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‘Stockbroking firms to be categorised’


Plans are underway to classify the stockbroking firms into about three or four categories based on the volume/value of transactions done by each of the houses.

The chairman, Association of Stockbroking Houses of Nigeria, ASHON, Mr. Emeka Mmadubuike, who disclosed this at the a two-day workshop of capital market correspondents entitled, ‘Effective Reporting of a Recovering Capital Market’, in Badagry, Lagos State, said the categorisation was part of efforts to reposition the stockbroking firms and make them more relevant in the scheme of things in the capital market.

This is even as he said that the association is moving towards a self-regulatory position to complement the role of the Securities and Exchange Commission, SEC and NSE in enthroning integrity and accountability among stockbrokers.

He said that the decision to classify dealing member firms was taken to replicate the experience in the banking industry where banks were categorised into international, national or regional banks.

With the categorisation in view, he explained that members would not be required to increase their capital base, saying that only top players among them would periodically up their capital to accommodate the volume/value of transactions they do.

“The stockbroking firms will be categorised based on their working capital, so that those that do not have up to N70 million required capital can still play in the market. There will also be sub-brokers who will only trade on behalf of other registered stockbroking houses,” he said.

Explaining the dominance of few stockbroking firms over the rest, the ASHON boss stated that large chunk of investors patronising the market are still foreign and institutional investors who have preference for highly capitalised  stockbroking firms in the industry.

“Even among the banks and media houses, there are big and small players. There are three levels of classification introduced in the banking sector by the CBN governor; that is what we intend to also do with the stockbroking houses. We don’t want a situation where all the dealing member firms will be mandated to increase their share capital; we have agreed that capital base should remain as it is today,” he stated.

On the issue of self-regulation, Mmaduibuike said, that the association has already developed code of ethics and sent to members for input before finalisation.

“Stockbrokers should look at what happened in the past and make sure that it does not happen again, talking about the issue of integrity and ethics. That is what ASHON is trying to do, to ensure that all members play by the rule. We are also putting modalities in place to ensure that we hold member accountable incase of misbehavior and infractions.”

He noted that in order to align the stock market with other developed markets, and make at par with peers in the emerging markets, there was need to develop a risk-based framework for the market.


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