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Capital base: SEC, NSE to implement risk-based regulation


Controversies surrounding the capital base for capital market operators may be put to an end soon as the Securities and Exchange Commission (SEC) and Nigerian Stock Exchange (NSE) have reached an advanced stage towards working modalities to adopt risk-based regulation for stockbroking firms and other market operators instead of the current system where all operators  are required to have the same level of capitalisation.

Investigation by Vanguard revealed that the current capitalisation requirement by SEC for stockbroking firms  still remain a minimum of N70 million paid-up share capital, despite the controversies that came as a result of announcement by the Commission that the capital base had been  raised to N1billion.

Meanwhile, some firms have share capital above that benchmark, while others operate below it, there have been calls for an increase in capital base. This development attracted various reactions, some in support, while others against it.

However,  given  the recent  market downturn and development in the global capital markets,  the need to strengthened regulation has thrown up  issue of   setting adequate capital base for operators in the Nigerian capital market.

It was gathered weekend that both regulators and operators are working towards  a risk base regulation, rather that setting a  one size-fits-all capital base for stockbroking firms.

Although details are still being worked out, the Chairman of Association of Stockbroking Houses (ASHON), Mr. Emeka Madubuike, confirmed weekend that it was a consensus among stakeholders in the market that a risk-based regulation should be adopted.

According to him,  a committee in that regard, comprising officials of SEC, NSE, Chartered Institute of Stockbrokers (CIS) and ASHON, was set up to work on the issue of capitalisation early this year. “The committee was chaired by the former Commission of SEC in charge of operations, Ms. Daisy Ekineh. After  several meetings, it was agreed that in line with what is obtainable in other jurisdictions, risk-based supervision and regulation should be adopted.

“This implies that each operator would be required to have capital base depending on the level of risk it is carrying. The arrangement and framework is being worked and would be made known at the appropriate time,” he said.

He added that the broking firms would be classified into different categories including broker/dealer, broker or sub-broker. This is said would determine the level of capital each would require.

“Besides, the NSE would then be reviewing each operator using the   base set by SEC.  The NSE will look at the performance of each firm, the volume of transactions and decide to advice on the need to increase the share capital or otherwise,” he revealed.


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