Efforts to woo more small and medium enterprises (SMEs) to list on the Nigerian Stock Exchange (NSE) are being threatened by penalties imposed by Securities and Exchange Commission (SEC) on listed companies.
THISDAY checks revealed that some of the listed companies are overwhelmed by the penalties and are contemplating delisting.
The penalties are said to be for non-rendition of quarterly, half-yearly and full year returns as required by the listing requirements. A market source told THISDAY that the penalties run into millions of naira and most of the SMEs listed on the Alternative Securities Market of the NSE (ASem) are finding it difficult to pay.
It was gathered that the penalties is responsible for the delay in the planned initial public offering (IPO) of McNichols Consolidated Plc.
The company, which got listed in 2009, had since last year applied to raise about N345 million. However, the fund raising process has been delayed due to penalties SEC was said to have imposed on McNichols for not rendering returns.
It was gathered that SEC imposed almost N300 million on McNichols alone for not rending quarterly, half yearly and full year results. Although officials of the food and beverages company declined to comment on the issue, spokesman for SEC, Mr.Obi Adindu, confirmed the development to THISDAY.
According to Adindu, there were status checks carried on McNichols and others which revealed some violation of the listing requirement that led to the imposition of the penalties.
“There is penalty they (McNichols) have not met on the basis of violation, and the specific violation is the non- filling of returns,” he said.
According to Adindu, the commission has a duty to develop the market and it will not compromise the listing requirements and standards.
THISDAY checks revealed that apart from McNichols, there are other companies suffering under the weight of the SEC’s penalties, which some market operators said, must have been informed by the commission’s aggressive move for funds.
“From every indication, the penalties, which I believe are discouraging efforts to bring more companies, are being imposed by SEC so as to get fund, considering the fact the commission has experienced a zero-budget for two years now,” an operator said.
A broker to one of the companies affected by the penalties explained that the modality used by SEC to impose the penalties is questionable.
“Apart from the fact that ASem companies are not required to render returns at the same rate with mainboard companies, SEC just woke up and started backing dating the penalties. As a regulator who is encouraging development and growth of the market, you cannot come up one day and say a company has defaulted in rendering of returns for many years.
"If the companies have been defaulting why not alert them at the time of default. And the officials of SEC have been attending the annual general meetings of these companies. Why did they not bring the default to the attention of the companies before now,” the broker said.
The broker added that in imposing the penalties, SEC said calculated three different reports for year end.
“What this means is that if a company failed to render a report at the end of year, say December, SEC imposed a penalty for non-rendition of returns for half year, fourth quarter and full year. What implies is that the company is being asked to pay a penalty thrice for a full year report. That is paying for failing to render the report as half year, fourth quarter and full year. This is highly discouraging,” the broker said.