Stock brokers protest N1bn market recapitalisation

Stockbrokers yesterday protested to the Senate the N1 billion recapitlisation ceiling given by Security and Exchange Commission (SEC) and suggested N250 million as minimum base. Director-General of SEC Musa Al-Faki had on March 18 2008 briefed the senate committee on capital market headed by Ganiyu Solomon that the recapitalisation had been raised to N1billion.
President of the Charttered Institute of Stockbrokers, Oladipo Aina, in a joint position of the institute and Association of Stockbroking Houses of Nigeria yesterday said the N1 billion capitalisation would not curb activities of unscrupulous players.
He told the committee “we do not believe that raising the capital base to N1 billion will curb the activities of unscrupulous players.”
Aina said, “If the N70 million capital base has been adequate to move the market exponentially from N2.1trillion to N13.3trillion in 2007 without any systemic failure, it is therefore difficult to justify such an astronomical jump in the new capital base.”
He said both bodies while agreeing that there should be an increase “we are convinced that there is need to stratify the market into three categories: N1 billion; N500 million, and N250 million based on volume of businesses to be done.
This categorisation will enable the market to evolve without causing any disruption.”
Aina said SEC had a self-adjusting mechanism for determining the level of capitalisation for any stockbroking firm vis-a-vis the volume of business it wanted to do with SEC.
“If this rule is strictly enforced by SEC, the issue of over-trading or high gearing ration would be nipped in the bud. This rule makes it possible for both the small and the big players to co-exist in the market.”
Aina said the new policy if allowed to hold “will shut out small investors from the market and will not ecnourage the growth envisaged, as the stockbroking firms with this level of capital will find it unprofitable to deal with small holders.
“The policy will further heat up the market and engender speculative trading of the few securities available giving rise to prices that have no bearing with the situation of the companies whose securities are being traded.”
Chairman of the committee, Ganiyu Solomon, however assured the two bodies that the committee would study their joint presentation before taking a decision and it would recall the two bodies should the need arise.