Nigeria: SEC Proposes N10 Million Penalty for Unapproved Securities Issuance

SEC Proposes N10 Million Penalty for Unapproved Securities Issuance
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The Securities and Exchange Commission (SEC) has put forward a proposal to impose a penalty of N10 million for the issuance of private securities without prior approval.

This revelation comes from the draft of New Rules on Issuance and Allotment by Private Companies Securities, which has been made available for review and input from stakeholders.

As per the proposed rule, “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:

  • A penalty of not less than N10,000,000 in the first instance and a further sum of N100,000 for every day the violation continues.
  • Suspension or withdrawal of the registration of the capital market operator(s) involved.
  • Disgorgement of proceeds/income from the transaction.”

The SEC specifies that these new regulations will impact debt securities issuances by private companies through public offers, private placements, or other approved methods. It also affects registered exchanges and platforms that handle trading, price discovery, or information repository purposes for debt securities issued by private companies. Additionally, registered capital market operators involved in the issuance and allotment of debt securities of private companies will be affected.

According to the document, a private company seeking to list its securities on a registered securities exchange must do so within 30 days after completing the allotment process.

To be eligible to issue securities under these regulations, a private company must be duly incorporated under the Companies and Allied Matters Act or other applicable laws and have at least three years of operation.

The SEC also proposes to cap the maximum amount a private company can raise through debt securities issuances at N15 billion. Additionally, a private company may conduct a maximum of three debt securities issuances within a one-year period, with the total amount raised not exceeding N15 billion. Any further debt securities issuance would require the company to re-register as a public company.

Regarding the utilization of proceeds, issuers are prohibited from using the proceeds for purposes other than those stated in the offer document without prior approval from the SEC. Furthermore, issuers must submit detailed information on the utilization of proceeds to the Commission not later than 90 days after the conclusion of an issue.

This proposed rule marks a significant step under the leadership of Dr. Emomotimi Agama at the SEC.

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