Investors Lambast SEC for Double-Standards

By Modupe Gbadeyanka

Investors in the Nigerian capital market have slammed the Securities and Exchange Commission (SEC) for failing the corporate governance test it punishes players in the sector for.

According to a report by The Nation, the apex industry regulator has not published its yearly reports and accounts for four years.

The last annual reports and accounts of the commission was for the year ended December 31, 2013, halting a tradition that had seen SEC publishing its annual reports yearly for more than a decade.

However, any company listed on the trading floor of the Nigerian Stock Exchange (NSE), which fails to file its earnings is heavily fined by the regulators and sometimes suspended from trading.

According to The Nation, the failure of SEC to publish its financial statements is a violation of the Investment and Securities Act (ISA) 2007, Code of Corporate Governance and extant rules at the capital market.

Asked why SEC has been unable to prepare and publish annual reports and accounts and whether the failure to publish annual reports for years will not undermine the moral authority of the agency, SEC’s Corporate Communication Department requested for “some time” to respond. It has not responded for more than three weeks.

Those who spoke on the matter on condition of anonymity, because they were under the regulatory purview of SEC, decried what they described as double-standards of the regulator.

A survey of stakeholders, including shareholders, capital market operators and quoted companies, was unanimous that the inability of SEC to publish its annual reports and accounts annually was a major failure that exposes capital market to ridicule in the comity of international markets.

Both the SEC and Nigerian Stock Exchange (NSE) enforce stringent disclosure and transparency rules that include submission of quarterly and annual reports within stipulated timelines, with penalties for violation including monetary fine, suspension of trading, “naming and shaming” and in the extreme cases, delisting of such violators. The NSE has meanwhile maintained publication of its annual report and holding of annual general meeting.

A source blamed the failure on “some internal challenges”, including the absence of a board for the Commission. However, the failure to publish yearly report predated the dissolution of the board of the Commission in 2015 by President Muhammadu Buhari’s administration.

According to ISA, the board of SEC is responsible for the financial management of the Commission. The ISA stipulates that the Commission shall cause to be kept, proper books of records and accounts “which shall be audited by auditors appointed by the board of the Commission”.

ISA requires SEC to, not later than three months after the end of each year, submit to the Minister and the National Assembly, a report on the activities and administration of the Commission during the immediately preceding year and, shall include in such reports, audited accounts of the Commission and the report of the Auditor on the accounts.

Existing rules at SEC requires capital market operators to file their annual reports and accounts “not later than six months after the end of the accounting year” and “where a market operator fails to file quarterly returns twice in a year and nine months after the annual accounts becomes due, the market operator shall be referred for further enforcement action”.

SEC is proposing to tighten the rules by reducing the submission period to three months, citing the need to harmonise the rules with the requirements at the NSE.

In justifying the reduction of the period to three months, SEC noted that “the current practice is not in tune with the risk-based approach to monitoring of capital market operators (CMOs) and the information required may have become obsolete six months after the accounting year of a CMO”.

Corporate governance rules at the stock market require quoted companies to submit their audited annual reports, not later than 90 calendar days, or three months, after the expiration of the period.