SEC issues deadline for mergers, acquisitions

In from Success Allantee
Securities and Exchange Commission (SEC), Nigeria’s apex capital market regulator, has directed all capital market operators desirous of any form of business combination to concretize the arrangement and file the necessary notification of such arrangement with the Commission latest July 31, 2015.
The directive was contained in a July 4-circular to all capital market operators as the apex capital market regulator seeks to commence preliminary enforcement process for the new minimum capital requirements for capital market operators.
According to the Commission, all capital market operators seeking to undertake mergers and acquisitions or any reclassification of their functions must file in such notifications with the Commission on or before July 31.
The directive also applies to capital market operators seeking to reclassify or reduce their registered functions. Under the new arrangement, both the SEC and Nigerian Stock Exchange (NSE) has provided a “soft-landing” window for capital market operators which may not be able to meet the new minimum capital base, to either reduce their registered functions or even reclassify from a main-line operator to a sub-operator. These could include re-registration from stockbroker to sub-broker, broker-dealer to either broker or dealer and from a combination of issuing house, broker-dealer and fund management to any of the functions.
The Commission had in December 2013 announced steep increases in minimum capital requirements for capital market functions. The deadline for new minimum capital structure was initially December 31, 2014 but it was extended to September 30, 2015. SEC has ruled out any further extension of the deadline.
Under the new minimum capital base, issuing houses, which facilitate new issues in the primary market, will now be required to have minimum capital base of N200 million as against the current capital base of N150 million. Minimum capital base for broker and dealer was increased by 329 per cent from the existing N70 million to N300 million. Broker, which currently operates with capital base of N40 million, will now be required to have N200 million, representing an increase of 400 per cent. Minimum capital base for dealer increased by 233 per cent from N30 million to N100 million.
Also, the capital requirement for underwriter also doubled from N100 million to N200 million. Trustees, rating agencies and portfolio and fund managers had their minimum capital base increased by 650 per cent each from N40 million, N20 million and N20 million to N300 million, N150 million and N150 million respectively. A Registrar will now have a minimum capital base of N150 million as against the current requirement of N50 million. While the minimum capital base for corporate investment adviser remained unchanged at N5 million, individual investment advisers will have to increase their capital base by 300 per cent from N500,000 to N2 million.
Recent reports had indicated that hard-pressed capital market firms were considering mergers and acquisitions to stave off outright liquidation.
Ripples.com.ng last week reported that nearly one-third of the registered stockbroking firms on the Nigerian Stock Exchange (NSE) may lose their dealing licences in a massive purge as Nigeria’s only stock exchange begins implementation of new rules.
Ripples.com.ng had confirmed that some 88 dealing licences may be withdrawn by the authorities at the Exchange under new rules that tie continued membership of the Exchange to minimum period of trading activity.

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A new rule on the revocation of dealing licences and expulsion of inactive stockbroking firms comes into effect last Monday. The resultant withdrawal of the licences will be the biggest in the history of the Exchange. The NSE had only in the past revoked 13 licences.
A circular by the NSE obtained by Ripples.com.ng stated that the Exchange would begin the implementation of the new rules and amendments on revocation of dealing licences with effect from June 29.
The new rules stipulate that where a dealing member is inactive for a period of six consecutive months, the Exchange shall revoke the license of the dealing member.
“Under no circumstances shall a dealing member cease to carry out its day to day business activities for which it was licensed to operate without any reasonable cause,” according to the rules.
A dealing member may become inactive voluntarily or involuntarily. Voluntary inactivity occurs where the firm has not recorded any trading activity without being suspended by the Exchange or SEC. Involuntary inactivity occurs where the firm has been suspended by the NSE or SEC for any infraction.
As against voluntary inactivity which comes with summary commencement of the revocation process, where a firm has been involuntarily inactive for the stipulated period of six months, the Exchange shall exercise its discretion in determining whether to revoke the firm’s dealing licence.
“Where the Exchange revokes a dealing member’s license, The Exchange shall immediately commence the process of expelling such dealing member,” the rules stated.
The circular authorizing the commencement of the implementation was signed by the head of legal and regulations department at NSE, Tinuade Awe. The rules had been approved by the Securities and Exchange Commission (SEC) in February 2015 but the Exchange delayed the implementation.
A status report at the weekend also indicated that the NSE has already determined 88 out of the 308 stockbroking firms on its dealing members’ list as inactive. According to the report, out of 308 existing stockbroking licences, 220 are active while 88 are inactive.
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