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SEC approves new minimum capital for market operators, creates 3 categories of brokers

By The Rainbow
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The Securities and Exchange Commission has approved  a set new minimum capital requirements for capital market operators.

The RAINBOW learnt authoritatively that the board of SEC that met in Abuja on Friday also agreed on far-reaching restructuring of the capital market, highlight of which is the introduction of three categories of broking firms:  broker-dealers, dealers and brokers.

Under the new structure, broker-dealers are expected to have minimum capital several times the  current amount required by the regulatory authorities for a company to qualify to trade on the exchange, while both brokers and dealers  which will operate with less capital are to trade through broker-dealers.

SEC during Musa AL-Faki administration tried to raise the capital requirements for operators, but the Federal Government later reversed action, which operators complained were too stringent especially when it came on the wake of the world financial crisis.

SEC then had proposed an increase of the minimum paid-up capital for issuing houses from N150 million to N2 billion, while that of broker dealers was increased from N70 million to N1 billion.

That of clearing and settlement agency was increased from N500 million to N1 billion, while that of registrars was increased from N50 million to N500 million.

Underwriters who had a minimum capital base of N100 million are now required to have N2 billion while fund portfolio managers' capital base was increased from N20 million to N500 million, and corporate sub-brokers capital base rose from N5 million to N50 million.

THE RAINBOW learnt that the new capital base would be close to those suspended under Al-Faki in order to ensure that broking firms are whittled down to less than 50.

According to one of our sources, who has impeccable reliability record, the new structure targets a reduction on the number of the NSE dealing members, which at current 311, is considered unwieldy by SEC.

The projection of the regulators is that just like in case of consolidation in the banking sector, many operators who are unable to independently recapitalise would combine with others to meet the requirement or opt for dealer or broker licences, which will not allow direct dealing on the floor of the exchange.

He we called the spokesman of SEC, Mr. Yakubu Olaleye, on phone he said he would call back, but his call did not come before press time.


The dealing members of the Nigerian Stock Exchange are institutions who, licensed by The Exchange as stockbrokers, can buy and sell securities quoted on The Exchange on behalf of the investing public.

The Articles of Association of The Exchange define a dealing member company as:

'A company incorporated and registered under the Company's Act which The Exchange issued a licence for the purpose of dealing in stocks, shares and other securities listed on The Exchange.'

The Director-General, Securities  Exchange Commission (SEC), Ms Arunma Oteh, at a media briefing after the Capital Market Committee (CMC)'s quarterly meeting in Lagos last July, hinted that the ommission was concluding the new capital requirements for market operators.

A recent assessment of securities regulation in Nigeria by the International Monetary Fund (IMF) supported increase in capital of broker-dealers.

The report – Assessment of the Level of implementation of the International Organisation of Securities Commissions (IOSCO) Principles in Nigeria, noted that due to the weak financial condition of many broker-dealers and limited ongoing monitoring, new risks may arise and remain unaddressed.

'The SEC should promptly implement a major overhaul of the capital requirements applied to broker-dealers, by raising their initial capital requirements and requiring them to maintain sufficient risk-based capital on an ongoing basis,' the report stated.

Oteh said the board of SEC had indicated the need to expedite action on the implementation of dematerialisation of share records and documents.

Also, the new capital base will bring together fringe players, thus paving way for well-capitalised and properly structured organisations in the capital market, according to the commission.