By Chinwendu Obienyi
In an effort to enforce capital adequacy standards and protect investors, the Securities and Exchange Commission (SEC) announced a N1.1 million fine on banks and firms with incomplete capital-raising processes. This move aligns with the Central Bank of Nigeria (CBN)’s directive for banks to increase their capital base, supporting the government’s goal of achieving a $1 trillion economy by 2030.
The SEC revealed this in a document titled ‘2024 Framework on Banking Sector Recapitalisation Programme,’ published on its website on Friday. The framework provides comprehensive guidance for banks, holding companies, and market participants to navigate the recapitalisation process successfully. As a regulatory body, the SEC’s mandate includes assisting the CBN in ensuring a smooth, transparent, and efficient capital-raising process for banks.
The framework details the guidelines and procedures banks must follow to raise capital through rights issuances, private placements, or other approved methods during the 2024-2026 recapitalisation period. All applications and documents are to be filed electronically via [email protected]. Documents submitted will be reviewed, and any deficiencies will be communicated to applicants electronically. If deficiencies are identified, the timeline for approval resets. Otherwise, approval is granted and communicated.
“An incomplete application will incur a penalty of N1,000,000 and a re-filing fee of N100,000, payable by the Issuing House without recourse to the Issuer or the Issue proceeds. For further inquiries, banks and stakeholders should contact the SEC’s dedicated offer application email,” the SEC stated.
The framework aims to guide banks, holding companies, and capital market operators in filing applications for capital raises and/or mergers and acquisitions. It ensures full disclosure of material facts in compliance with the Investments and Securities Act 2007, SEC Rules and Regulations, and other relevant laws, ensuring proper and timely transaction reviews.
The SEC emphasized the capital market’s crucial role in facilitating the recapitalisation programme, as banks are expected to leverage the market to raise necessary funds or engage in various business combinations. The framework is an excerpt of the existing SEC Rules and Regulations and should be read alongside the Investment and Securities Act, 2007.
“Where an issuer has already filed necessary documents with SEC (e.g., Memorandum and Articles of Association, certificate of incorporation, or certificate of increase in share capital), the issuer need not file these documents in subsequent transactions, provided an undertaking is given that no changes have occurred since the previous filing,” the SEC clarified.
Market stakeholders have commended the SEC’s initiative, emphasizing that incomplete or improper capital-raising processes can mislead investors, causing financial losses and eroding market confidence. They noted that the SEC’s penalties aim to deter such practices and safeguard investors.
“Proper recapitalisation is crucial for the financial health of banks and firms. Ensuring these processes are completed correctly helps maintain the stability of the financial system. By penalizing non-compliant institutions, the SEC enforces discipline within the financial sector, encouraging firms to adhere strictly to legal and regulatory requirements,” stakeholders stated.