The Nigerian Stock Exchange (NSE) has placed cautionary red alerts on 34 companies for their inability to meet listing requirements, implying underlying corporate governance weaknesses that investors need to consider about the companies.
The latest tracker on compliance with basic listing requirements at the stock market obtained by The Nation at the weekend indicated that the companies were flagged by the NSE for failure to submit their financial statements within the stipulated timeline.
The Exchange stated that the identified companies “fell short of the minimum listing standards in terms of timely disclosure of their audited annual financial statements”, a major infraction that directly affects the market’s efficient price discovery and liquidity.
According to the Exchange, the 34 companies failed to submit their financial statements and accounts for the first quarter of this year, ended March 31, 2019, in contravention of the extant listing requirements at the market.
Post-listing rules at the NSE require quoted companies to submit interim or quarterly report not later than 30 calendar days after the end of the relevant period.
Most quoted companies, including banks, major manufacturers, oil and gas companies, breweries and cement companies use the 12-month Gregorian calendar year as their business year. The deadline for the first quarter, which ended March 31, 2019 was Tuesday, April 30, 2019.
Quoted companies are also required to publish the financial statement within five business days after the date of filing, in at least one or two national daily newspapers, and post it on the company’s website, with the web address disclosed in the newspaper publication.
Also, an electronic copy of the publication shall be filed with the Exchange on the same day as the newspaper publication. Where the company chooses to audit its quarterly accounts, it shall be required to file such accounts not later than 60 calendar days after the relevant quarter.
The report, which was based on the Compliance Status Indicator (CSI) of the NSE, uses three-letter codes to mark out companies that fall below the post-listing requirements at the Exchange and it is usually part of the consideration for regulatory reviews and approvals at the Exchange.
The companies flagged with the red-alert warning codes included Lafarge Africa Plc, Lasaco Assurance Plc, Mutual Benefits Assurance Plc, Niger Insurance Plc, Aso Savings & Loans, Capital Oil, Conoil, Cornerstone Insurance, Daar Communications, Deap Capital Management & Trust Plc, DN Tyre & Rubber Plc, Evans Medical Plc and A.G Leventis Nigeria Plc.
Others were Anino International Plc, First Aluminium Nigeria Plc, Fortis Microfinance Bank Plc, FTN Cocoa Processors Plc, Goldlink Insurance Plc, Guinea Insurance Plc, International Breweries Plc, International Energy Insurance Plc, Juli Plc, NPF Microfinance Bank Plc, Omatek Ventures Plc, RT Briscoe Plc, Resort Savings & Loans Plc, Royal Exchange Plc, defunct Skye Bank, now Polaris Bank; Smart Products Nigeria Plc, Staco Insurance Plc, Standard Alliance Insurance Plc, Unic Diversified Holding Plc, Union Homes Savings & Loans Plc and Universal Insurance Company Plc.
Besides the warning red flags, the companies are also required to pay monetary fines for the defaults. While authorities at the Exchange have not indicated the actual amounts payable by the companies, the report noted that “the sanctions for non-compliance with periodic financial disclosure obligations are clearly spelt out in the rules”.
Monetary sanctions could range from N100,000 to N100 million. Under the rules at the Exchange, late submission under the first instance of 90 days could attract N9 million, the additional period of 90 days will attract N18 million while such delay beyond the first 180 days to the next 180 days could attract as much as N72 million, bringing fines payable by a defaulting company within a year mto N99 million