- Penalties killing business – Experts
- We won’t bend rules – Stock Exchange
I n spite of the Federal Government’s campaign to boost backward integration and local investment in the economy, some experts at the Nigerian Stock Exchange have alleged that the sanctions imposed on erring quoted companies by the management of the Exchange are over-burdening and counter-productive.
The stakeholders said that the activities of the regulator were discouraging both existing and potential quoted companies.
Precisely, stockbrokers and investment analysts blamed the management of the Exchange for the low participation of investors and Nigerian companies as a result of some exorbitant levies and outrageous sanctions, imposed on companies that were unable to meet the deadline for submission of quarterly results.
The development, experts said, had either forced companies that were struggling to voluntarily apply for delisting or scared scores of companies from listing on the floor of the Exchange.
For instance, between 2015 and 2016, the Exchange made over N66 million from various fines and sanctions on 37 companies for failing to file their audited results and interim financial statements.
Investigations by our correspondent revealed that the NSE X-compliance report indicated that the Exchange imposed fines that ranged between N6 million and N8 million on each of the defaulting companies.
An analysis of the data gathered by our correspondent showed that Africa Alliance Insurance Plc was fined N4.2 million for failing to submit its 2015 financial year result while Daar Communications Plc, DN Tyres & Rubber and Great Nigeria Insurance paid N3.7 million, N3.8 million, and N12.8 million, respectively, for not submitting their 2014 and 2015 quarterly and full results.
Consequently, Daar Communications, in failing to file its December 2015 accounts, had forced the NSE management to sanction the company to the tune of N6 million, an indication that the company was fined N13.5 million in total sum.
Some other companies that defaulted filing in their 2015 full year results included ASO Savings and Loans that was fined N3.7 million and R. T Briscoe Plc, which was sanctioned to the tune of N4.2 million.
Also, an ailing Resort Savings and Loans paid a fine of N4.3 million while Nigerian Enamelware and ETranzact, were sanctioned N1.6 million and N2.7 million respectively. Universal Insurance, on its part, got a fine of N5.3 million.
I am not saying fines and sanctions should be eradicated but these should be done constructively and not in ways to pull quoted firms down. We all understand the state of the economy and how difficult it is for businesses to operate in the country
MIXED FEELINGS TRAIL FINES
While some market operators expressed the belief that such fines should not be applicable to most of the fringe players listed above, others argued that it was important and necessary for the Exchange to enforce discipline and orderliness in the market.
For instance, some stakeholders insisted that most of the companies voluntarily delisted their shares, having found that the market was not really meant for fringe players.
To them, the development is responsible for the low patronage of qualified companies. A stockbroker, Dr. Bode Ajao, is particularly irked by the free fall of equities, coupled with the unprecedented lull that has besieged the market in the past few months.
He expressed displeasure over what he described as “unfavourable government policies and unreasonable fines,” calling for new strategic initiatives that would reverse the weak performance of the major market indicators.
He maintained that these factors were disincentives to investment, while suggesting that the Federal Government and the NSE should, as a matter of urgency, revive businesses of listed companies and encourage local investors by reviewing the fines attached to several offences.
Ajao said, “I am not saying fines and sanctions should be eradicated but these should be done constructively and not in ways to pull quoted firms down. We all understand the state of the economy and how difficult it is for businesses to operate in the country. I suggest sanctions should be reviewed for now that the economy is in recession.
“What the regulator does not understand is that some companies are using the shareholders’ funds to pay most of the fines.
At the end of the day, the investors the regulator is trying to protect would lose their investments when fines have been paid from either shareholders’ fund or profit.”
Another market operator, Mr. Tope Omopariola, also linked the current depression in the market to harsh policies of the NSE, which he claimed had aggravated investors’ apathy to investment.
According to him, board members and not companies should be sanctioned for failing to submit reports. Citing several millions paid on fines by companies, the economist urged the apex regulator of the market, the Securities and Exchange Commission, to intervene and save shareholders’ life savings.
Omopariola said, “The owners and directors of most of the ailing companies and the ones that had delisted from the market have failed their shareholders as they have been treated unfairly by the management of the Exchange.
“If the board failed to perform their duties and is fined, such sanction should not be taken or paid from the company’s vault. If that is done, you are asking investors to pay for an offence they did not commit and that is fraudulent. SEC should ensure such fines are paid by the defaulters.”
However, President, Chartered Institute of Stockbrokers, Mr. Oluwaseyi Abe, told our correspondent that most of the equities were fined or delisted due to their irredeemable inability to comply with the listing requirements of the Exchange, especially in the areas of timely and accurate rendition of operational and financial accounts and other corporate governance issues.
In order to avoid further loss of investment, Abe urged investors to change their investment strategies and avoid falling victims of circumstances in cases where some quoted companies keep incurring fines or risk being delisted from the market.
He added that, despite the persistent lull in the nation’s capital market, investors should leverage on the current low prices of stocks to expand their portfolio. Abe stated that investors should buy stocks of companies that render essential services and produce household goods.
“Investors should look out for, not only companies that have less Forex exposure, but also firms that their services are essential and can generate quick money from sales.”
The Managing Director, Highcap Securities, Mr. David Adonri, also advised investors to identify companies that had potentials of benefitting from economic policies and not the ones with greedy or negligent board members, before buying the stocks.
He said that the stocks of such companies stood the chance of yielding good returns in the near future. He further added that investors needed to increase their participation in the market, increase the capitalisation and stimulate the market for a rebound, especially for the prevailing bad time facing the market.
WE WON’T BEND OUR RULES – NSE
Head, Corporate Communications, NSE, Mr. Olumide Orojimi, told The Point that inasmuch as listed companies had signed undertaking to comply with postlisting rules of the Exchange (which specifies that any breach attracts sanction), the management of the NSE would not stop protecting investors and the market from the negative activities of erring firms.
“The NSE had several engagements with companies before sanctioning or delisting them. Monetary sanctions remain the only way to force them to sit up,” he said.
