SEC imposes N10m penalty for unauthorised security issuance

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The Securities and Exchange Commission (SEC) has proposed new rules governing the issuance and allotment of securities by private companies, introducing strict penalties for violations. According to the proposed rules, individuals who issue or allot securities without SEC approval or violate any provisions of the regulations will face penalties starting at N10 million for the first instance and an additional N100,000 for each day the violation continues.

The rules apply to debt securities issuances by private companies, registered exchanges, and platforms trading debt securities, as well as capital market operators involved in such transactions. Penalties for violations include fines, suspension or withdrawal of registration of involved operators, disgorgement of proceeds, and ratification or rescission of transactions in the public interest.

To be eligible to issue securities under the regulations, a private company must be duly incorporated under applicable laws and have a track record of at least three years. The regulations limit the maximum amount a private company can raise within a year to N15 billion, requiring re-registration as a public company for further debt securities issuances.

Issuing houses are required to file a summary report with the SEC within 21 working days of allotment, including post-allotment information and details of allottees. Private companies with existing debt securities held by qualified investors must apply for registration with the commission through securities exchanges within three months of the issuance of the rules.

Source: PUNCH

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