The Securities and Exchange Commission (SEC) is making move to stop listed companies from distributing gift items at annual general meetings (AGMs).
The capital market regulator is also ensuring that quoted companies do not convene any meeting with select group(s) of shareholders prior to an AGMs or an extra-ordinary general meetings(EGMs).
These move by SEC were contained in an exposure draft of sundry amendments to SEC’s rules and regulations, exposed to the market last Friday.
Justifying the proposed rule, the commission said public companies spend a significant amount of money on corporate gifts at AGMs/EGMs and this has a great impact on their profitability.
“Few of the companies are making reasonable profits and even fewer can afford to pay dividends. If the amount budgeted for gifts at AGMs/EGMs can be reserved for other relevant operational or administrative expenses, it would positively impact on their earnings per share,” it explained.
Explaining further, SEC said: “It has been observed that some companies arrange meetings with select groups of shareholders ahead of general meetings to discuss proposed resolutions and agree on strategies which are often detrimental to the interest of other shareholders.”
Specifically, the proposed rules provide that, “public companies shall not distribute gifts to shareholders, observers and any other persons at AGMs/EGMs. Public companies shall not convene any meeting with select group(s) of shareholders prior to an AGMs/EGMs.”
SEC stated that any company that violates the provisions of (4) and (5) above shall be liable to a penalty of not less than N10 million.
In another proposed new rule, SEC is moving to reinstate the individual sub-broker function to the market.
Individual sub-broker function was removed in November 2017. However, SEC said the deletion of that rule generated a lot of comments from the Nigerian Stock Exchange (NSE) and Association of Stock Broking Houses (ASHON), who thereafter requested for the reinstatement of the function.
“The Rules Committee revisited the issue and the commission agrees that reinstatement of Individual Sub – broker function will help in enhancing financial inclusion, deepening the market, and attracting more retail investors as well as enable the Sub – brokers have more presence at the grass root level,” SEC explained.