UPDATE ON NEW MINIMUM CAPITAL REQUIREMENT

Isyaku Bala Tilde HOD, Monitoring Department

Securities & Exchange Commission

Introduction

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The implementation of the first phase of new minimum capital requirement was concluded in line with the set deadline of September 30, 2015. There were no major hitches with the implementation.

Before the DeadlinePeriodical meeting of the Implementation Committee to review progress and compliance

Engagement of stockbroking firms in a meeting organized by ASHON to sensitize them of various options toward compliance

A Town Hall meeting with dealing members organized by The Nigerian Stock Exchange to discuss issues relating to the operation of sub-broking function. The following presentation were made at the meeting;

‐Procedure for reclassification to Sub-Broker by SEC‐Guidelines for Dealing with Sub-Brokers by The NSE‐Settlement process for the Sub-broker model by CSCS

‐ Presentation on the Sub-Broker Model by Meristem Stockbrokers Ltd and GTL Securities Limited.

Meetings with Registrars, Fund/Portfolio Managers & Trustees who were not likely to meet the capital requirement by the deadline.

Circulars were issued advising companies and investors to confirm the compliance status of their Capital Market Operators (CMOs) on the SEC website. The list of CMOs compliance status was updated on weekly basis few weeks to the deadline. 3

Some of the major actions taken to ensure hitch free exercise before the deadline include;

After the deadline

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The provisional list of CMOs that complied with the minimum capital requirement was released on October 1, 2015. The overall level of compliance of the affected CMOs was 72% as detailed below;

Function Registered CMOs

Complied Yet to Comply

% Level of Compliance

Broker/Dealer/Sub-brokers

224 165 59 74%

Issuing Houses 25 18 7 72%

Rating Agencies 5 3 2 60%

Fund/Portfolio Managers

69 33 36 48%

Registrars 21 18 3 85%Trustees 15 10 5 67%

CMOs with Multiple Functions

147 114 33 78%

Total 506 361 143 72%

Level of Compliance (by Function)

After the deadline – Cont’d

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Category Number

Remark

Broker/Dealers, Corporate Sub-brokers, Fund/Portfolio Managers, Issuing Houses, Rating Agencies, Registrars, and Trustees

361 Functions directly affected by recapitalization exercise

Corporate Investment Advisers/Inter-Dealer Brokers/Commodity Pool Broker

55

Receiving Bankers/Custodians 21

Sub- Total 437

Self Regulatory Organization 6

Capital Market Consultants 526

Total 969

Summary of Provisional List of CMOs

After the deadline – Cont’d

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Reduction in Function and Reclassification

Approved

Broker/Dealer to Broker 31Broker/Dealer to Dealer 1CMOs with Multiple Functions that dropped one of their functions 6Sub-total (Reduction in Function) 38

CMOs that reclassified to Sub-brokers 9

Total Applications (approved) 47

Mergers No. CMOs InvolvedConcluded Mergers 2 4Mergers pending approval & Court Sanctioning 4 9

Mergers suspended 2 5

Total 8 18

After the deadline – Cont’dSuspension of registration of CMOs with inadequate capital

The review of claims and appeals from CMOs with inadequate capital is in progress. However, consideration for compliance is subject to verification of claims by Audit firms.

Circular was posted on SEC website to guide investors on how to transfer their accounts from under-capitalized stockbroking firms to capitalized stockbroking firms.

Sixteen (16) Audit firms were engaged to conduct capital verification. The reports of the verification exercise have been submitted to the Commission and are being reviewed.

The final list of capitalized CMOs would be made public after the review.

The Commission has commenced the process of cancellation of registration of inactive/under -capitalized CMOs.

The cancellation of registration of other CMOs with inadequate capital would commence after the final list is released.

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THANK YOU