SEC Proposes Stringent Penalties for Violators of Securities Issuance Rules
By Patience Ikpeme
The Securities and Exchange Commission (SEC) has unveiled proposed new rules aimed at regulating the issuance and allotment of securities by private companies, with stringent penalties prescribed for violators.
According to the proposed rules, any person who issues or allots securities without prior approval or violates any provisions of the regulations will face hefty fines and other sanctions.
Outlined in the proposed rules, individuals or entities found in violation will be subject to a penalty of not less than N10 million in the first instance, with an additional sum of N100,000 for each day the violation persists.
Moreover, the SEC reserves the right to impose other sanctions, including the suspension or withdrawal of registration of capital market operators involved, disgorgement of proceeds from the transaction, and ratification or rescission of the transaction if deemed necessary in the public interest.
The rules are part of the SEC’s efforts to enforce greater transparency and accountability in Nigeria’s capital market. They apply to debt securities issuances by private companies through public offers, private placements, or other approved methods, as well as to registered exchanges and platforms admitting such securities for trading or information repository purposes. Additionally, registered capital market operators involved in the issuance and allotment of debt securities by private companies are also subject to the rules.
SEC emphasized that private companies seeking to issue securities under the regulations must be duly incorporated under the Companies and Allied Matters Act (CAMA) or other enabling laws, with a minimum of three years’ track record of operation. The maximum amount a private company can raise within a one-year period is capped at N15 billion. However, if a private company intends to undertake further debt securities issuance, it must re-register as a public company.
In addition, the proposed rules mandate issuing houses to submit a summary report to the SEC within 21 working days of allotment, containing post-allotment information, details of applicants and allottees, and reasons for rejection of applications, among other requirements.
The rules also address the utilization of proceeds, prohibiting issuers from using funds for purposes other than those stated in the offer document without prior approval from the SEC. Issuers are required to provide detailed reports on the utilization of proceeds on a quarterly basis until the funds are fully utilized.
These rules, made pursuant to Section 43(1)(b) of the Business Facilitation (Miscellaneous Provisions) Act 2022, empower the SEC to prescribe regulations for the issuance and allotment of private companies’ securities.
The SEC has invited stakeholders to provide comments and input on the proposed rules within two weeks from the date of publication on its website, signaling its commitment to stakeholder engagement and the development of robust regulatory frameworks for Nigeria’s capital market.
