Securities and Exchange Commission (SEC) is considering amendments to capital market rules and regulations’ that will empower it to suspend any public company that fails to submit its annual report within stipulated deadline.
The Commission is seeking to introduce a new rule, which will allow it to direct that trading on the shares of a company that fails to submit its annual report be suspended. The draft rule also empowers the Commission to “impose any other sanction as it deems fit”.
“Suspension of trading may also apply where a company has been granted an extension, but fails to file at the expiration of the extension period,” according to the draft rule.
The amendment further strengthens existing enforcement regime on submission of annual reports. Under existing rules, any company that fails to file its annual report with the Commission is liable to a fine of N1 million and the sum of N25, 000 for every day the default continues.
However, the draft rules allow any public company that fears it may not be able to meet the stipulated deadline to apply for extension of time to file its audited report, with such application for extension not later than 30 days before the due date. Such application for extension shall state the reasons for the inability to file within time and shall be supported with relevant documentary evidence.
In granting the application for extension, the Commission may consider occurrence of an unforeseen circumstance, national emergency and intervention by a regulatory agency.
According to the new draft, a public company whose application has been granted for extension of time to file its audited financial statements shall be required to publish a notification of its failure to file on the due date in a national newspaper and on the company’s website.
The Commission noted that despite its zero-tolerance for late and non-filing of financial statements and annual reports by public companies, it is mindful that certain unforeseen circumstances may warrant the granting of time extension to a public company to file same.
SEC, however, reiterated its commitment to take appropriate action by imposing sanctions that could include suspension of the trading of the shares of a public company whose financials are not released to the investing public as at when due.
The draft amendments align SEC’s rules with existing rules at the Nigerian Stock Exchange (NSE), in furtherance to the ongoing efforts to standardise the rules across the markets.
Under the existing rules, public limited liability companies are required to file their annual reports with the Commission not later than 90 days after the financial year end in line with the provisions of Companies and Allied Matters Act (CAMA).
The annual report to be filed with the Commission shall in all material facts comply with the relevant accounting standard. It shall also make disclosures of its unclaimed dividend fund with respect to bank balance, investments and earned income by way of notes to the audited accounts and other periodic reports filed with the Commission.
The chief executive officer and chief financial officer or officers or persons performing similar functions in a public company, shall, in filing the annual account, attach a duly signed certification letter to the matters while the external auditor to the public company shall be registered by the Commission.
The auditor of a public company shall in his audit report to the company issue a statement as to the existence, adequacy and effectiveness or otherwise of the internal control system of the company, while the annual report shall state the level of compliance of the public company with the Code of Corporate Governance for public companies.