SEC Issues N10 Million Sanctions on Unregistered Securities Issuance

According to the regulations, any person or organisation that issues or distributes securities without first getting permission from regulators or continues to break any rules will be punished severely. The SEC also stated that violators may receive an initial penalty of at least N10 million and a daily fine of N100,000 for each day they continue to violate the law.

The SEC also listed other sanctions for non-compliance in addition to monetary fines. These sanctions in the release include refunding transaction proceeds, suspension or withdrawal of registration for involved capital market operators, and possible transaction ratification or withdrawal by the Commission.

“The rules apply to Debt securities issuances by private companies either by way of public offer, private placement or other methods as may be approved by the Commission; Registered exchanges and platforms which admit debt securities issued by private companies for trading, price discovery or information repository purposes; Registered capital market operators who are parties in issuances and allotment of debt securities of private companies,” it explained.

Following the new regulations, private businesses must list their securities on a registered securities exchange within a 30-day grace period following allotment. The law also states that companies must have been legally established under applicable laws and have operated for at least three years to be eligible to issue securities.

The regulations set a maximum fundraising limit of N15 billion for private companies within a year. Companies that plan to issue more debt securities must re-register as public companies.

In addition, the regulations require issuers to submit a summary report to the SEC with post-allotment data and allottee details within 21 working days of the allotment.

If private companies have debt securities currently held by qualified investors, they must apply for registration within three months of the rule's issuance. Failure to comply will result in penalties.

The SEC demands that debt securities be sold exclusively to qualified investors and that private companies cannot offer equity securities to the general public. Debt securities issuances are restricted to registered capital market operators only.

“The issuer is prohibited from using the proceeds of the issue for purposes other than those stated in the offer document without the prior approval of the Commission.

“The issuer shall file with the Commission not later than ninety (90) days after the conclusion of an issue on the appropriate SEC Form, detailed information on the utilisation of proceeds.

“Evidence of such utilisation shall be provided as appendix to the report. The rendition shall be on a quarterly basis until issue proceeds are fully utilised,” the commission said in the circular.

Regarding how to use the proceeds, issuers are prohibited from using the money for reasons other than those specified in the offer document without obtaining approval from the SEC. Companies must file detailed reports on proceeds utilisation quarterly until fully utilized.