•11 banks pay N2.3bn fine
•Operators share more insight, as shareholders kick
By Peter Egwuatu
More companies are defaulting in filling their financial statements at the Nigerian Exchange Limited NGX. As at end of first half 2021, H1’21, 33 of them defaulted, up by over 103 percent from 16 last year.
This comes as 11 banks paid N2.3 billion in penalties for various regulatory infractions in the financial year ended December 2020.
Listed companies on the Exchange are required to file their financial statements on a timely basis in accordance with the listing rules of the NGX. For annual audited financial report, listed companies are required to submit their reports three months after the end of the financial year.
Financial Vanguard’s findings from the Exchange showed that a total of N190.6 million was imposed as sanctions for flouting the post listing requirement this year as against N99.8 million last year, representing 122 per cent increase.
Meanwhile, the companies that missed regulatory filling of their results to the Exchange for full year ended 2020 include seven active and 17 inactive companies.
They are: Niger Insurance Plc, Royal Exchange Plc, The Tourist Company of Nigeria Plc, Deap Capital Management & Trust Plc, African Alliance Insurance Plc, Royal Exchange Plc, Thomas Wyatt Plc. Others include: Roads Nigeria Plc, Nigerian German Chemicals Plc, Multi-Trex Intergrated Foods Plc, DN Tyre & Rubber Plc, Aso Savings & Loans Plc, Capital Oil Plc, Evans Medical Plc, International Energy Insurance, Resort Savings & Loans, Staco Insurance, Standard Alliance Insurance, Unic Diversified Holdings, Union Homes Savings & Loans, Juli Plc, Goldlink Insurance Oando Plc and Medview Airline Plc.
The development implied that less number of companies are complying with the rule with the number of compliant companies dropping to 134 from 141.
The top five companies that were sanctioned by the NGX for the defaults include: Niger Insurance Plc N42.2 million, FTN Cocoa Processors Plc N32.3 million, Union Dicon Salt Plc N18.3 million, R.T Briscoe Nigeria Plc N13.8 million and Lasaco Assurance Plc N9.0 million.
In its comment on the posting listing requirement, NGX stated: Early filers are companies that file their interim financial statements at least two weeks before the due date and audited annual financial statements at least four weeks before the due date.
”The Exchange has identified the companies listed on Schedule 3 as companies that fell short of the minimum listing standards in terms of timely disclosure of their audited annual financial statements and have Missed Regulatory Fillings (MRF) or are Awaiting Regulatory Approval (AWR) from their primary regulators.
“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 (Issuers’ Rules).
“We are extremely proud of the early filers and will continue to show case quoted companies that imbibe high corporate governance practices.”
Meanwhile, the banks that were penalised by the Central Bank of Nigeria, CBN,Securities and Exchange Commission, SEC and Nigerian Stock Exchange, NSE for regulatory contraventions in 2020 are: FCMB Plc N183.4 million, Fidelity Bank Plc NN446.9 million, Stanbic IBTC N277.0 million, Wema Bank N23.4 million, UBA Plc 636 million, Zenith Bank Plc N11.0 million, First Bank Nigeria Plc N204.9 million. Others include: Sterling Bank N34 million, Access Bank N464.2 million and Unity Bank Plc N35 million and Union Bank Nigeria Plc N10 million.
Commenting on this development, analyst and Managing Director, APT Securities & Funds Limited, Mallam Garba Kurfi, said: “Many companies are trying to meet up with releasing timely report. That is why Flour Mills Plc is able to release their result in early June same with Honeywell Flour which before now takes longer time to release their results.
”However, fines are being slammed on those that fail to comply with the requirement. Timely release of report raises the status of the Exchange like any other emerging market or advance market, since the market is information driven as we are witnessing now.
”The release of results of Total Nigeria Plc, United Capital Plc, etc for Q2’21 are taking market up and those who are not able to meet up immediately notified the NGX the reason for the delay which keeps the market informed.”
Commenting on the sanction, he said: “When you have law without sanctions how will it be enforced? My only concern is that whatever money paid as sanction should not be part of the NSE income because that will encourage more sanctions but the money should be paid into a separate account for market development. Same with other regulators like Securities and Exchange Commission, SEC, CBN, Nigeria Pension Commission, PENCOM, National Insurance Commission, NAICOM, to mention a few.
“The capital market is built on trust and integrity. It is also information driven. Without issuers, there will be no product to sell in the market.
”Similarly, investors are needed to buy the products subject to the safety and profitability of their investments. As a result, investors need to be constantly aware of the performance of issuers, to ascertain if trust and integrity still exist. ”This underscores the importance of regular corporate disclosures by listed companies in compliance with the post listing requirements of the stock exchange.”
Also commenting another analyst, the Vice Chairman, HIGHCAP Securities Limited, David Adonri, said: “Any listed company that fails to meet the post listing requirements of the Exchange has fallen short of the minimum quality for continued listing. The first sanction is payment of fine and if the contravention persists, the securities listed by the company run the risk of delisting.”
On the sanction to defaulting companies, he said: ”Fees paid as fine can also be channeled to market development. The increase in number of derelictions may be connected to the disruption caused by Covid19 pandemic.
”Subsequent renditions are expected to be more timely since the economy has opened up. It is not likely that the same anomaly will occur in the 2021 financial year and beyond. I do not think that market operators suffered the same fate as issuers in 2020 because their activities were mainly virtually conducted.
”The punishment meted out to affected issuers for dereliction is unfortunate and regrettable but necessary, to uphold sanity in the capital market and sustain investors’ confidence.”
In her comment, Mrs. Bisi Bakare, Chairman, Pragmatic Shareholders Association of Nigeria, said, ” My advice is that those officers of the companies assigned to process returns should do so as at when due to avoid unnecessary penalties.
”Also, our regulatory authorities should know that the burden or consequences of penalty is borne by shareholders. This is because the aftermath effects 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 to temper justice with mercy, by looking at other ways to punish them 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.
Commenting, Mr. Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria, PSAN, said: “The NSE need to further carry out investigation on why these 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 explanation that a fine could be imposed; and the fine should be imposed on all the officers responsible for turning in the results and not to the firm itself.
”Also, the Exchange and other regulators should compel companies to state reasons 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.”