The Securities and Exchange Commission of Nigeria has introduced strict new rules to control how private companies issue and allocate securities.
The SEC has stated that any unauthorized issuance or allocation of securities will result in a substantial penalty of at least N10m, with an extra N100,000 fine accumulating daily until the violation stops.
It announced this in a statement released to journalists on Thursday.
The SEC's proposed rules outline serious consequences for those who do not adhere to them.
“Anyone who issues or allocates securities without the prior approval of the Commission, or violates any provisions of these rules will face a penalty of not less than N10m initially,” the Commission stated, highlighting the seriousness of the sanctions.
“To be qualified for issuing securities, a private company must be properly incorporated with a minimum three-year operational track record.”
Furthermore, the SEC requires that securities must be listed on a registered exchange within 30 days after allocation.
The regulations limit the amount a private company can raise in a year to N15bn. Issuing houses must submit a detailed post-allotment report within 21 working days to ensure transparency in the allotment process.
SEC has also placed restrictions on the use of proceeds from securities issues.
“Issuers are prohibited from using the proceeds of the issues for purposes other than those stated in the offer document without its prior approval,” the Commission clarified, emphasizing the need for accountability in fund utilization.
SEC has requested public feedback on the new rules, demonstrating its commitment to engaging with stakeholders and being transparent. All comments should be sent to the Rules Committee within two weeks of publication on the SEC’s website.
The new rules show the SEC’s determination to safeguard Nigeria’s capital markets' integrity and protect investors from unauthorized and potentially dangerous financial activities.
