The President of Capital Market Academics of Nigeria, Professor Uche Uwaleke, at the weekend commended the new management of the Securities and Exchange Commission (SEC) for its new rules on the issuance and allotment of private companies’ securities.

He however suggested that maximum capital raise be reduced from N15bn to N10bn within one year such that the fine of N100m minimum will represent one per cent of the amount.

Recall that the commission recently released a draft rule on debt securities issuances by private companies either by way of public offer, private placement or other methods as may be approved by the Commission.

According to the draft, any person who issued or allotted securities without the commission’s prior approval or violate any provisions of its regulations will pay a penalty of N10 million in the first instance.

The Commission added a sum of N100,000 for every day if the violation continues.

Addressing newsmen at the weeken in Abuja, Uwaleke described the new regulation as a welcome development geared toward enhancing investor protection.

The Capital Market Expert advised the Commission to undertake massive sensitisation on the rules to enhance compliance and reduce violations arising from ignorance.

According to him, “the idea of capping the maximum debt capital that can be raised is intended to discourage reckless risk-taking on the part of private companies.

”Enforcement of rules is enhanced by stiff sanctions which is why I support the relatively huge fine. Given that one person can now form and incorporate a private company in Nigeria and that the minimum share capital to incorporate a private company is only N100,000, going by the CAMA of 2020, I think the cap of N15 billion is for private companies.

“Other considerations in the CAMA which tend to lend credence to a reduced limit for capital raise include the fact that the appointment of a company secretary is now optional for a private company. New private companies need not appoint auditors although the rule requires that such a company must have a minimum of three years track record,” he added.

Others are registered exchanges and platforms which admit debt securities issued by private companies for trading, price discussion or information repository purposes.

On proceeds utilisation, the Commission held that issuers are prohibited from using the proceeds of the issues for purposes other than those stated in the offer document without its prior approval.