are considering reclassification of functions, reduction of functions or merger/acquisition in view of the recapitalisation exercise.
In a circular to market operators, entitled ‘New minimum capital requirement: Extension of notification and procedure for reclassification/reduction of registered functions, mergers and acquisitions’, the SEC said it had extended the deadline to August 31, 2015.
In an earlier circular, the commission had directed all capital market operators proposing reclassification to notify it on or before July 31, 2015.
Just like the latest circular, firms that wanted to become sub-brokers or reduce their registered functions in view of the new minimum capital requirement were included in the initial notice.
The SEC in the new notice urged market operators to note that conversion/migration to any of the options was not automatic as routine regulatory requirements must be fulfilled.
It also reviewed the procedures on the various options, “to ensure a seamless and less rigorous exercise”
For instance it said 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.
It added that the letter should also 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.
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 N5m.
The commission said approval of the application by it would be granted within five working days contingent upon filing of complete documentation.
The NSE is also expected to issue letters of approval for the process, after which the CSCS would set up and migrate the sub-broker to its sponsoring broker/dealer.
The commission directed affected CMOs to comply immediately with the above procedures, warning 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.”
The 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 N70m to N300m. That of brokers was raised to N200m from N40m, while that of dealers was hiked to N100m from N30m.
The minimum capital requirement for issuing houses was increased from N150m to N200m, while that of underwriters was raised from N100m to N200m.
The requirement for registrars was increased to N150m from N50m, while the requirement for trustees was increased to N300m from N40m. Rating agencies were not left out as their minimum capital requirement was increased to N150m from N20m.
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Source : Punch