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Capital base requirement: SEC urges investors to verify compliance of operators

By Nkiruka Nnorom

Following the recent announcement by the Securities and Exchange Commission (SEC) of the level of compliance by Capital Market Operators (CMOs) to the new minimum capital requirement, the Market-wide Implementation Committee has called on the investing public to verify the compliance status of their preferred CMO before patronising them.

This is even as the Commission disclosed that as at close of business on September 30, 437 operators had met the requirement as posted on the Commission’s website while there were four merger applications awaiting apex regulator and court’s approvals.

Nigerian Stock Exchange
Nigerian Stock Exchange

The Commission stated that the list of the 437 qualified firms are provisional lists based on the submissions by CMOs, who are eligible to undertake capital market activities, adding that it would engage accounting firms to conduct capital verification before a final list would be made public.

A statement signed by the Committee’s secretary and posted on SEC website, listed some guidelines that should be adhered to by investors, target firms and the Central Securities Clearing System (CSCS), where an investor wishes to move his stock account from an under-capitalised broker/dealer to a well capitalised broker/dealer or broker.

Capital requirement

According to the statement, where the broker/dealer has not met the new minimum capital requirement, the investor should approach a capitalised broker/dealer or broker for engagement and should undergo a Know Your Customer (KYC) process with the new firm.

The statement further said that “The broker/dealer or broker should open a CSCS account for the investor using the investor’s existing Clearing House Number (CHN) from his former brokerage firm, The investor should give a mandate to the target firm to transfer his/her account from the under-capitalised firm to the Target firm (capitalised firm), and the investor should submit evidence of purchase of the shares such as contract notes, receipts of purchase, dividend stubs or confirmation of holdings from the registrar’s office, signed by the managing director of the registrar firm to the target firm.”

Other aspects of the guidelines provide that “The Target firm (capitalised firm) should initiate inter-member transfer request, the managing director of the Target firm (capitalised firm) shall go to the CSCS to sign off the indemnity form and the CSCS shall process the request and notify the broker/dealer or broker through the CSCS website.”

It would be recall that the board of the SEC had on December 18, 2013, announced new minimum capital requirements for all categories of market operators in pursuant to Section 313(6) of the Investments and Securities Act (ISA) 2007.

To facilitate the smooth implementation of the new minimum capital requirements for operators, the CMC set up a market-wide “Implementation Committee on New Minimum Capital Requirement for CMOs,” comprising the SEC, Nigerian Stock Exchange (NSE), Central Securities Clearing System (CSCS), Association of Stockbroking Houses of Nigeria (ASHON) and all other capital market trade groups.

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