Nigeria: NSE Suspends 5 Firms, As Defaults in Financial Results Rendition Drops

7 October 2019

The level of compliance in terms of timely submission of financial results by corporate entities listed on the Nigerian Stock Exchange, NSE, may have significantly improved as the number of defaulters in the first half of 2019, H1'19, dropped by 80 percent to three from 15 in the corresponding period of 2018, HI'18.

Findings by Financial Vanguard from the data obtained from the NSE shows that the value of fine imposed on the defaulting companies for HI'19 declined by 97.9 percent to N3.2 million from N158.3 million in H1'18.

The three companies that defaulted in HI'19 and fine paid include: Lasaco Assurance N300, 000; Universal Insurance N700,000 andThomas Wyatt N2.2 million.

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Meanwhile, the NSE has suspended seven companies this year for breach of its rule for filing of accounts and treatment of default filing, but has readmitted two after complying with post-listing requirements.

The companies under suspension include; FTN Cocoa Processors Plc, Goldlink Insurance, R.T Briscoe Nigeria Plc, Resort Savings & Loans Plc, and Standard Alliance Insurance Plc.

In its explanation for the suspension, the NSE said: "The companies listed in Schedule 9 were suspended pursuant to the provision of Rule3.1, Rules for Filling of Accounts and Treatment of Default Filing, Rulebook of the Exchange (Issuers'Rles), which provides that: "if an issuer fails to file the relevant accounts by the expiration of the Cure period, the Exchange will: send the Issuer a "Second Filing Deficiency Notification within two business days after the end of the Cure period; suspend trading in the Issuer's securities; and notify the Securities and Exchange Commission, SEC and market within 24 hours of the suspension."

The Exchange further noted that early filers are companies that file their audited financial statements four weeks before the due date, adding that quoted companies are required to file their financial statements on a timely basis in accordance with the listing rules.

The earlier filers for both Q1'19 and Q2'19 include: Infinity Trust Mortgage Bank Plc, Secure Electronic Technology Plc, Access Bank Plc, and Austin Laz & Company Plc.

The NSE said: "Referring to companies with early filers, we are extremely proud of these companies and will continue to show case quoted companies that imbibe high corporate governance practices."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 N300,000.00 in addition to N25,000 per day for the period the violation continues.

Shareholders react

Mr. Oderinde Taiwo, National Coordinator, Proactive Shareholders Association of Nigeria, PROSAN, said: "It is good news that less companies missed their regulatory fillings of their results. This shows that companies' management are beginning to take their responsibility serious.

"We hope to see sustained 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 own opinion, those officers of the companies assigned to process returns should do the needful to avoid unnecessary penalties.

"The regulators in the banking, capital market and insurance sectors, Central Bank of Nigeria, 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 companies have dropped"

Mr. Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria, PSAN, said "It is a good thing that number of companies that have complied is on the increase.

"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. Our association always tell companies are 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."

Defaulting companies' reaction

The companies that were suspended and few that defaulted in the timely submission of results were unable to respond to the text messages sent to them as at press time, except for Royal Exchange Plc and Niger Insurance Plc

Reacting, the Head of Corporate Communication, Royal Exchange Plc, Mr. Wilson Okoh said: "We have met the compliance and our suspension from the NSE has been lifted.

The letter sent to us on Thursday, August 29, 2019 reads "We refer to our Market Bulletin dated July 2, 2019, with Reference Number: NSE/RD/LRD/MB34/19/07/02 wherein we notified Dealing Members of the suspension of eleven (11) listed companies for non-compliance with Rule 3.1, Rules for Filing of Accounts and Treatment of Default Filing, Rulebook of The Exchange (Issuers' Rules) (Default Filing Rules"), which provides that: "If an Issuer fails to file the relevant accounts by the expiration of the Cure Period, The Exchange will: send to the Issuer a "Second Filing Deficiency Notification" within two (2) business days after the end of the Cure Period; (b) suspend trading in the Issuer's securities; and (c) notify the Securities and Exchange Commission (SEC) and the Market within twenty- four (24) hours of the suspension."

Relevant accounts

Royal Exchange Plc, one of the eleven (11) companies that were suspended on July 2, 2019, has now filed its Audited Financial Statements for the year ended December 31, 2018 with the Exchange.

In view of the Company's submission of its Audited Financial Statements, and pursuant to Rule 3.3 of the Default Filing Rules, which provides that: "The suspension of trading in the Issuer's securities shall be lifted upon submission of the relevant accounts provided

The Exchange is satisfied that the accounts comply with all applicable rules of The Exchange.

The Exchange shall thereafter also announce through the medium by which the public and the SEC was initially notified of the suspension", Dealing members are hereby notified that the suspension placed on trading on the shares of Royal Exchange Plc was lifted today."

For Niger Insurance Plc, its Head of Corporate Commission, Shola said "We are working on meeting compliance and very soon the suspension would be lifted."

But the NSE has lifted the suspension it placed on the shares of Niger Insurance Plc and Guinea Insurance Plc. In a statement last week, the NSE said: "Both insurance firms have now submitted their reports and hence, the decision to lift the suspension.

"In view of the Companies' submission of their Audited Financial Statements, and pursuant to Rule 3.3 of the Default Filing Rules, which provides that, "The suspension of trading in the issuer's securities shall be lifted upon submission of the relevant accounts provided the Exchange is satisfied that the accounts comply with all applicable rules of the Exchange."

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