July 23, 2018

NSE sanctions : Shareholders demand penalties for erring directors

NSE sanctions : Shareholders demand penalties for erring directors


Affected coy faults NSE
By Peter Egwuatu
SHAREHOLDERS of quoted companies have asked regulators in the financial markets to impose sanctions on directors/officers of those companies that defaulted in their regulatory fillings rather than make the investors suffer for such failures.


Meanwhile one of the companies sanctioned have faulted the Nigerian Stock Exchange, NSE, saying it never committed the offence for which it was sanctioned.

The shareholders’ position came on the heels of the NSE’s decision to take stiffer penalties on companies that default its post listing requirements, just as it suspended eight companies from trading while freezing their share prices.

Some of the insurance companies have blamed non submission of results to the NSE as required by the Exchange’s post-listing rules, on the delay by the insurance industry core regulator, National Insurance Commission, NAICOM, in approving their financial results.

This is coming against the backdrop of a decline in the number of companies failing in this post listing requirement as five companies missed regulatory filling dates for their results in the first quarter of 2018, Q1’18, as against eight in the corresponding period of 2017. However, 26 companies quoted on the Exchange were fined N86.6 million for their failure to file in their audited report for the full financial year 2017.

The Q1’18 fillings showed a significant drop when compared to the period of Q1’17 in both value and number of companies by 90.5 percent and 37.5 percent respectively.

The five companies which flouted the regulatory requirements and were fined in Q1’18 include Diamond Bank Plc (N1.1 million) Union Bank Nigeria Plc (N1.0million), Mutual Benefit Assurance Plc (N1.600 million), Great Nigeria Plc (N3.7 million) and Presco Plc (N300,000 ), all totaling N7.7 million as against eight companies which included Daar Communications Plc (N14.1 million), Great Nigeria Insurance Plc (N24.8 million ), Newrest ASL Plc (N2.4 million), Niger Insurance Plc (N16.1 million), Phama-Deko Plc (N1.6 million), Sovereign Trust Insurance Plc (N10.2 million), Staco Plc (N7.5 million), and Union Diagnostic & Clinical Services Plc (N3.9 million) that were fined in Q1’17, making a total N80.6 million

Meanwhile, the Exchange said that two companies, Infinity Trust Mortgage Bank Plc and Forte Oil Plc, filed their results ahead of all others in Q1’18, while for audited accounts 2017 Nigerian Breweries Plc, Transcorp Plc, Total Nigeria Plc, Africa Prudential Plc, United Capital Plc and Seplat Petroleum Development Plc were on the early birds list.
Referring to companies that file early the NSE stated: “We are extremely proud of these companies and will continue to showcase quoted companies that imbibe high corporate governance practices.” Early filers are companies that file their audited financial statements four weeks before the due date.

According to the NSE, “Any late submission of accounts shall attract a fine of N100, 000 per week from the due date until the date of submission. A listed company who contravenes any of the provisions of the Listing Rules and General Undertaking and fails to pay the penalty imposed on it for such contravention on or before the due date shall be liable to a further fine of N300,000 in addition to N25,000 per day for the period the violation continues.”
Defaulting companies’ reaction

Reacting to enquiries by Financial Vanguard, Great Nigeria Insurance Plc said: “The report under reference was filed on time as required. We are shocked to hear that it is still been flagged by the NSE.” The other defaulting companies could not comment as they did not respond to our enquiries.
Shareholders kick

Mr. Oderinde Taiwo, National Coordinator, Proactive Shareholders Association of Nigeria, PROSAN, said: “It is good news that less companies missed their regulatory fillings. This shows that companies’ management are beginning to take their responsibilities serious. We hope to see improved adherence to the rules of the Exchange at the end of this financial year. For companies that still flout the rules, then the directors responsible for the filing should be held accountable and in that way they will sit up”

Mrs. Bisi Bakare, Chairman, Pragmatic Shareholders Association of Nigeria, said, “In my opinion, those officers of the companies assigned to process returns should do the needful to avoid unnecessary penalties. A review of regulatory fine from regulators in the financial sector show that the Central Bank of Nigeria, CBN, fine is much higher than that of the NSE. So our regulatory authorities should know that the burden or consequences of penalty is borne by shareholders.

This is because the aftermath is that topline and bottomline will definitely be affected and dividend proposed will decline and the working capital of these companies are also affected. On this note, I want our regulators, especially the CBN to temper justice with mercy, by looking at other ways to punish companies in such a manner that our investment will not be affected.

“The regulators in the banking, capital market and insurance sectors (CBN, SEC, NAICOM) should be up and doing in their responsibilities because most times it is when one regulator or the other do not complete their work on time that it affect prompt filling of results by companies to the NSE.

It is a good thing that the number and value of fine for defaulting is dropping”
Mr. Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria, PSAN, said “The NSE need to further carry out investigation why these few companies have failed to meet regulatory requirement. Imposing of fine is not the best, as this action affects the owners of the companies (shareholders) and not the management. It is only when such action is taken and the company fails to provide reasonable reason that a fine could be imposed; and the fine should be imposed on all the officers responsible to turn in the results and not to the firms.

“Also, the Exchange and other regulators should compel companies to state reason for late fillings of results in their annual reports. This will enable shareholders to tackle and hold the management responsible during Annual General Meetings, AGMs.”

Commenting as well, Mr. Moses Igbrude, Public Relations Officer, Independent Shareholders Association of Nigeria, ISAN, said “There are rules and regulation in our market and operators must abide by them. So, management of companies should be aware of the rules and penalties involved. The management as our Association always tell them is to guide against being penalised.
Rules and penalties

“Another issue why some companies do not meet regulatory requirement, is because of the numerous regulators in our system. If one regulator delays a company from meeting the requirement of other regulators; should they be held responsible? No, I don’t think it is proper. So, the NSE should look at this issue critically before imposing fine to defaulting companies. Sanctions are not always the best as we normally advise. We think regulators should find a way of rewarding those that meet regulatory requirements; in that case others will learn and be attracted to get such reward subsequently.

“Again even when penalties are to be imposed, the officers or directors responsible to turn in results should be punished. We frown at a situation where the entire company or shareholders bear the brunt of the negligence of some few officers. If that is done, you will see that the directors will sit up and do things that will not attract penalty to the company.”

Mr. Owolabi Peter, Chairman, Integrated Supreme Shareholders Association of Nigeria, said “In as much that sanction is necessary to make the companies sit up, it is still not the best form of punishment.

It is the shareholders’ investments that suffer most. Whether there is fine or not directors are paid their money. Also, the fee for these penalties from the CBN are too much, the least fee you get from the CBN is N50million for one offence, why that much, it is killing. An offence, no matter how big is too much for N50 million.

This money is shareholders’ fund. I think regulators should rather sanction officers directly involved for failing in his or her responsibility. In that way they will sit up to avoid unnecessary penalty.”