The Securities and Exchange Commission (SEC) of Nigeria has said the removal of  fourth quarter results (Q4) filing by listed companies will be of significant disadvantage to investors.

According to a statement signed by the SEC’s Management and obtained from the apex regulator’s official website, the SEC, while addressing the concerns of Nigeria Employers’ Consultative Association (NECA) on sanctions imposed on quoted companies for not filing their Q4 results, observed that if the Q4 report is jettisoned, there would be a 5 month period between when the Q3 returns are filed and the deadline for submitting audited annual financial statements.

“During this 5 month period, there would be no information on the company’s financial status to the investing public. In such a situation, investors, particularly retail investors, would be at a significant disadvantage.”

The SEC’s statement however noted that the Commission is consulting widely and studying practices in other jurisdictions, to ensure that a decision which best addresses this unique situation is taken on the matter.

Furthermore, the Commission said it is considering Rules on accelerated filing which would give quoted companies the options of either retaining the current Q4 filing system as provided in the SEC Rules or filing their audited annual accounts latest by the second week of February of the next year, in order to forgo the requirement of filing Q4 unaudited accounts.  

NECA had earlier sent a petition to the Minister of Finance, Mrs. Kemi Adeosun, signed by the Director- General, NECA, Mr. Olusegun Oshinowo, condemning the sanctions by SEC, describing it as unlawful, and claiming that the alleged default was based on the regulations and practice in the capital market.

According to NECA: “By virtue of Rule 19.6 of the attached Nigerian Stock Exchange (NSE), which was approved by SEC as the apex regulatory authority in the capital market in Nigeria, Q4 financial statements are not required to be filed with the regulatory authorities by companies.” SEC said that NSE Rule 19.6 states that “An Issuer shall announce the financial statements for each of the first three quarters of its financial year immediately after the figures are available, but in any event not more than 30 days after the relevant financial period.”

“Pages 1 and 12 of the NSE Rules are relevant to this issue. This is the reason why companies file their unaudited financial statements for the first three quarters and file audited financial statements within 90 days after the end of the year.

“It is our view that SEC should not in one regulation exclude the filing of Q4 financial statements and subsequently decide to penalise companies for not filing the same returns without any express communication to the stakeholders mandating them to file Q4 financial statements. This is because SEC cannot have two conflicting regulations in the capital market on the same issue, as it would create avoidable confusion,” Oshinowo said.

Meanwhile, the Commission stated that while it engages stakeholders and looks at ways to address the issue of quarterly filingsit cannot abdicate its duty of applying existing Rules and Regulations.

“Filing Q4 financial statements by public companies is mandatory under the SEC Rules as currently provided for. Without an amendment of the Rules, the Commission would continue to apply these Rules, while consulting with relevant stakeholders on necessary amendments.”

The SEC further said “As the apex regulatory authority of the Nigerian capital market, the SEC will continue to live up to its responsibility of investor protection by sustaining market fairness and integrity. Sometimes this may entail applying strict sanctions as provided in the law against erring participants. In our considered opinion, maintaining a posture of zero tolerance has presented a credible deterrence that is already improving compliance levels across our market and reducing the number of infractions. It is noteworthy that the fines and penalties applied by the Commission has led to a massive improvement in filing compliance by quoted companies from less than 25 percent in December 2011 to over 85 percent as at 30th September 2016.

The implication of this development has been the significant improvement in the access and quality of information about quoted companies now available to the investing public to make more informed investment decisions. All categories of investors (retail, domestic institutional and foreign investors alike) stand to benefit from this improved market behaviour. The SEC will continue to pursue policies that sustain this momentum.”

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