… Seek risk base regulatory framework
The Chartered Institute of Stockbrokers (CIS) and Association of Stock broking Houses of Nigeria (ASHON) have faulted the newly increased capital base for capital market operators by the Securities and Exchange Commission, SEC saying it was ill timed and uncalled for at this moment in time that the market is experiencing recovery from the global meltdown.
The two groups over the weekend told few capital market correspondents that they will engage the Securities and Exchange Commission (SEC) to address the grey portion of the new capital structure, even as they recommend a risk base regulatory framework.
President of CIS, Alhaji Ariyo Olushekun said “ The new structure is faulty with apparent deficiencies as regards to investor protection and risk management”.
He said, “ We intend to approach this issue in a way to show we are not at logger head with SEC. SEC, ASHON, CIS and other trade groups in the market have worked together in the last five years to resolve issues in the market and the result of our joint efforts is the level of recovery that we are seeing now in the market.
“Last year the market gained 34.4 per cent, this year it gained has already gained about 40 to 42 percent. Because we have been working together the market has been the better. That relationship we have had with SEC and other stakeholders is valued a lot. We believe that dialogue should be the spirit in dealing with the matter.”
Continuing, he said “The recapitalization structure is faulty and has apparent deficiencies especially as it relates to protection of the investors. We believe that SEC has not consulted adequately on this. We believe that the focus of any minimum share capital requirement structure should be risk based management; how to address the risk that every capital market operator is exposed to and that is why you are seeing apparent deficiencies in this structure. We are going to express our feelings and point out those deficiencies to SEC. We believe that the deficiencies we have observed is not what SEC cannot consider and address.”
Olushekun assured operators and other stakeholders that the issue would be discussed with the commission and resolved amicably and urged SEC not to join the bandwagon of current financial industry increase in share capital, but to emphasize on market development and investor confidence.
Also, reacting to the new capital requirements, the Chairman of ASHON, Emeka Madubuike, described it as a rude shock and a setback to gains recorded so far in the industry.
He said that the new capital requirement, if implemented by SEC, would distort the overall policy geared towards earning confidence of both the operators and investors.
“We believe that the market is still undergoing demutualisation programme and it should be allowed to run its course. The timing for the upward review of operational capital of operators is not appropriate because the market is still emerging from the pangs of global financial meltdown.”
According to him “We need to sit down and look at this policy once again. We have to engage SEC and to reconcile on some fundamental issues. That will be to the best interest of the market. We are not against any recapitalization programme but to express our feelings that certain other things need to be put in place before embarking on such policy. We have requested that we should be given another opportunity so that we can sit together and put things together that will be in the overall interest of the market.”
Recall that in the past various attempts had been made to increase the capital market operators minimum capital requirements and there had been resistance. The last recapitalisation exercise carried out by SEC was in 2004 while other sectors of the financial system have witnessed recapitalisation in recent times. For instance, in 200,4the Central Bank of Nigeria (CBN) increased capital requirements for banks from N2 billion to N25 billion.