As part of efforts to avoid recurrence of the crash of the Nigerian stock market in 2008 and 2009, the Securities and Exchange Commission (SEC) has stopped the publicity of private placements in the market, warning that any company that publicises its private placement risks the suspension or withdrawal of approval.
The Commission also warned that any capital market operator engaged in an advisory role on the private placement may be sanctioned.The apex regulatory body gave these directives in a new rule known as Rule 90(2) just created in line with provisions of Investments and Securities Act (ISA), which gives the commission powers to make rules meant to effectively regulate the capital market.
THISDAY had last Thursday exclusively reported one of the new rules, which will compel issuers of shares to pay interest on returned monies to unsuccessful subscribers. According to the rule, any company that delays monies of unsuccessful subscribers will pay interest of Central Bank of Nigeria (CBN)'s Monetary Policy Rate plus five per cent on such monies.
The Commission made more of the new rules available last Friday, which include the ban on publicising private placements.SEC said, “A new Rule 90(2) is created to read as follow: Private Placements shall not be advertised, mentioned and/or discussed in the print and electronic media. Approval of a private placement may be suspended or withdrawn for violation of this rule. Any Capital Market Operator engaged in an advisory role on the private placement may also be sanctioned.”
Statutorily, private placements, which is the opposite of public offering of shares is supposed to be restricted and marketed to few private investors, but many companies disregarded this and were publicising private placements.