NSE vows to check abnormalities in private placement

Following the upsurge in the number of private placement across the various sectors of the Nigerian economy and the attendant abnormalities trailing it, the Nigerian Stock Exchange (NSE) has vowed to expose promoters who negate the rules for the floatation of the foreign placement.
Speaking during a joint interactive session with stockbrokers and journalists on development in the capital market in Lagos, the Director-General of the NSE, Professor (Mrs.) Ndi-Okereke Onyiuke disclose the unconstitutional manner in which the private placement exercises have been carried out, saying “It has become alarming and calls for immediate action in order to protect investors from fraudulent and dubious promoters and to also protect the Nigerian capital market from collapse and lost of public confidence”, she said.

“The rate and number of private placement has become very alarming. These days every company irrespective of their status want to raise funds through private placement to the extent that the process is being abused and has recorded numerous abnormalities.

Today, private placements are being conducted like public offers. Many of the complaints we have been receiving from investors are about private placements. Many of the investors were misled to believe that the share of the company would be listed on the NSE immediately after the offer.

It is necessary we take certain step to stem the abuse and the abnormalities that have been recorded in the placement exercise.”

The measures introduced by the NSE to check the proliferation of private placement is it decision to ensure that companies does not list its shares by introduction unless, it presents before the NSE, its placement memorandum, barring such company from raising additional funds until one year after listing, insisting that the company brings to the trading floor five per cent of their total shares on issue, raising it to 10 per cent from September 2008, and listing the shares on the price at which the private placement was undertaken.”

Onyiuke disclosed that the normal process of private placement does not require that prospectus be printed but placement memorandum which are placed before not more than fifty investors identified by the company undertaking the private placement.

According to her, ““The Company and Allied Matter Act (CAMA) gave directions on how private placements are to be undertaken. These days, private placements are conducted like public offers. The law states that the document which carries information about the placement exercise be called a placement memorandum and should be laid before not more than 50 investors identified by the company, allowing for the company to overshoot this limit after it might have registered as a Public Limited Company (PLC).

These days, promoters of private placement print prospectus and distribute to everybody at every place. These is not supposed to be the case.”” She vows that the NSE will, henceforth, drag banks, stockbroking houses, issuing houses and other parties that goes contrary to the provisions of the constitution for the conduct of private placement, to the relevant regulatory authorities for sanctions to be meted out on them, warning that they stand the risk of getting jail terms. File name: NSE. June 16, 2008—Vanguard