Broker WH Ireland is to raise £5m from shareholders in order to comply with Financial Conduct Authority capital adequacy rules.
The rules require financial institutions to retain a certain proportion of their balance sheet in liquid assets such as cash or short dated bonds, so they can absorb losses if needed.
WH Ireland, which also issued a profit warning, said in a statement to the market this morning (March 5) that it was looking to raise the additional capital to meet the requirements.
The announcement stated: "Following a broad review of the group's likely future regulatory capital requirements and in particular, the group's regulatory capital buffers, the directors believe the placing will ensure that the group has sufficient resources in place to satisfy the FCA's present capital adequacy requirements.
"In addition, completion of the placing would increase the group's core tier 1 capital ratio, which is a key measure of the group's financial stability and strength for market regulators and investors, as well as contribute to the group's working capital."
In November the company reported a loss of £1.9m for the period for the six months to September 30, compared with a profit of £263,000 for the same period in the previous year.
The losses came after a project to outsource the custodial and operational functions of its business ran over-budget.
But WH Ireland warned this morning profits were unlikely to improve in the immediate future.
The company stated: "Trading conditions have remained challenging for both divisions and the directors do not believe that there will be any improvement before the end of the financial year or in the immediate future.
"The board now believes that operating losses will be substantially higher in the second half of the year when compared to the first six months.
"In addition, since the trading update, the directors have also identified additional exceptional costs, some of which are the result of the ongoing transformation strategy of the company, which they will look to provide for in the final results for the year ending 31 March 2019."
david.thorpe@ft.com
