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Securities issuance: SEC rolls out regulations for private companies


Securities and Exchange CommissionThe Securities and Exchange Commission (SEC Nigeria) yesterday unveiled new regulations governing the issuance and allotment of securities by private companies, limiting the maximum to N15 billion annually.

SEC in the new rules which outlined the process and penalties for private companies wishing to issue and allot its securities within registered securities exchange space, declared that any person who issues or allots securities without its prior approval or violates any provisions of its regulations will be liable to a penalty not less than N10 million in the first instance and a further sum of N100,000 for every day the violation continues.

It explained that for a private company to be eligible to issue securities under the regulations it must be a company duly incorporated under Companies and Allied Matters Act (CAMA), or other enabling Laws with at least three years track record of operation.

Under conditions for securities issuance, SEC ruled: “A private company may issue its securities under these Rules provided that: –

a) Only plain vanilla bonds/debentures and other debt instruments including sukuk and as may be determined by the Commission from time to time, shall be issued. b) For sukuk issuances, the issuer shall comply with the provisions on sukuk (as applicable) and set out in Rules 569 – 588 of the Commission’s Rules, as amended from time to time.

c) The securities shall be offered to only qualified investors.

“d) A private company may undertake a maximum of three debt securities issuances within a one-year period, whether through a shelf program or one-off offering, the total amount to be raised not exceeding N15 billion, provided that where a private company intends to undertake any further debt securities issuance, it shall be required to re-register as a public company”.

The Commission which set out stringent punishment for those who violate the regulation, stated: “Any person who issues or allots securities without the prior approval of the Commission, or violates any provisions of these rules shall be liable to any one or more of the following sanctions: i. A penalty of not less than N10 million in the first instance and a further sum of N100,000 for every day the violation continues; ii. Suspension, or withdrawal of the registration of the capital market

operator(s) involved; iii. Disgorgement of proceeds/income from the transaction; and iv. The Commission may ratify or rescind a transaction if it is in the interest of the public to do so; v. Any other sanction the Commission deems fit in the circumstance”.

It stated that for a private company with existing debt securities held by qualified investors, the company “shall no later than three months from the date of issuance of these rules, file an application for the registration of the securities to the Commission through the securities exchanges. Failure to comply with this provision shall attract a penalty of not less than two million Naira and a further sum of N100,000 for every day the violation continues”.

It added that a private company “shall not offer its equity securities (shares) to the public under any circumstance. b) Debt securities issued under these rules, shall be sold only to qualified investors. c) Only registered capital market operators shall be parties to debt securities issuances under these rules. d) No private company or any person acting on its behalf shall offer, sell or allot securities to the public without the prior clearance of the securities exchange and registration of the securities by the Commission. e) Securities purchased in a public offer pursuant to these rules shall only be traded on a registered securities exchange”.

SEC 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, adding that “the issuer shall file with the Commission not later than 90 days after the conclusion of an issue on the appropriate SEC Form, detailed information on the utilization of proceeds. Evidence of such utilization shall be provided as appendix to the report. The rendition shall be on a quarterly basis until issue proceeds are fully utilized”.

The Commission said the rules were made pursuant to “Section 43 (1) (b) of the Business Facilitation (Miscellaneous Provisions) Act 2022 which amends Section 67 (1) of the Investments and Securities Act and empowers the Commission to prescribe regulation for the issuance and allotment of private companies’ securities”.

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