The Securities and Exchange Commission has proposed a penalty of N10m for the issuance of private securities without its approval.
In a draft seen the New Rules on Issuance and Allotment by Private Companies Securities exposed for stakeholders’ review and contribution.
The proposed rule goes thus that “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.”
These new rules would affect debt securities issuances by private companies either by way of public offer, private placement, or other methods as may be approved by the Commission, registered exchanges, and platforms that admit debt securities issued by private companies for trading, price discovery or information repository purposes as well as registered capital market operators who are parties in issuances and allotment of debt securities of private companies.
In the document it was stated that a private company may list its securities on a registered securities exchange, adding that such securities must be listed not later than 30 days after completion of allotment.
Also, the SEC is proposing to peg the maximum amount that a private company can raise via debt securities issuances at N15bn.
“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 N15bn, 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 proposed rules said.
On the utilisation of proceeds, 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, 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 utilisation 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 utilised”.
