SEC Seeks to Reduce Cost of Raising Capital

The Securities and Exchange Commission, SEC, released a draft rule seeking reduction in cost of primary equity and fixed income issues by various trade groups in the capital market, including the Nigerian Stock Exchange, (NSE) and the Commission.

In the draft rule, titled: “Exposure of Proposed New Rule and Sundry Amendment to the Rules and Regulations of the Commission”, SEC stated that the total cost of issue should not exceed 2.833 per cent and 2.293 per cent of the total gross proceeds of the issue for equity and bonds respectively, excluding underwriting commission and registrars’ fees.

A breakdown of the new cost structure indicates that on equity, first N500 million to be raised by an issuer would attract 0.275 per cent fee from SEC as against 0.30 per cent previously charged; next N500 million will attract 0.225 per cent fees, while balance above N1 billion will attract 0.15 per cent commission. For the NSE, listing fee on the Main Board will henceforth attract 0.25 per cent of offer size subject to maximum fee of N200 million; listing fee for the Premium Board stands at 0.25 per cent of offer size subject to maximum fee of N400 million, while listing on ASeM attracts flat fees of N100,000.

For every initial N1 billion being raised by companies from the equities market, issuing houses are expected to charge 1.35 per cent of offer size, next N1 billion will attract 1.225 per cent fee, while balance over N2 billion will cost the issuer 1.15 per cent of the offer size.

The Central Securities and Clearing System, (CSCS) commission is capped at N5million; 0.0075 per cent of the offer size as against 0.01 per cent previously charged. For fixed income primary issuance fees, SEC is expected to charge 0.15 per cent on the first N500 million being raised by an issuer compared to 0.15 per cent of offer size previously charged. The next N500 million will as well attract 0.145 per cent fee, while balance above N1 billion will attract 0.1425 per cent fee. For the NSE, there is zero fee for companies already having equity listing, compared to 0.15 per cent of offer size originally paid by issuers. Meanwhile, companies without equity listing are expected to pay 0.0375 per cent issuance fee. While commission to CSCS is capped at N5 million; 0.0075 per cent of the offer size, stockbrokers are expected to collect 0.13 per cent of offer size as fee.

On the other hand, the Commission proposed 900 per cent increase in registration filing fees for all categories of Capital Market Operators, CMOs, from N5,000 to N50,000, while processing fee is pegged at N200,000.

According to the proposed rule, for registration on stock/commodities exchanges, bankers to an issuer, clearing and settlement agency/depository agency, should be increased by 900 per cent from N100,000 to N1 million respectively, registration for an over-the-counter market is being raised to N1 million, while that of inter broker/dealer and capital trade points have been pegged at N500,000 respectively. Registration for broker/dealer, fund manager, registrar and trustees should also be raised by 40 per cent from N100,000 to N500,000; the fee for issuing houses, market , custodian of securities and underwriters is being upped from N200,000 to N500,000, representing 150 per cent increase. For people seeking to enter the market as brokers, dealers, capital market consultants (corporates), corporate investment advisers and rating agencies, the expected registration fees stands at N300,000 from initial N100,000. Capital market consultant (partnership), sub-broker and individual investment advisers will have their fees raised from N50,000 to N200,000.

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