…gives a deadline of June 2027
…Tier 2 issuer houses need N7bn
….Tier 1 portfolio managers need N5bn
….broker-dealers N2bn
The Securities and Exchange Commission (SEC) is another regulator that has joined the bandwagon of massive increases in capital requirements by revising the minimum capital applicable to all categories of regulated capital market entities.
According to the SEC, the minimum capital review is informed by the need to strengthen market resilience, enhance investor protection, align capital adequacy with the evolving risk profile of market activities, and ensure that regulated entities have sufficient financial capacity to discharge their obligations in a sustainable manner.
“The revised minimum capital framework aims to: enhance the financial soundness and operational flexibility of market operators; align capital requirements with the scope, complexity and risk exposure of regulated activities; promote market stability and systemic risk mitigation; and support innovation and orderly development of new market sectors, including digital assets and commodity markets”, the SEC said in a circular sent to market operators on my Business Day on January 16.
The SEC circular was sent to all entities regulated by the Commission, including, but not limited to: major and non-major capital markets operators; Market Infrastructure Institute; capital markets advisors; financial technology (fintech) operators; Virtual Asset Service Provider (VASP); And
Commodity market arbitrageur.
All affected entities are required to comply with the revised minimum capital requirements on or before June 30, 2027.
“Entities that fail to comply with the prescribed requirements within the prescribed timelines will be subject to appropriate regulatory sanctions, including suspension or withdrawal of registration, as may be determined by the Commission,” the SEC said.
For example, Tier-1 Portfolio Managers ((full scope) which include: management of collective investment schemes (CIS) and alternative investment funds (private equity, venture capital, infrastructure funds etc.) above N20 billion net asset value (NAV); discretionary and non-discretionary private portfolio management services above N20 billion assets under management (AuM); exposures to foreign instruments up to 40 per cent of NAV. Now up to N150 million. A minimum capital requirement of N5 billion is required.
“Any fund and portfolio manager with NAV/AUM of more than N100 billion must have a minimum of 10 per cent of NAV/AUM as capital,” the SEC said.
For Tier-2 fund/portfolio managers (limited scope), which include: Management of collective investment schemes with limited deposits not exceeding 10 times the required capital (N20 billion) on Net Asset Value (NAV); Discretionary and non-discretionary private portfolio management services worth over N20 billion; And with exposure to foreign instruments of more than 20 per cent of NAV, they now require N2 billion as minimum capital, compared to the minimum of N150 million.
Also read: The SEC and the chemistry of risk-based supervision
Similarly, broker-dealers whose services include: client execution, proprietary trading, margin/securities lending and advisory services are no longer required to have N300 million minimum capital to operate, but N2 billion.
The SEC said the minimum capital review from 2015 is in line with its mandate under the Investments and Securities Act, 2025 to regulate and develop the Nigerian capital market.
Also, Tier 1 – issuing houses that provide non-interest finance services, advisory and arrangement services, and no underwriting now require N2 billion as against N200 million; While Tier 2-provides a 'one-stop-shop' for the issuing house and issuers with underwriting, providing underwriting services, and
This business requires a minimum capital of N7 billion compared to N200 million for advisory and product development services.
Brokerage Services:
The minimum capital requirement for brokers (client execution only) has been increased from N200 million to N600 million; Dealer (Proprietary Trading Only) from N100 million to N1 billion; broker-dealer (client execution, proprietary trading, margin/securities lending and advisory services), N300 million to N2 billion; Sub-Broker (Digital) from N10 million to N100 million; Sub-Broker (Corporate) N10 million to N50 million. Also, sub-brokers (individuals) now require N10 million minimum capital for this business compared to N2 million, while inter-dealer brokers require N2 billion compared to N50 million.
