Friday, 10 May 2024 04:40

SEC introduces new regulations on private companies’ securities issuance, allotment

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The Securities and Exchange Commission (SEC) has unveiled fresh regulations governing the issuance and allotment of securities by private companies. According to the new rules, any individual who issues or allocates securities without prior approval from the SEC, or breaches any of its regulations, will face penalties starting at N10 million initially, with an additional daily penalty of N100,000 for each ongoing violation.

These regulations, outlined in the proposed guidelines by the SEC, encompass various aspects including debt securities offerings by private companies through public offers, private placements, or other approved methods. The rules also extend to registered exchanges and platforms facilitating trading, price discovery, or acting as information repositories for debt securities issued by private entities.

In addition to monetary penalties, the SEC has outlined stringent consequences for violators, including suspension or withdrawal of registration for involved capital market operators, disgorgement of transaction proceeds, and the authority to ratify or rescind transactions in the public interest.

Private companies seeking to issue securities under these regulations must be duly incorporated under applicable laws, with a minimum operational track record of three years. The regulations cap the maximum amount a private company can raise within a year at N15 billion. Companies wishing to undertake further debt securities issuances would need to re-register as public companies.

Furthermore, private companies are required to list their securities on a registered exchange within 30 days of completing allotment. The regulations mandate issuing houses to file a summary report with the SEC within 21 working days of allotment, containing post-allotment information, details of applicants and allottees, and reasons for any rejections.

For private companies with existing debt securities held by qualified investors, there's a three-month window to apply for registration of these securities with the commission through securities exchanges, as per the proposed rules.

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