Some shareholders of companies quoted on the Nigerian Exchange have expressed worry that the frequent imposition of fines on companies defaulting from post-listing requirements is scaring away investors and potential companies willing to list on the nation’s capital market.
The shareholders who stated this in a chat with Nairametrics noted that the market regulators must pursue friendly policies and initiatives through dialogue with market operators to push the market forward.
They agreed that the regulators should not condone a breach of listing rules of the Exchange which must often lead to fines/penalties. However, they recommended alternative sanctions because the imposition of monetary fines is crippling some of these companies financially.
The fine: This year alone, some 17 NGX-listed firms were fined a total of N93.920 million for failure to file their financial statements after the regulatory due date.
Checks by Nairametrics showed that the companies were sanctioned for their inability to meet the regulatory requirements of filing ranging between the third quarter of 2021 and the third quarter of 2022.
Among the companies that were fined is Coronation Insurance Plc led with N14.9 million of the fines which represent 36.34% of the total fines while Royal Exchange Plc followed with a fine of N9.8 million, Mutual Benefits Assurance Plc was fined N6.2 million, LASACO Plc got a fine of N5.3 million while Veritas Kapital Assurance trailed with N4.8 million fine. Others include First Bank Holding Plc led with N8.1 million of the fines while Unity Bank Plc followed with a fine of N4.2 million and Union Bank Plc trailed with N1.2 million, among others.
The shareholders advised the Exchange and other regulators that if such fines continue, potential investors and even existing ones will be discouraged.
Market integrity: In its latest X-Compliance report, the Nigerian Exchange explained that the listing rule was designed to maintain market integrity and protect investors by providing compliance-related information on all listed companies. The listing rule specifies this:
- “Companies that are listed on the Exchange are required to adhere to high disclosure standards which are prescribed in Appendix 111 of the Listing Rules.
- “Financial information which is periodic disclosure and on-going material events disclosure should be released to The Exchange in a timely manner to enable it efficiently perform its function of maintaining an orderly market”.
Shareholders’ position: The President of the New Dimension Shareholders Association, Mr Patrick Ajudua speaking to Nairametrics noted that he agrees that too much fine is scaring away investors in the capital market.
He added that as shareholders they don’t condone a breach of listing rules of the exchange which must often lead to fines/penalties but they have encouraged regulators to do such with a human face.
- “Some of these breaches are not their fault as they also as a company report to their primary regulators before sending the report to the exchange. Therefore they should not be penalized for offences that they have no power to avoid.
- “Also, fines in their nature are meant to serve as a punitive lesson to them but the question is why is there a continuous breach? The regulator needs to sit down with such a company and find a better way to avoid such.
- “In a situation of a hostile business environment, high cost of doing business, and unfavourable government policies, when you now add the burden of fines and penalties the tendency of the market to attract new investors is next to zero, and even old ones will use that as an excuse to exit the market such as was done by Mobil Plc”.
Ajudua noted that fines/penalties should be the last resort by regulators and efforts must be made to encourage constant dialogue adding that where this fails then such fines must be done with a human face knowing fully well that such payment is always made by the company from shareholders’ fund.
The Chairman, of Issuers and Investors Alternative Dispute Resolution (IIADRI), Mr Moses Igbrude, said:
- “Whatever is happening to the environment affects everything, this is what we get when there are policy issues. When regulators like SEC and NGX are allowed to be self-funded and generate revenue for their operations by the government, their drive would be to make money through levies, dues, and penalties to remain in operation” he said.
Igbrude who said SEC recently increased all its fees across the board, explained that before annual general meetings are held, the proxy material fee paid to the SEC was initially N5000.00 but with the recent increment, it has gone up to N500,000.00.
- “On what justification will SEC move the fee from N5000.00 to N500,000.00? SEC has the power for regulation but when it comes to fees, the Commission is supposed to consult and engage the stakeholders to determine the economic situation these companies are facing.
- “We are not saying that the NGX should not penalize defaulters but with engagement and dialogue and it must be with a human face.
- “For example, companies like Tantalizers that are in distress 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 penalized.
- “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.
Mr Boniface Okezie, the national coordinator of the Progressive Shareholders Association, said 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.
The opinion expressed by the shareholders cannot be acceptable. We cannot go back to the old ways of doing things by listed companies when it takes more than three years to release an annual report not to mention quarterly reports. The stock market is driven by information and when such is denied then we allow rumours and hearsay to play dominant roles in price determination. We cannot go back to the sack ages
Where there are no rules then there are no offences
The listed companies signed to abide by the post listing rules of the Exchange. Therefore, the rules must be observed and where the rule is infringed there are appropriate
and non- discriminztory sanctions . No one is talking about the punitive CBN sanction on banks. The exchange is the weeping company. I don’t blame the complainants. The exchange hoisted it upon itself having been lacaidastical in it’s operations and meeting the aspirations of investors in the last then years
It is a known fact these listed companies do watch their competitors before releasing their accounts to watch market reactions. Also, I hope some of these complaining shareholders are aware that some companies like Daar Comms, Conoil , C & I Leasing, etc are happy to pay fines than release their accounts at the appropriate time. First Bank has suddenly joined those companies that delay release of Accounts. There was a particular year first bank paid N5billion in fines to CBN. This is enough to rejuvenate SMEs in 5 States or more. CBN does not need the bank cheque. It just debits. No story!
So I will not agree to NGX or sec slowing down on fines. It is you shareholders that should penalize your directors and audit committes to do the proper thing. The exchange provide window for companies to seek extension. When delay is envisaged.whatecer is happening or going to happen, companies should notify the NGX.
I absolutely agree with your views
When one read certain opinions being expressed, it seems as if Nigeria should design its own corporate governance practices and codes different from the international community
Obviously, the complaints party do not understand how the exchange works. Let it be known that the exchange and market operators organised visits to listed companies. These meetings are strategic in the sense that it is done so as not to create the impression that the exchange want to interfere in the day to day management of the business..
There is opportunities for companies to brief the market operators when there are important news and events that may or may not affect prices
There are specific times accounts are due for submission. Companies are allowed to write and seek extension even more than twice if I am correct. As for banks and insurance companies, their accounts are deemed as submitted as soon as the companies confirm in writing that they have submitted the accounts to CBN and PENCOM respectively. CBN and sec makes far more from sanctions than stock exchange. I am not the spokesperson of the exchange but it is based on studies I have undertaken over the years.
We need to understand the trajectory of events and at which point fines are imposed. It takes several warnings unlike CBN and SEC. No mercy. The CBN has both the yam and the knife and so can cut it anyhow.
Investors need to be protected. It is obligatory for companies to submit reports as at when due. There should be no waivers. One begin to ask why is it that companies like Nig Breweries, GTB,. Nestle, Zenith etc were award winners in the past all because they hardly pay fines to the exchange. They confirm to the rules while most others get point deductions for the number of reminders they get.
Those who desire the exchange to be micro managing companies are surely not speaking the truth. There are structures within companies to manage companies. The staff, board, audit committee, auditors,, shareholders, all receiving salaries, fees, dividends etc. These are all structures of control. Adding the exchange is not proper. Surely NGX has failed woefully in its role as a rallying point of these quoted companies and as an advocacy or link in the relationship of industry with government. Quoted companies are like orphans fighting their battles in their own while they pay humongous annual listing and other fees to NGX.
So where NGX has failed are obvious not in imposition of fines. The exchange now score over 90percent in corporate reporting unlike in the past. We hope the numbers can consistent 100 percent soon. We must operate in line with global best practices.