New Telegraph

Monitoring compliance through timely disclosure

Timely disclosures should remain one of the key requirements for capital market operation. CHRIS UGWU writes

Stock markets all over the world are information driven, as investors do not see the physical products such as shares and stocks of companies they are buying but rather take investment decision based on information about the companies that are issuing those shares. Having so much conviction and confidence in the information received from quoted companies coupled with investment advice from their stockbrokers, investors stake their funds in shares in the stock market.

The importance of information to the market cannot be overemphasized as stock exchanges world over set listing and post-listing requirements for companies seeking quotation. In a bid to stem the tide of corporate governance lapses in quoted companies and among capital market operators, there are requirements issued by the NSE and the Securities and Exchange Commission to be met by the companies.

One of the major standard requirements include regular dissemination of information about the financial performances and any changes that can affect their operations. Regrettably, some companies and operators have not been adhering to this corporate governance ethics, thereby keeping investors in trance about their financial health, which had led many investors to take wrong investment position by investing in moribund companies.

Lapses in adherence to these principles have contributed majorly to crisis in the NSE even as most countries have recovered from the global financial meltdown. Over the years, many stock brokers and other quoted companies have been violating this important obligation, thereby keeping investors in the dark about their financial health among others.

Many ignorant investors have burnt their fingers by investing in some of the dormant companies, which do not furnish the market with their financials. Investors cannot forget in a hurry the unreasonable manipulation of share prices which companies, in collaboration with some stock brokers, indulged themselves, a despicable practice that saw the market bubble to a peak on March 5, 2008, with market capitalisation and index hitting N13 trillion and 66,371.20 points respectively only to reversed speedily to N6.957 trillion and 31,450.78 by December, 2008. However, recently, the SEC in keeping to its regulatory role withdrew the registration certificates of about 157 inactive capital market operators that have failed to render their statutory returns to the commission. The action was part of the regulator’s drive to sanitise operations in the capital market and further ensure investor confidence.

Affected firms

The Securities and Exchange Commission recently said it was set to withdraw the registration certificates of about 157 inactive operators. In a circular obtained from SEC’S website tagged ‘Pre-Notice on Cancellation/Withdrawal of Certificates of Registration of Inactive Capital Market Operators,’ SEC noted that the 157 capital market operators, which were registered for various functions in the capital market, failed to render their statutory returns to the commission, had their capital eroded while others were affected by policy changes. The SEC said: “In view of this fact, the commission, hereby requests the affected CMOs to submit presentations to the commission, on or before November 30, 2020, why their registration should not be cancelled.” The affected firms include 2AS Amao Consult, Adamawa Securities Limited, AIMS Asset Management Limited, AIQ Venture Capital Fund Managers Limited, Allbond Investment Limited, Amalgamated Capital Funds Ltd, Arnold Portfolio Co, Associated Investment Trust Co. Limited, Bayhead Alpha Capital Ltd, Bendu Peter Ser. Nig. Ltd, Bluebird Capital Limited, Boston Capital investments limited, Brickfield Road Associates Ltd, and Bytofel Trust & Securities Ltd. Others are Cadington Securities Ltd, Capital Partners Limited, Capital Structures Ltd, CDL Asset Management Ltd, Circular Trust Ltd, Citi Asset Management Limited, Citizens Inv. & Sec. Ltd, City Investment Management Ltd, Consolidated Discount Ltd, Consolidated Inv. Limited, Consult & Capital Limited, Cornerstone Asset Management Ltd, Corporate Diamond Securities and investments Limited, Custodian & Allied Insurance Plc, Cutix, Dakal Services Limited, Dambale (Nigeria) Limited and De-Canon Investment Ltd. It also include Development Business Co. Limited, Dolbic Finance Limited, Dynamic Trust & Securities Ltd, Eazytrade Concept Ltd, Elyon’s Asset Management Ltd, Emerging Capital Ltd, EMI Capital Resources Ltd, Enterprise Bank Plc, Enterprise Capital Management Ltd, Equibond Securities Limited, Equinox Asset Management Limited, Equitorial Trust Bank Plc, ET&F Investment Ltd, Express Discount Limited, FB Asset Management Limited, Femi Ajijala & Co, First Alstate Securities Ltd, First Marina Trust Limited, Fittco Seurities Limited, Floodgate Finance & Sec. Limited, G. Akomas & Partners, Global Capital Market Ltd, Global Inv. & Sec. Ltd, GMT Securities Ltd, Gombe Securities Ltd, Habitat Trust Ltd, Hazonwao Assets Management Ltd, Heap Investment Ltd, Honey Comb Asset Management Ltd, Horizon Stockbrokers Ltd, Imperial Finance & Sec. Ltd, Indemnity Finance Limited and Integrated Capital Services Ltd. Others included International Standard Sec. Ltd, Investment Monitors Ltd, Investment Shark & Asset Management Ltd, IT IS Securities Limited, Jubilee Global Fund Plc, Kedari Securities Limited, Kendall Securities Limited, Kingsway Securities Limited, Koltron Ltd, Lakesworth Inv. & Sec. Ltd, LASACO Assurance Plc, Leadway Assurance Co. Ltd, Lion Stockbrokers Limited, LMB Stockbrokers Limited, Lombard Asset Management Limited, Lynac Securities Limited, Mact Securities Ltd, Malachai Funds & Assets Management Ltd, Maninvest Asset Management Plc, Maven Asset Management Ltd, Mega Asset Managers Ltd. Mercov Securities Limited, Metropolitan Trust Nigeria Ltd, MICC Consult-Mashasha Inv. & Commerce Co. Limited, Monument Sec. & Fin. Ltd, NCDF Investment Limited, N-cheque Securities Ltd, NIC Securities & Trust Ltd, formerly known as NIC Trustees Ltd; Niche Securities Limited, NICON Trustees Ltd, NMA Investment & Securities Ltd, Noble Financial Trust Ltd, Nouveau Delice International Ltd, Novare Investments Ltd, Ocean Securities and Stock Brokers Ltd, Oceanic Trustees Ltd, Omas Inv. & Trust Limited, Omnisource International Ltd, Osunbade, Okiti & Co, Pan Securities Limited, Peach & Prime Ltd, Peak Securities Limited, Peninsula Assets Management & Investment Co. Ltd, Petroleum Inv. Mgt. Limited, Pharez Limited, PHB Asset Management Ltd, Platinum Capital Limited and Professional Stockbrokers Ltd, among others.

Also included are Profund Securities Limited, Prudential Securities Ltd, Prudential Trust Co. Ltd, Real Laam Enterprises, Regency Financings Limited, Resano Securities Limited, Seasons Trust & Investment Ltd, Seclink Nigeria Limited, Securities Solutions Limited, Securities Trading & Invest. Ltd, Sekat Company, Skylimit Investment Ltd, Slamad Securities Ltd, Stacoprime Capital Ltd, Stan Consultants Nigeria, Standard Alliance Insurance Plc, Stanwal Securities Limited, Stock Investment Sec. Ltd, Strategy & Arbitrage Limited, Stronghold Inv. Limited, Summa Guaranty & Trust Co. Plc, Summit Finance Co. Ltd, Supra Commercial Trust Ltd, Synergy Inv. & Sec. Limited, T. A. Oke, Taricol Investment Ltd, TDA Capital Management Ltd, Treasureline Interlink Ltd, Truevine Global Asset Management Limited, UAC Registrars Ltd, Unic Insurance Plc, Unicapital Plc, Union Homes Savings & Loans Plc, Unique Venture Capital Management Co. Ltd, UTB Trustees Limited, Ventures & Trust Limited, Vileo Capital & Asset Management Ltd, Visa Investments & Sec. Ltd, Vono Product Plc, Wema Asset Management Ltd, Wema Securities & Finance Plc, Wizetrade Capital Asset & Management Ltd, WT Securities Ltd and Zuma Securities Limited.

Shareholders’ view

According to the founder, Independent Shareholders Association of Nigeria (ISAN), Sir. Sunny Nwosu, going by what the SEC said, the companies deserved to be sanctioned. Nwosu noted that the affected companies supposed to have ensured that they met the requirements as such would help shareholders to understand their financial health for investment decisions. “It is not a new thing and it does not come to us as a surprise. We have constantly written to the exchange and raised the issue at annual general meetings that there is need to know the status of these companies to enable us take investment position,” he noted. The President of the Progressive Shareholders Association, Mr. Boniface Okezie, while reacting to the development, said the sanction could have taken place long ago, adding that it was better for Nigerians to have few companies that are ready to play by the rules than to have all the companies in the world that are not ready to satisfy post-listing requirements. Okezie said that the action was a welcome development, as it will lead to more confidence in the market and appropriate pricing of securities. He said more entities would be compelled to give information to the market on a timely basis, adding that investor confidence in the regulatory capacity of the SEC and the market would be enhanced.

Last line

A developed capital market is a world class market and such market is one that engenders investor confidence, has breadth and depth in terms of product offerings, characterised by market integrity, has a sound regulatory framework, a strong and transparent disclosure and accountability regime, fosters good corporate governance and is fair, robust and efficient market place. Hence there is need for regulators to tighten the noose on market infractions and other capital market crimes.

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