Registration Requirements For Commodity Exchanges in Nigeria.
A commodity exchange is an exchange or market where various commodities are traded. Most Commodity markets usually deal in raw materials and agricultural products, with trading involving derivative contracts based on these commodities in the form of forwards, futures and options as well as spot trades. A good example of a commodity exchange is the Nigerian Commodity Exchange.
Registration of commodity exchanges in Nigeria is governed by the Securities and Exchange Commission (SEC) and its requirements will be the focus of this article .
Registration requirements for commodity exchanges are grouped into:-
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– Payment requirements
– Sponsored Individuals & Director requirements
– Applicant Company requirements
Payment Requirements
- Evidence of payment of a filing/application fee of 50 Thousand Naira.
- Evidence of payment of a processing fee of 200 Thousand Naira.
- Evidence of payment of a registration fee of 1Million Naira.
- Evidence of payment of a sponsored individual fee of 50 Thousand Naira per sponsored individual.
- A minimum paid up capital of 500 Thousand Naira.
- A current fidelity insurance bond covering at least 25% of the minimum paid-up capital as stipulated by the SEC rules and regulations.
Sponsored Individuals & Directors
- A minimum of 4 sponsored individuals, one of whom shall be a compliance officer.
- The managing director of the company is to be among the sponsored individuals.
- Full postal addresses of immediate previous employers, bankers (with current account numbers) and nominated referees of sponsored individuals.
- Detailed CVs of sponsored individuals and directors which should include dates & details of activities arranged from secondary school to date .
- Copies of credentials of sponsored individuals including secondary school and NYSC certificates with originals for sighting purposes.
- Evidence of having the minimum 4(Four) years post-graduation experience needed to perform the function as stipulated by SEC rules and regulations.
- Police clearance reports for each sponsored individual. Each sponsored individual is to report at the SEC Head office or Lagos xonsl office with 2 recent passport photographs for the process.
- Valid means of identification.
Applicant Company Requirements
- A profile of the company.
- The names of addresses of the company’s subsidiaries and percentage holdings as well the type/nature of the businesses.
- Evidence of payment of shares allotted to the shareholders.
- Information relating to its market trading facilities.
- A copy of the form for the general undertaking of members.
- Operational manual and organizational chart of the company.
- A business plan.
- Bank statements for accounts operated by the company for the last 6 months.
- Copies of the company’s certificate of incorporation.
- A copy of the company’s memorandum/articles of association.
- Corporate Affairs Commission (CAC) forms showing statement of share capital, return of allotment and particulars of directors with originals to be presented for sighting.
- A notarized sworn undertaking to abide by SEC Rules and Regulations as well as the Investment & Securities Act (ISA).
- A notarized sworn undertaking by members of the company on its board of directors and who also have interests in companies whose commodities are being traded or could be traded on the exchange.
- A sworn undertaking signed by a director of the company or its company secretary to comply with and to enforce compliance by its members with the ISA & SEC Regulations.
The CBN Guidelines On Large Exposures (LEX)
The Central Bank of Nigeria (CBN) released in September 2021, a set of guidelines aimed at aligning its supervisory role in Nigeria with the expectation of the Basel Committee on Banking Supervision (BCBS) standards on Large Exposures (LEXs or LEs) & ensuring a more consistent supervisory approach to dealing with large exposures in Nigeria.
This article will be looking at the provisions of the guidelines and their implications.
Are the guidelines to operate alone as a supervisory mechanism of the CBN?
No, the guidelines are designed to compliment existing guidelines on Risk-Based capital requirements.
What are the objectives of the guidelines?
The objectives of the guidelines are to :-
– Restrict the level of exposures to a single counterparty or group of connected counterparties so as to ensure that the maximum loss in the event of a sudden default of a counterparty would not endanger a bank’s survival as a going concern.
– Reducing the vulnerability of the Nigerian Banking system to idiosyncratic risk due to large exposures to individual counterparties.
– Contributing to the stability of the Nigerian Financial System.
What is the scope of application of the guidelines?
The guidelines shall apply to all commercial, merchant & Non-Interest banks operating in Nigeria at both the entity and consolidated levels.
What is the scope of the term “counterparties” under the Guidelines and their exceptions?
The guidelines apply to all bank exposures to single counterparties and groups of connected counterparties irrespective of their perfection or the quality of any pledged collateral, with the following exceptions :-
– exposures to the Federal Government of Nigeria and state governments guaranteed by the FGN which are eligible for a Zero percent risk weight;
– exposures to the CBN;
– exposures where the principal and interest are fully guaranteed by the FGN;
– exposures secured by financial instruments issued by the government of Nigeria;
– intra-day interbank exposures.
What exactly is a large exposure?
The guidelines define a large exposure as the sum of all exposures of a bank to a single counterparty or to a group of connected counterparties that are equal to or above 10% of shareholder’s funds unimpaired by losses.
What do the guidelines require mainly for Banks with large exposures?
The guidelines state that banks shall report their large exposures to the CBN on a monthly basis as per approved templates.
What is the limit for large exposures?
The sum of all exposure values of a bank to a single counterparty or to a group of connected counterparties must not be higher than 20% or 50% of the bank’s shareholders fund unimpaired by losses for a commercial or merchant bank respectively.
What is an exposure value?
An exposure value is simply the accounting value of an exposure.