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Peter Obi

SEC: No Extension On Compliance With Minimum Capital Requirement

Joy Onyemaechi

The Securities and Exchange Commission (SEC) says it has no intention to extend the September 30 deadline for market operators to comply with the new minimum capital requirement of N300 million

The Securities and Exchange Commission (SEC) on Tuesday issued a circular to all capital market operators who are yet to comply with the new minimum capital requirement of N300 million advising them to do so before the deadline of September 30, 2015. In the circular the commission reiterated its commitment to this deadline and affirmed it would not grant any further extension. Attention was drawn to the guidelines on the new capital requirements. The commission approved the new minimum capital requirement for the capital market operators in December 2013. The aim of the recapitalization according to the commission is aimed at improving operators baseline infrastructure, market access and service delivery.

The market operators were originally given till December 31 2014 to comply with the requirements. Under the new structure, the capital requirement for brokers and dealers was increased from N70million to N300 million. For the broker, the capital requirement is now N200 million up from the previous N40 million while the dealer now has to raise his capital base to N100 million from N300 million. Rating agencies also saw their minimum capital requirement increased to N150 million from N20 million. Due to inability to meet with the December 31, 2014 deadline, SEC extended the date to September 30, 2015 and has said it wouldn’t extend the date. The deadline for the compliance by the existing CMOs is September 30, 2015 while compliance was stated as a prerequisite for the registration of new CMOs. These guidelines are intended to serve as a guide to all capital market operators in meeting the new requirements.

\According to the guideline released in 2014, the capital base was construed as the shareholders fund comprising paid up share capital, reserves which include capital, general and revaluation reserves, retained earnings and accumulated losses. It went further to add that only capital, general and revaluation reserves contained in the audited accounts not older than nine months would be recognized for determination of capital base. The capital market operators are encouraged to consider merger and acquisition in order to be able to meet up with the deadline. The CMOs are required by SEC guideline to show proper documentation of capital injection into their companies. Adequate provisions must be made as it concerns increase in authorized share capital in the Memorandum and Articles of association, board and shareholders resolution authorizing the increase in share capital and the certificate of increase in share capital. As proof of amount of cash injected into the system, a copy of the cheque/draft/evidence of transfer/ bank teller must be shown.

Other documents include bank statement as well as evidence showing lodgment of the fund into the company’s account. The receipt issued and audited account signed by two directors with an attestation letter by the eternal auditor is necessary. Evidence of ownership of securities by the subscriber, confirmation that the securities are without any lien or encumbrances, copy of the securities transfer instruction are documents to be presented as proof of proper transfer of quoted securities.

Any property that is to be transferred or acquired must be relevant to the operations of the company and must be located in Abuja or any state capital which SEC considers to have a vibrant market. The property must have a Certificate of Occupancy and deed of assignment duly executed as well as consent by relevant authorities. In terms of the transfer of tangible non-current assets, the company must present evidence of ownership of the asset by subscriber, Sec registered valuer’s report, and letter of confirmation from the subscriber that the asset is free of lie or other encumbrances as well as perfected change of ownership as applicable.

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