SEC is changing its rules and regulations for the capital markets

SEC is changing its rules and regulations for the capital markets

Nigeria’s Securities and Exchange Commission has notified the capital markets that it is changing its primary rules and regulations.

The SEC is exposing the proposed amendment to enable all stakeholders make inputs.

See below the full amendment as proposed:

EXPOSURE OF PROPOSED NEW RULE AND
SUNDRY AMENDMENTS TO THE RULES AND REGULATIONS OF THE COMMISSION

(a) Proposed Fixed Income Primary Issuance Fees

(b) Proposed Equity Primary Issuance Fees

Sundry Amendments  

(c) Proposed amendment to Rule 314- Cost of Issue

(d) Proposed amendment to Rule 456 (f)- Rules on Obligations of the Custodian of a Collective Investment Scheme

(e) Proposed amendment to Schedule I of the Commission’s Rules and Regulations-Registration Fees, Minimum Capital Requirements, Securities and Others

(f)  Proposed amendment to Schedule VI- Basis of Computation of Bid and Offer Prices for Collective Investment Schemes

(g) Proposed amendment to Rule on Trading in Unlisted Securities- Inclusion of Debt Securities

  1. PROPOSED
    FIXED INCOME PRIMARY ISSUANCE FEES
S/N Cost Centre   CURRENT FEE RATES  Proposed fee Rates
1 SEC  @ 0.15%  of offer size  1st N500 Mn @ 0.15%
       Next N500 Mn @ 0.145%
       Balance above N1 Bn @ 0.1425%
2 NSE  @ 0.15%  of offer size Companies already having Equity Listing @ 0%
      Companies not having Equity Listing @ 0.0375%
      States and Supra-nationals @ 0.05%
3 ISSUING HOUSE Max 1.35% of offer size 1ST N1 Bn @ Max of 1.35%
      Next N1 Bn @ Max of 1.225%
      Balance above N2 Bn @Max of 1.15%
4 CSCS @ 0.01% of Offer size @ 0.0075% of Offer Size
      Capped @ N5 Mn
5 RECEIVING AGENT @ 0.75% of Offer size @ 0.25% of Offer size
6 STOCKBROKER @ 0.13% of Offer size @ 0.13% of Offer size
7 REGISTRARS N30 (Existing Application) N30 (Existing Application)
    N40 (New Application) N40 (New Application)
    Take on fee of N1 Mn Take on fee of N1 Mn
8 SOLICITOR TO THE ISSUE @ 0.1% of Offer size @ 0.05% of Offer size
    Subject to a min of N1 Mn Subject to a cap of N10 Mn
9 SOLICITOR TO THE COMPANY @ 0.05% of Offer size @ 0.01% of Offer size
    Subject to a min of N500,000 Subject to a cap of N5 Mn
10 REPORTING ACCOUNTANT @ 0.1% of Offer size @ 0.05% of Offer size
      Subject to a min of N1 Mn
      Subject to a max of N7.5 Mn
11 AUDITORS @ 0.05% of Offer size @ 0.01% of Offer size
      cap of N4 Mn
12 TRUSTEES 0.1% – 0.35% Of Offer size Max of 0.035% of Offer size
      Cap of N5 Mn
13 UNDERWRITING  Negotiable (Excluded from current fee
regime)
Max of 2.3% of Offer size
14 PRINTING/ (Excluded from current fee regime) Max of 0.2% of Offer size
  ADVERTISEMENT/PUBLICITY/OTHER  
  EXPENSES    
  TOTAL MAX 3.9375% (excluding underwriting
commission, Printing/Adverts and Registrars fee )
 Max 2.293% (excluding underwriting
commission and Registrars fee )

 

 

  1. PROPOSED
    EQUITY PRIMARY ISSUANCE FEES
S/N Cost Centre  CURRENT FEE RATES  PROPOSED FEE RATES 
1 SEC 1st N500 Mn @ 0.30%  1st N500 Mn @ 0.275%
    Next N500 Mn @ 0.225%  Next N500 Mn @ 0.225%
    Balance above N1 Bn @ 0.15% Balance above N1 Bn @ 0.15%
2 NSE At 0.30% of Offer size Main Board – Listing Fees  – 0.25% of
Offer size subject to maximum fee of N200m.
      Premium Board – Listing Fees 0.25% of Offer
size subject to maximum fee of N400m.
      ASEM – flat fee of N100,000.00.
3 ISSUING HOUSE At 1.35% of Offer size 1ST N1 Bn @ 1.35%
      Next N1 Bn @ 1.225%
      Balance over N2 Bn @ 1.15%
4 CSCS At 0.01% of Offer size At 0.0075% of Offer Size
      Capped @ N5 Mn
5 RECEIVING AGENT At 0.75% of Offer size @ 0.50% of Offer Size
6 STOCKBROKER 0.13% of Offer size 0.13% of Offer Size
7 REGISTRARS N30 (Existing Application) N30 (Existing Application)
    N40 (New Application) N40 (New Application)
    Take on fee @ N1m Take on fee @ N1m
8 SOLICITOR TO THE ISSUE At 0.1% of Offer size 0.05% of Offer Size
    Subject to a min of N1 Mn Subject to a min of N1 Mn
      Capped at N10Mn
9 SOLICITOR TO THE COMPANY At 0.05% of Offer size At 0.01% of Offer Size
    Subject to a min of N500,000 Subject to a min of N500,000
      Capped at N5Mn
10 REPORTING ACCOUNTANT At 0.1% of Offer size 0.05% of Offer Size
      Subject to a min of N1 Mn and a max of N7.5
Mn
11 AUDITORS At 0.05% of Offer size At 0.01% of Offer size capped @ N4 Mn
12 UNDERWRITING  Negotiable (Excluded from current fee
regime)
Max of 2.3% of Offer size
13 PRINTING/ (Excluded from current fee regime) Max of 0.2% of Offer size
  ADVERTISEMENT/PUBLICITY/OTHER  
  EXPENSES    
  TOTAL MAX 3.17% (excluding underwriting commission,
Printing/Adverts and Registrars fee )
 Max 2.833 % (excluding underwriting
commission and Registrars fee )

 

C. PROPOSED AMENDMENT TO RULE 314- COST OF ISSUE

         Existing Rule:

The total cost of issue shall not exceed 3.17% for equity transactions and 3.9375% for bonds of the gross total proceeds, excluding indemnity fee, advertisement, printing and take on fees for registrars, from the issue or such percentage as the Commission may prescribe from time to time.

Proposed Amendment:

“The total cost of
issue shall not exceed 2.833% for equity and 2.293% for
bonds of the total gross proceeds excluding underwriting commission and
registrars’ fees
from the issue or such percentage of the gross
total proceeds
as the Commission may prescribe from time to time”.

 

  1. PROPOSED AMENDMENT TO
    RULE 456 (F)- OBLIGATIONS OF THE CUSTODIAN OF A COLLECTIVE INVESTMENT SCHEME

 

 Existing Rule 456 (f):

The Custodian shall:

Be independent of a scheme’s fund manager, and not be affiliated to either of the parties.

 Proposed amendment:

Be independent of a scheme’s fund manager.

  1. PROPOSED AMENDMENT TO SCHEDULE I OF THE
    COMMISSION’S RULES AND REGULATIONS-REGISTRATION FEES, MINIMUM CAPITAL
    REQUIREMENTS, SECURITIES AND OTHERS

The following amendment is proposed to Schedule I to break up the Registration fee into 3 components:  Filing fees, Processing fees and Registration fees.

S/N CATEGORY CURRENT
FEES =N=
PROPOSED
FEES =N=
1 Filing
fee for all categories
5,000.00 50,000.00
2 Processing
fee for all categories
N/A 200,000.00

The following amendment is proposed to categorise market participants by registration threshold.

 

S/N TYPES
OF FUNCTION
CURRENT
REGISTRATION FEES =N=
PROPOSED
REGISTRATION FEES =N=
1. Stock/Commodities
Exchange
100,000.00 1,000,000.00
2. Over
the Counter Market
N/A 1,000,000.00
3. Clearing
& Settlement Agency/Depository Agency
100,000.00 1,000,000.00
4. Bankers
to an Issue
100,000.00 1,000,000.00
5. Issuing
House
200,000.00 500,000.00
6. Broker/Dealer 100,000.00 500,000.00
7. Registrar 100,000.00 500,000.00
8. Trustee 100,000.00 500,000.00
9. Registrar 100,000.00 500,000.00
10. Fund Manager 100,000.00 500,000.00
11. Underwriter 200,000.00 500,000.00
12. Market
Maker
200,000.00 500,000.00
13. Inter
Broker/Dealer
N/A 500,000.00
14.   Custodian of Securities 200,000.00 500,000.00
15.   Capital Trade Point N/A 500,000.00
16. Broker 100,000.00 300,000.00
17. Dealer 100,000.00 300,000.00
18. Rating
Agency
100,000.00 300,000.00
19. Capital
Market Consultants (Corporate)
100,
000.00
300,000.00
20. Capital
Market Consultants (Partnership)
50,000.00 300,000.00
21. Corporate
Investment Adviser
100,000.00 300,000.00
22. Sub-broker 50,000.00 200,000.00
23. Individual
Investment Adviser
50,000.00 200,000.00
24. Capital
Market Consultants (Individual)
20,000.00 200,000.00
25. Sponsored
Individual
10,000.00 50,000.00


  1. PROPOSED AMENDMENT TO SCHEDULE VI-BASIS OF COMPUTATION OF BID AND OFFER PRICES FOR COLLECTIVE INVESTMENT SCHEMES

1.1 Existing Schedule VI:

The bid and offer prices of units in a collective investment scheme shall be based on the net asset value of the
scheme calculated on a weekly basis by the scheme manager….

Proposed Amendment:

The bid and offer prices of units in an open-ended collective investment scheme shall be based on the net asset value of the scheme calculated on a daily basis by the scheme’s manager…

 1.2 Existing Note at end of Schedule VI:

 Securities traded on a Stock Exchange or any regulated market will generally be valued at the last traded price quoted on the relevant exchange or market as at the date of computation. If no trade is reported for that date or if the exchange was not open on that day, the last published sale price or the recorded bid price (whichever is more recent) shall be used. Unlisted equity securities will be valued initially at cost and thereafter, as the Scheme’s Manager shall in its discretion deem appropriate. Unlisted securities (other than equities), for which there is an ascertainable market value will be valued generally at the
last known price dealt on the market on which the securities are traded on or before the day preceding the relevant date of valuation and unlisted securities (other than equities), for which there is no ascertainable market value, will be valued at cost plus interest (if any) accrued from purchase to (but excluding) the Valuation Date plus or minus the premium or discount (if any) from par value written off over the life of the security. Any value otherwise than in Nigeria Naira shall be converted at the prevailing market exchange rate.

Proposed addition to Note at end of Schedule VI:

An addition to “Note” at the end of Schedule VI is proposed
as follows:

Securities traded on a Stock Exchange or any regulated market will generally be valued at the last traded price quoted on the relevant exchange or market as at the date of computation. If no trade is reported for that date or if the exchange was not open on that day, the last published sale price or the recorded bid price (whichever is more recent) shall be used. Unlisted equity securities will be valued initially at cost and thereafter, as the Scheme’s Manager shall in its discretion deem appropriate. Unlisted securities (other than equities), for which there is an ascertainable market value will be valued generally at the
last known price dealt on the market on which the securities are traded on or before the day preceding the relevant date of valuation and unlisted securities (other than equities), for which there is no ascertainable market value, will be valued at cost plus interest (if any) accrued from purchase to (but excluding) the Valuation Date plus or minus the premium or discount (if any) from par value written off over the life of the security. Any value otherwise than in Nigeria Naira shall be converted at the prevailing market exchange rate.

The closing unit price of Closed-ended funds shall be published on a daily basis on the fund manager’s website.

  1. PROPOSED AMENDMENT TO RULE ON
    TRADING IN UNLISTED SECURITIES-INCLUSION OF DEBT SECURITIES

   1.1   Existing Rule (a):

All Securities of unlisted public companies shall be bought, sold or transferred only by means of a system approved by the Commission and under such terms and conditions as the Commission may prescribe from time to time.

Proposed amendment:

All securities of public unlisted companies shall be bought, sold or transferred only by means of a system approved by the
Commission and under such terms as the Commission may prescribe from time to time.

1.2Proposed New sub-rule (b):

 A new sub-rule (b) is proposed as follows:

 

All debt securities issued in Nigeria by the Federal Government of Nigeria (“FGN”), Subnationals (State and Local Government), Supranational and Corporate entities, shall be bought, sold or transferred in
the secondary market only through a SEC registered trading facility or Securities Exchange.

 

1.3 Proposed New sub-rule (c) :

A new Rule (c) to include regulation of trading in foreign currency securities of Nigerian entities listed in other jurisdictions is
proposed as follows:

 

All exchange of debt securities traded (including foreign currency securities of Nigerian entities listed in other jurisdictions like Eurodollar bonds) in the Nigerian capital market shall be executed on or reported to a SEC-registered Securities Exchange or trading facility.

 

1.4 Existing Sub-rule (b):

No person shall buy, sell or otherwise transfer securities of an unlisted public company except through the platform of a registered securities exchange established for the purpose of facilitating over-the-counter trading of securities.

 

Proposed amendment:

To be renumbered as Rule (d) and amended as follows:

No person shall buy, sell or otherwise transfer securities of a public unlisted company or government agency except
through the platform of a SEC-registered securities exchange or trading facility established for the purpose of facilitating
over-the-counter trading of securities.

1.5 Existing sub-rule (c):

Any unlisted public company, director, company secretary, registrar, broker/dealer or such other persons who facilitates the buying, selling or transfers of the securities of an unlisted public company otherwise than through the platform of a registered securities exchange, shall be liable to a penalty of not less than N100, 000 in the first instance and not more than N5, 000 for every day the infraction continues.

Proposed amendment:

The existing Rule (c) as outlined above to be slightly amended and renumbered as Rule (e) to read as follows:

Any public unlisted company, director, company secretary, registrar, broker/dealer or such other persons who facilitate the buying, selling or transfer of the securities of a public unlisted company or government agency otherwise than through the platform of a SEC-registered securities exchange or trading facility shall be liable to a penalty of not less than N100,000 in the first instance and not more than N5,000 for every day of default.