While much is yet
to be heard of the proposed minimum capital base of N1 billion for
stockbroking firms, some market operators said they believe that the
Securities and Exchange Commission (SEC) has ‘soft pedalled’ on the
issue.
The Nigerian Stock
Exchange had earlier this year said that all stockbroking firms must
meet the initial minimum capital base of N70 million required by the
SEC, the capital market regulator.
Rilwan Belo-Osagie,
managing director/chief executive officer of First Securities Discount
House (FSDH) Group, said too much capital base may put pressure on a
company’s performances.
“I think the
proposed N1 billion share capital for stockbroking firm is an overkill
because there is a danger in having too much capital in your business,”
Mr Belo- Osagie said yesterday at the company’s 19th Pre-Annual General
Meeting.
“When you have too much capital, it puts pressure on your returns and it can force you to take more risk,” he added.
He said one major challenge that financial institutions are presently facing is risk management.
“As an institution,
we should ask how much risk are you willing to take; how do you
dimension that risk; and what measures are being put in place to
mitigate that risk? I think management of risk is one of the biggest
challenges we all face,” he said.
He said about five
years ago, what financial institutions had to manage was credit risk,
“but now, because we are dealing with a lot of long term risk asset,
other risks too have to be managed; such as interest risk and market
risk.”
However, he said
management of reputation is also important because “we are finding it
extremely important to know what reputation does a financial situation
has today,” adding that the issue of reputation also touches on
corporate governance, which financial regulators have stressed.
Arunma Oteh,
director general of SEC, at a chief executive officer breakfast forum
in Lagos last week, said that corporate governance is key at restoring
investors’ confidence in the market.
“Corporate
governance, rather than being a cost, is a competitive tool of true
advantage to nations, firms and investors,” Ms Oteh said, adding that
besides the proven fact that well governed companies perform better
than their peers, “corporate governance immunises nations and companies
from the vagaries of financial crises.”
She said it also engenders accountability, transparency, and responsibility, and thereby creates better shareholder value.
She used the medium
to call on private companies to consider listing their shares on the
Stock Exchange, given the inherent benefits of improved national and
corporate profile, increased visibility, and enhanced capital resource
availability.
Meanwhile, Ese
Onosode, CEO FSDH Securities Limited, said earlier in the year there
was a strong possibility of the SEC increasing the capital base of
stockbroking firms to N1 billion, “but because we have regulators who
seem to feel the pulse of both the operators and the investors, I think
they have soft pedalled on that particular issue.”
Mr Onosode said he
believed the commission has been able to realise that increasing
capital base does not necessarily translate to the world-class capital
market which is its main objective.
