The President of Capital Market Academics of Nigeria, Professor Uche Uwaleke, has commended the Securities and Exchange Commission (SEC) for its new rules on the issuance and allotment of private companies’ securities.
Uwaleke said this in an interview with newsmen in Abuja weekend while reacting to the new rules released by the Commission.
He described the new regulation as a welcome development geared toward enhancing investors’ protection.
Uwaleke advised the Commission to carry out massive sensitisation of the rules to enhance compliance and reduce violations caused by ignorance.
On the maximum amount a private company can raise within a one-year period, which SEC pegged at N15 billion, Uwaleke suggested a reduction to N10 billion.
He said the maximum capital raise be reduced such that the fine would represent one per cent of the amount.
”I think the new rule is a welcome development.
”The idea of capping the maximum debt capital that can be raised is intended to discourage reckless risk-taking on the part of private companies.
”Enforcement of rules is enhanced by stiff sanctions which is why I support the relatively huge fine.
”Given that one person can now form and incorporate a private company in Nigeria and that the minimum share capital to incorporate a private company is only N100,000, going by the CAMA of 2020, I think the cap of N15 billion is for private companies.
”Other considerations in the CAMA which tend to lend credence to a reduced limit for capital raise include the fact that the appointment of a company secretary is now optional for a private company.
”New private companies need not appoint auditors although the rule requires that such a company must have a minimum of three years track record.
”I suggest that maximum capital raise be reduced from N15 billion to N10 billion within one year such that a fine of N100 million minimum will represent one per cent of this amount.
”In other words, I think the fine should not be a flat rate amount but a percentage of the amount raised in violation of the rule,” he said.
SEC said the rules applied to debt securities issuances by private companies either by way of public offer, private placement or other methods as may be approved by the Commission.
According to the SEC, any person who issued or allotted securities without its prior approval or violated any provisions of its regulations will pay a penalty of N10 million in the first instance.
The Commission added a sum of N100,000 for every day if the violation continues.
Others are registered exchanges and platforms which admit debt securities issued by private companies for trading, price discussion or information repository purposes.
On proceeds utilisation, the Commission held that issuers are prohibited from using the proceeds of the issues for purposes other than those stated in the offer document without its prior approval.
