Companies for failing to meet post-listing requirements, timely release of operational reports and financial statements on the Nigerian Exchange (NGX) Limited are been sanctioned or fined.
All the quoted companies are required to comply with some rules and regulations, including strict adherence to high disclosure standards as prescribed in Appendix 111 of the NGX Listing Rules.
NGX listing requirement mandates listed companies to submit their quarterly financial statement, not later than one month after the last day of the quarter. It also mandates companies to submit their audited annual financial statements not later than three months after the last working day of the financial year.
The sanctions for non-compliance with periodic financial disclosure obligations are clearly spelt out in the Rules for Filing of Accounts and Treatment of Default Filing, Rulebook of the Exchange. Under the rules, a late submission attracts a fine of N100, 000 daily for the first 90 calendar days of non-compliance, another N200,000 per day for the next 90 calendar days and a fine of N400,000 per day thereafter until the date of submission.
In 2022, 17 companies were fined N93.92 million for failure to file their financial statements after the regulatory by the NGX.
Shareholders of companies quoted on the NGX expressed different view, while some worried over the frequent imposition of fines on companies defaulting from post-listing requirements, others are of the view that the sanctions would compel companies to disclose their information to the market on a timely basis.
The managing director of Lancelot Ventures Limited, Mr Adebayo Adeleke, a shareholder said, “There is a position that shareholders have taken over a long period of time and it seems the position does not go down with the regulator both NGX and Securities and Exchange Commission (SEC). Maybe one day we will be able to harmonize our positions.”
According to Adeleke, the position of the shareholders is that fines does not solve the problem and that fines are punitive. A punishment to the shareholders, because shareholders are not the one responsible for late submission of results, for example. “These companies have management and we believe that instead of fining the company, and those fines will be paid from shareholders’ funds, the management who is responsible does not actually feel the pain of the fine.”
He called on the regulators to seek corrective measures rather than fines on the companies.
The secretary, Independent Shareholders Association of Nigeria (ISAN), Mr. Moses Igbrude, said the issue of penalties must be readdressed by market operators for confidence building.
He said some companies had delisted from the Exchange due to penalties, while new companies were afraid to list. “The Securities and Exchange Commission (SEC) and NGX should encourage the companies to embrace the share buyback initiative instead of approval share reconstruction for companies used in robbing investors,” he said.
The national coordinator of the Progressive Shareholders Association (PSAN), Mr Boniface Okezie, said no doubt, it is affecting the shareholders’ dividend.
“It is really unfortunate, saying that the market regulators must pursue friendly policies and initiatives to push the market forward.
“The NGX needs to go all out to find out the exact state of the companies. To find out if they can overcome their problems in a short while rather than taking the hostile decision to delist them,” Okezie said.
Chairman, of Issuers and Investors Alternative Dispute Resolution (IIADRI), Mr Moses Igbrude, said the issue of penalties must be readdressed by market operators for confidence building.
He said some companies had delisted from the Exchange due to penalties, while new companies were afraid to list.
Igbrude noted, “We are not saying that the NGX should not penalise defaulters but with engagement and dialogue and it must be with a human face.
“For example, companies like Tantalizers that are in distress ed state need to be identified and engaged for possible help and incentives that will bring them back to life instead of using fines to finally nail their coffin. These companies are finding it very difficult to operate, even paying salaries is a herculean task and they are being penalised.
“What are the benefits a company listed on the Exchange enjoys over non-listed ones? My thinking is that Exchange should engage the government to encourage quoted firms with incentives that would attract other companies to list on the market,” he said.
On the other side, a shareholder, Dr Timi Olubiyo, stated that “this is part of regulation and should be a welcome idea as it improves market confidence. This is an indication that the regulators are ready to the task. Also, this is to encourage transparency and compliance on behalf of the companies.”
The managing director of Crane Securities Limited, Mr Mike Eze, said the action of NGX would also boost investor confidence in the market because it is sending a clear message on the need for investors to get companies’ financial reports as at when due.
He added that investors always need to make informed decisions about which stocks to buy and that they can only be able to do that if companies release their regulatory filings on time.
A founding member of Nigeria Shareholders Solidarity Association (NSSA) and one of the leading shareholder activists, Alhaji Gbadebo Olatokunbo said, “We must always abide by the rules, sanctions would make the companies sit up and post their results as and when due, thereby providing investors, analysts and stockbrokers the platform to predict the real value of the companies.”
