MCR: Capital Market Academics Want SEC to Review Recapitalisation Deadline
The Capital Market Academics of Nigeria (CMAN) has advised the Securities and Exchange Commission (SEC) to revisit and extend the recapitalisation deadline fixed for regulated market operators.
CMAN gave the advise in a communiqué signed by Prof. Uche Uwaleke, the President of the association at the end of its meeting in Abuja on Tuesday.
SEC recently released a new Minimum Capital Requirement (MCR). The new MCR mandated all regulated capital market entities to comply with the revised requirement on or before June 30, 2027.
The communique said that the proposed compliance deadline may not be feasible due to the ongoing recapitalisation exercise in the banking, insurance, and pension sectors in which the market operators were involved in
It said that the association had recommended an additional six months extension, preferably to December 2027, to allow market operators to raise capital under more favourable market conditions.
The communique also said that the scale of the increase for some categories of operators, especially broker-dealer, appeared disproportionate to the associated risk.
It advised SEC to further engage market players with a view to revisiting the magnitude of the increases. According to the communique, CMAN is of the view that overly high capital floors could lead to market concentration, reduced competition, and unintended exclusion of retail investors.
It said that capital adequacy should be complemented by strong corporate governance, effective supervision, and technology adoption.
”The proposed compliance deadline of June 30, 2027 may not be feasible given that 2027 is an election year in Nigeria often characterised by investment climate uncertainties.
”The commission is equally invited to consider the implications of the new MCR for sections 795 and 796 of CAMA 2020 with respect to Limited Liability Partnerships which could be exploited to circumvent the MCR.
”There is the need for more clarity and flexibility regarding what qualifies as core capital ” the communiqué said.
It recommended that retained earnings should be allowed to count as part of qualifying capital, subject to appropriate verification.
“This approach will recognise firms that have grown sustainably through internal capital formation, while maintaining prudential standards,” it said.
It said that to minimise recapitalisation costs and accelerate compliance, regulatory support measures, including possible fee waivers or discounts in association with Corporate Affairs Commission (CAC) and other regulatory bodies would be encouraged.
It also recommended streamlined approval processes, and clearer guidance on mergers, acquisitions, and business combinations as other regulatory support to drive compliance. The communique commended SEC for its commitment towards strengthening the country’s capital market.
It advised the commission to engage with stakeholder where necessary, to ensure that the MCR framework enhanced market resilience, support innovation, and promote inclusive growth. SEC, in a circular dated Jan. 16, said that the revised framework was to strengthen market resilience
The commission said that it would also enhance investor protection, and align capital adequacy with the evolving risk profile of market activities.
It said that the review was to ensure that regulated entities possessed sufficient financial capacity to discharge their obligations in a sustainable manner. #MCR: Capital Market Academics Want SEC to Review Recapitalisation Deadline#
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