Yesterday, September 15th the market was hit with the shocking news that Access Bank shares has been placed on technical suspension several weeks or even months ahead of its proposed capital raising exercise. In fact the board of Access Bank scheduled an EGM for October 13 2014 to seek shareholders approval to raise capital via rights issue. Now this is almost a month after technical suspension.
NSE has now released an FAQ on Suspension of Securities and sighted provisions in SEC rules that allows it to take such a decision. I will leave out the big grammar in the FAQ which you can download here for your records and delve straight into the core issues.
According to NSE under Rule 198 of the SEC Consolidated Rules 2013,
“An exchange may, in accordance with its rules, suspend from trading a security listed thereon and the Exchange shall within 24 hours notify the Commission of any such suspension, the effective date and the reasons therefore.”
NSE has basically exploited a gaping loophole or ambiguity in the SEC rule giving it enormous powers to place a stock on technical suspension whenever it likes and without objection provided it notifies SEC within 24 hours. This assumes the notification does not require any approval or suggestion that SEC can reasonably withhold consent to the suspension. NSE therefore can based on “rule of thumb” place a stock on technical suspension.
On granting Access Bank approval
Here is what NSE said;
By placing Access Bank Plc’s shares on technical suspension, is The Exchange signaling that it will grant technical suspensions, going forward?
Anticipatory approval to place Access Bank Plc’s shares on technical suspension was granted based on a written request by the Bank in anticipation of its proposed rights issue. By granting anticipatory approval, The Exchange is indicating to the capital market that in appropriate circumstances, it will entertain requests from issuers to place their shares on technical suspension.
So despite not even giving us the exact reasons NSE basically just granted the approval because Access Bank had indicated interest to commence a rights issue even though there is nothing official from the bank indicating that the approval has been obtained in approval or awaiting ratification considering that the Board meets about 3 weeks from now.
I see this as a bad precedence for the market as companies can simply just place their shares on technical suspension months ahead of a capital raising exercise in other to ensure their market price remains unfazed by the market. If you also consider that their Q3 results may b released sometime in October (an information that can affect share price) this move appears to be in bad faith from an initial point of view.
Ironically, NSE mentioned in the FAQ that they had stopped technical suspension on the price of stocks undergoing a capital raising exercise only for SEC to give them a leeway. It will be interesting to see how the market absorbs all of this. And by the way…Aig Imoukhuede is the first Vice President of NSE giving credence to some sort of influence here.
What do you think?