ANALYSIS: 38 firms fines ₦429.5 million for late filing of financial statements
FEYISAYO POPOOLA examines the fines imposed on firms listed on the Nigerian Stock Exchange for late filing of financial statements last year as well as the delisting of firms
The Nigerian Stock Exchange imposed a total of ₦429.5 million in fines on companies that failed to file their financial statements as and when due last year.
The latest data obtained from the NSE by our correspondent showed that the fines were slammed on 38 companies for 52 offences at different times.
The erring companies were Unity Bank Plc, FTN Cocoa Processors Plc, Academy Press Plc, Union Dicon Salt Plc and Standard Alliance Insurance Plc.
Unity Bank got the highest fine of ₦79.7 million, while FTN Cocoa Processors was slammed with a fine of ₦78.7 million.
Unity Bank and FTN Cocoa Processors were penalised for failing to file their audited financial statements for 2017, the first quarter of 2018, half-year 2018 and the third quarter of 2018.
Academy Press was fined ₦35 million for failure to submit its audited 2017 financial statement at the due date.
Union Dicon got the fourth highest fine of ₦30.8 million for late submission of its first quarter and half-year 2018 financial statements.
Standard Alliance was fined ₦28.7 million for failure to file its audited financial reports for 2017 and the first quarter of 2018.
The NSE, in its X-Compliance Report, said the sanctions were applied in accordance with the rules for filing of accounts and treatment of default filing, rulebook of the Exchange (Issuers’ rules).
It said listing on the Exchange would provide listed firms with a strongly regulated operating environment, transparent transactions, competitive prices, access to a large pool of domestic and international investors, efficient and advanced trading platform and efficient investor protection regime.
The bourse added that post-listing on the Exchange required certain obligations to be met.
One of the obligations, according to the NSE, is the filing of financial statements as and when due.
The report revealed that five firms were delisted from the Exchange last year.
Three of them, namely Seven-Up Bottling Company Plc, Paints and Coatings Manufacturers Nigeria Plc and Great Nigeria Insurance Plc, left the Exchange voluntarily.
The other two firms, African Paints Nigeria Plc and Afrik Pharmaceuticals Plc, were delisted on regulatory grounds.
The National President, Constance Shareholder’s Association of Nigeria, Mr Shehu Mikail, said the NSE was being too hard on listed firms with its fines and sanctions.
According to him, the voluntary delisting of companies is one area the NSE has not tried as much as possible to curb.
“Incentives and initiatives need to be put in place to encourage the companies not to leave. Companies are finding it difficult to meet up with the post-listing requirements and something must be done by the NSE to look into the issue,” he said.
Mikail noted that the companies that left came to the NSE on their own accord.
He said they must have had something in mind or found something attractive about the Exchange to come and list in the first instance.
He urged the NSE to seek to identify areas where it fell short of companies’ expectations and address them.
Mikail said, “I also heard that the NSE wants to list its equities on the floor and this should not be so because I do not see why an exchange needs to list.
“This will only put the NSE on the gallery of listed companies and they are supposed to be a regulator. Would that not expose our capital market to ridicule? This is one of the things that need to be addressed.”
Great Nigeria Insurance said in December that its listing on the NSE brought no benefit to it or its shareholders.
In an explanatory note to shareholders on its voluntary delisting, the firm said over the last five years, there had been little or no trading activity on the shares held by the minority shareholders.
It said there had also been a considerable fall in trading volumes over the last 12 months with an average daily volume of circa 1,200 units during the period March 2017 to March 2018.
The note read in part, “Shareholders are not benefiting from the continued listing as they are not getting any exit opportunity and their investments have been locked up as they find it difficult to dispose of their shareholding.
“Neither has the company benefited from listing on the Exchange as the company’s shares continue to trade at a significant discount to the intrinsic value. Moreover, the company is bearing unnecessary cost in complying with its listing obligations.”
The firm said the voluntary delisting would enable its directors to exercise a regulatory provision that would shield it from any enforcement of action that the Exchange might effect, such as the outstanding free float deficiency.
The Chief Executive Officer, NSE, Mr Oscar Onyema, said last month that the Exchange would reduce the compliance burden on listed firms.
Onyema said, “We are trying to make sure that we continue to give listed companies value. We recently sent letters to all chief executive officers of firms and encouraged them to engage with us.
“So, we cannot stop a company from leaving if they feel their listing on the Exchange is not in alignment with their business goals. However, we are mindful of the burden of compliance and we are trying to reduce it. We are not interested in issuing fines.”
The Vice-President, Association of Stockbroking Houses of Nigeria, Mr Akinsola Akeredole-Ale, said one of the things the NSE could do to encourage new listings and retain existing companies “is to reduce listing and post-listing costs.”
He said the NSE should reduce the over-regulation of listed companies.
According to him, the post-listing requirements often become a burden to listed companies and make them want to leave.
Akeredole-Ale said, “Also, some companies believe their stocks are supposed to be valued at higher prices than they are on the stock exchange.
“Some people believe that their stocks are undervalued on the NSE and prefer to exit and leave their stocks at over-the-counter. Using the Nigerian Bottling Company (Coca-Cola) as an example, they did not see any value for being listed and when they wanted to delist, the prices of their shares rose.
“This and many others give people the belief that they will get more value when they leave the Exchange.”
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