At a time when every investment banker and his semi-numerate half-cousin wants to launch an NBFI play, the Financial Regulatory Authority issued new regulations last week on the licensing new entrants to the industry. The regulations are designed to ensure transparency in the industry — and to make sure that any NBFI has an anchor shareholder that knows NIM ≠ Nimh. (The first being one’s net interest margin, and the second being bedtime reading for the elementary school set).

What do the new NBFI regulations do? They set out stipulations on ownership structure, require regulatory approval for additional stake sales, and force minority shareholders holding stakes of up to 5% to declare their ownership status within two weeks of completing the transaction.

Who’s covered? Companies already working in (or looking to set up shop in) sectors including securities and investment banking, refinancing and valuation, financial leasing, factoring, microfinance and insurance, according a primer on the regs from our friends at Shalakany Law Office (pdf)

The basics: At least 50% of an NBFI’s equity must be owned by legal persons and at least 25% of the share capital must be held by a financial institution. New entrants will be required to submit technical and feasibility studies with their filing, as the FRA will hand out licenses for services based on the market’s need for them. Companies will have to seek regulatory approval before offering or adding any services to their portfolio.

Other highlights from the decision include:

• Shareholders owning 10% or more of capital must receive regulatory approval before acquiring an additional 5% or more of the company;
• Shareholders must also acquire approval before acquiring a third or more of a company;
• Any group or entity holding a stake of 25% or more must submit to the FRA their future investment plans, as well as their management strategy and policies;
• Companies must begin operating within six months of receiving FRA approval. The rules grant a three-month extension window, after which the permit will be considered void. Final licenses should be obtained within three months of starting operations.