Proposed SEC Rule Tasks Public Companies On More Governance Information

In a bid to enhance good corporate governance in the country, Nigeria’s Securities & Exchange Commission (SEC), on Friday, released an exposure draft of Sundry Amendments to the Rules and Regulations for the good of the nation’s capital market.
Among rules proposed for amendment are those to promote disclosures to guide investment decisions, including Rule 42, for which a Sub-rule 190 (3) requiring public companies to disclose minimum corporate governance information on their websites.

Such information includes governance structure, composition, and structure of the board, shareholding and Dividend analysis among others, which the SEC explained, would form “part of the corporate governance scorecard implementation strategy.
Minimum Corporate Governance Report to be provided on the websites of public companies, the commission recommends, would “contain reasonable corporate governance information on” such companies.

Also, in what may lead to a significant drop in what public companies spend to organize their annual general meetings and thereby ensure investors get better value for their investments, while positively impacting on earnings per share, the commission is proposing the creation of a subrule.
The new sub-rule specifically seeks to make illegal the distribution of gifts to shareholders, observers and any other persons at annual and extraordinary general meetings.
Should the rule be agreed on, “public companies shall not convene any meeting with select group(s) of shareholders prior to an Annual General Meeting/Extraordinary General Meeting.”

Justifying the proposed rules, the SEC observed: “that some companies arrange meetings with select groups of shareholders ahead of general meetings to discuss proposed resolutions and agree on strategies which are often detrimental to the interest of other shareholders.”

While lamenting the huge amount spent by such public companies on corporate gifts at AGMs/EGMs, which greatly impact their profitability, the commission is proposing that erring companies “shall be liable to a penalty of not less than N10m.”
It argued that at a time when few companies are making reasonable profits and even fewer can afford to pay dividends, the latest move would positively impact on earnings per share of many if the amount “budgeted for gifts at AGMs/EGMs can be reserved for other relevant operational or administrative expenses.”

“Public companies spend a significant amount of money on corporate gifts at AGMs/EGMs and this has a great impact on their profitability. Few of the companies are making reasonable profits and even fewer can afford to pay dividends. If the amount budgeted for gifts at AGMs/EGMs can be reserved for other relevant operational or administrative expenses, it would positively impact on their earnings per share” the Rule stated.
Also, as part of the amendment to Rule 67(2)- Reinstatement of Individual Sub-Broker Function the SEC is proposing the deletion of Rule 67 (2) in November 2017 generated a lot of comments from the Nigerian Stock Exchange (NSE) and Association of Stock Broking Houses (ASHON), who thereafter requested for the reinstatement of the function.

“The Rules Committee revisited the issue and the Commission agrees that reinstatement of Individual Sub – broker function will help in enhancing financial inclusion, deepening the market, and attracting more retail investors as well as enable the Sub-brokers to have more presence at the grass root level,” the SEC stressed.

Photo Caption: Board member of the Private Equity and Venture Capital Association Nigeria, Mrs. Folake Elias-Adebowale; Chairman, PEVCA, Paul Kokoricha, Acting Executive Commissioner, Operations, Securities and Exchange Commission Isyaku Tilde and Executive Secretary PEVCA, Mrs. Ify Ossi during a Meeting between PEVCA and SEC in Abuja weekend.

https://investdata.com.ng/2019/05/proposed-sec-rule-tasks-public-companies-on-more-governance-information/