CORPORATE GOVERNANCE FAILURE: More firms attract NSE sanctions for flouting post listing rules

Shareholders seek punitive measures on directors

By Peter Egwuatu

THE number of quoted firms sanctioned by the Nigerian Stock Exchange, NSE, for flouting its post listing rules rose by 28 percent  in 2018 reflecting decline in quality of corporate governance among firms in the nation’s capital market.

Shareholders, however, blamed the NSE and other regulators for this decline in corporate governance, citing their unwillingness to sanction directors responsible for the default of post listing rules.

Financial investigations show that the number of listed firms sanctioned and penalised by the NSE for flouting the post listing requirement of timely disclosure of interim and audited financial performance for the year 2018 rose by 28 percent to 36 from 28 in 2017. However the amount of penalty imposed dropped by 12.6 percent to N200.3 million in 2018 from N229.2 million in 2017.


Contravention of post listing requirements in 2018

The 36 firms that defaulted in 2018, include 12 firms that also defaulted in 2017 namely: Union Bank, Great Nigeria Insurance, Niger Insurance, Royal Exchange, Universal Insurance, Conoil, Veritas Kapital, Cornerstone Insurance, Fidelity Bank, Unity Bank and FTN Cocoa Processors.

Other defaulters in 2018 are Diamond Bank Plc, Cement Company of Northern Nigeria, Standard Alliance Insurance Plc, PZ Cussons Plc, Union Dicon Salts Plc, Thomas Wyatt Nigeria Plc, FTN Cocoa Processors Plc, International Energy Insurance Plc, Omatek Ventures Plc, Aso Savings Plc, Multi Trex Integrated Foods Plc, Fortis Microfinance Plc, Union Homes Savings & Loans Plc, Unic Diversified Holdings, Road Nigeria Plc.

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The list also includes: MedView Airline Plc, NPF Microfinance Plc, Grief Nigeria, Presco Plc, Mutual Benefit Assurance Plc, Staco Insurance Plc, Smart Products Nigeria Plc, Roads Nigeria Plc, Nigerian German Chemical, Amino International Plc, Juli Plc and Cornerstone Insurance Plc.

Early Filers in 2018

Financial ’s investigation further revealed that eight companies surpassed the Exchange’s post listing requirements, otherwise known as early filers in 2018, up from six in 2017, with regards to the audited financial statements

The eight early filers for the 2018 audited financial statements are: Transnational Corporation of Nigeria Plc, Nigerian Breweries Plc, Zenith Bank Plc, Guinness Nigeria Plc, Transcorp Hotels Plc, United Capital Plc, Austin Laz & Company Plc and Newrest ASL Nigeria Plc.

The early filers are companies that file their interim financial statements at least two weeks before the due date and audited financial statement at least four weeks before due date. According to the NSE, “Quoted companies on the Exchange are required to file their financial statements on timely basis in accordance with Appendix iii of the listing rules.”

Accordingly, the NSE said: “The Exchange has identified these companies that have exceeded the minimum listing rules standards in terms of timely disclosure of their annual audited and quarterly financial performance as early filers. We are extremely proud of these companies and will continue to showcase quoted companies that imbibe high corporate practices.”

Shareholders reactions

Mrs. Bisi Bakare, Chairman, Pragmatic Shareholders Association of Nigeria, said: “It is very alarming that companies default the post listing requirement of the Exchange in terms of timely reports of their financials. I think the Exchange should begin to sanction directors directly rather than imposing the fine on the company. It is shareholders that bear the brunt at the end. In my opinion those officers of the companies assigned to process returns should be sanctioned.

Regulatory authorities

“Also, our regulatory authorities should know that the burden or consequences of penalty is borne by shareholders. This is because the aftermath effects is that topline and bottomline will definitely be affected and dividend proposed will decline and the working capital of these companies are also affected. On this note, I want our regulators to temper justice with mercy, by looking at other ways to punish these companies that flout listing rules than monetary fine so that our investment will not be affected.

“The regulators in the banking, capital market and   insurance sectors (CBN, SEC,NAICOM) should be up and doing in their responsibilities because most times it is when one regulator or the other does not complete its    work on time that it affects prompt filling of results by companies to the NSE.”

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. The management, as our Association always tell them, is to guide against being penalised. The director in charge of the preparation of accounts should as well be held responsible and be sanctioned instead of everybody bearing the consequences. 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.

Regulatory requirement

“Another reason 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. Sanction is 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.”

Mr. Boniface Okezie, Chairman, Progressive Shareholders Association of Nigeria, PSAN, said, “The NSE needs to further carry out investigation into why these companies have failed to meet regulatory requirement. Imposing fine is not the best, as this action affects the owners of the companies (shareholders) and not the management. It is only when such action is taken and the company fails to provide reasonable reason that a fine could be imposed; and the fine should be imposed on all the officers responsible to turn in the results and not on the firm itself. 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.”

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’ investment that suffers most. Whether there is fine or not directors are paid their money.


Unnecessary penalty


The money used in paying these fines is shareholders’ fund. I think regulators should rather sanction officers directly involved for failing in his or her responsibility. In that way they will sit up to avoid unnecessary penalty.”

In his view, National Co-ordinator, Proactive Shareholders Association of Nigeria, PROSAN, Mr Oderinde Taiwo said: “It is not a good thing that these companies keep flouting the rules every year. It is the shareholders that always bear the brunt. I think regulators should find other means to discipline these companies.

“Besides, we advocate for regulatory friendly policies. The friendly policies that we want include reduction of incessant penalties by the Central Bank of Nigeria, CBN imposed on quoted companies, a reduction of withholding taxes, stoppage of channelling of unclaimed dividends into a special fund, and non mandatory electronic annual report among others.

“These anomalies are discouraging companies from remaining on the NSE, attracting new listings and thereby affecting returns on investments.  We don’t want the Securities and Exchange Commission, SEC to make e-electronic compulsory but optional. We want all the regulators to adopt friendly policies and regulation to boost the Nigerian capital market.”

Most of the companies contacted through text message as at press time could not respond, while some especially from the insurance companies that preferred anonymity, blamed the delay in the submission of results to their primary regulator.

“We cannot submit our results to the Exchange when it has not been approved by our primary regulator, National Insurance Commission, NAICOM. “So, I think the NSE should give us more grace for the submission of results knowing fully what obtains in our industry” one of the insurance operators noted.


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