Stakeholders in the financial market have expressed dismay over the rate
at which public companies violate extant rules of their respective
regulators, thereby attracting heavy fines. According to a cross-section
of key shareholders that spoke with Financial Vanguard,
recklessness and carelessness on the part of companies’ chief
executives that give rise to such penalties should be curtailed, or the
board and management of such companies should either be sacked or be
made to pay the fines instead of using shareholders’fund.
They said that shareholders bear the brunt of their carelessness as
the company’s profit is reduced as a result and in effect lowers the
dividends accruing to members of the company. Financial Vanguard
investigation showed that, a total of N241.529 million was paid as
fines by four banks — FCMB Group Plc, Sterling Bank Plc, Access Bank Plc
and United Bank for Africa (UBA) for flouting the Central Bank of
Nigeria (CBN) directives in 2014 financial year alone.
Also, this year, the Nigerian Stock Exchange (NSE) fined 33 quoted
companies N63.8 million. Their offence was reneging on their
post-listing rules requirement in relation to timely submission of
yearly and quarterly financial statements.
Financial Vanguard findings showed that Access Bank suffered the most
penalties among all the listed entities surveyed and was made to pay
N184 million in fines for contravening various sections of Bank and
Other Financial Institutions Act (BOFIA) and CBN’s circulars.
The bank was fined N174 million for a contravention on the reporting
of public sector deposits in line with the CBN guidelines. It was also
fined N2 million by the CBN for weaknesses observed in its internal
process and KYC procedures, including other offences. The sum of N51.5
million fine was imposed on Sterling Bank Plc by the CBN and the
Nigerian Stock Exchange (NSE) for violating their various regulations,
as fines.
Specifically, the CBN fined the bank N50 million for under-reporting
its public sector deposits as at August 29, 2014, while the NSE slammed
N1.5 million fines on the bank for publication of newly appointed Board
members without prior notification and approval from the
Exchange. Similarly, FCMB Group Plc paid cash penalty amounting to N6
million for contravening some sections of the provisions of the BOFIA
and relevant CBN circulars.
A subsidiary of the bank – FCMB Limited, according to Financial Vanguard
findings, failed to satisfactorily implement prior-year external
auditors’ recommendations and was fined N2 million; it also rendered
incorrect returns to CBN on its MTR 202 and also failed to comply with
ATM operation standard at ATM located at Lekki, Lagos, and was fined N2
million each for both of the offences. During the 2014 financial year,
the United Bank for Africa paid a penalty of N0.29 million for ‘delay in
remitting unapplied funds to beneficiaries’.
Already, this year (2015), the CBN has imposed combined fine of N4.8
billion on UBA Plc and First Bank of Nigeria for Treasury Single Account
(TSA) breach. In the same vein, Skye Bank Plc was fined N4 billion for
the same offence. The companies involved in the NSE sanctions include:
Aso Savings and Loans Plc (N3.7m); Mutual Benefit Assurance Plc (N3.8m);
African Alliance Insurance Plc (N4.2m); Resort Savings and Loans Plc
(N4.3m); Nigeria Enamelware Co. Plc (N1.6m); eTransact Int’l Plc
(N2.7m);
Universal Insurance Plc (N5.3m); Great Nigeria Insurance Plc (N5.6m);
C & I Leasing Plc (N1.3m); Nigerian Ropes (N100,000.00); N.E.M
insurance (N300,000.00); Fortis Microfinance Bank (N600,000.00); LASACO
Assurance (N400,000.00); Equity Assurance Plc (N500,000.00); Japaul Oil
and Maritime Plc (N400,000.00); Regency Assurance Plc (N700,000.00);
Staco Assurance Plc (N700,000.00); Niger Insurance Plc (N700,000.00);
Daar Communications Plc (N6m); Linkage Assurance Plc (N900,000.00);
Studio Press Plc (N900,000.00); and R.T Briscoe, which was fined N1.5
million for late submission of its 2014 full year result.
Others are; NASCON Allied and Industries Plc (N100,000.00); Vitafoam
Nig. Plc (N1.4m); Union Diagnostic and Clinical Services (N100,000.00);
Law Union & Rock Insurance Plc (N100,000.00); Multiverse Plc
(N1.8m); Flour Mills of Nigeria Plc (N300,000.00); Standard Alliance
Insurance Plc (N2.4m); Arbico Plc (N1.8m); Conoil Plc (N1.8m); Omoluabi
Savings and Loans Plc (N1.6m) and Oando Plc (N6.2 million).
Reacting, Mr. Abayomi Obabolujo, President, Avid Shareholders
Association, described it as a mark of high level of indiscipline among
the management staff of those companies, saying that it shows that they
are not competent enough. “As a matter of fact, any of them that erred
should be removed because at the end day, whatsoever fine the company
pays, the salaries and allowances of those management staff that are
responsible for the act still remain the same.
“At the end, we have to suffer it as shareholders because the
company’s profit comes to zero or lower than what it should have been.
As a result, the dividend they ought to pay will either not be paid or
the dividend becomes small. So, it is very sad news and it portends
danger for the entire industry.
He urged the Securities and Exchange Commission (SEC) to rise to the
defence of the shareholders by ensuring that any management whose
organisation is found to have contravened any rule to have made the
organisation to pay any fine should be dealt with. “This could be done
by ensuring that such money is converted to loan from the salaries and
allowances of the management concerned and then they pay back. If not,
at the end of the day, it is the shareholders that have invested; that
are not part of the management that have to pay.
They contravene, they still collect their allowances and salaries,
and at the end, they have nothing to suffer,” he lamented. “Depending on
the gravity of the offence, the first thing is that such management
staff should be suspended with immediate effect because if nothing is
done, others will go ahead and continue to do it, but if it happens that
somebody did it and he was punished, others will be very careful.
“If you look at MTN for instance, as we speak today, it is only in
Nigeria that such goes unnoticed. As at today, the managing director of
MTN global is no longer there; so, it is now that the chairman took over
the executive position for a period of six months. If it is in Nigeria,
the managing director will continue, the chairman will continue,
everybody will continue. So, if such managing director cannot pay, he
should be sacked and all his entitlement forfeited. That is the ideal
compensation to shareholders,” Obabolujo added.
Speaking in the same vein, Alhaji Gbadebo Olatokunbo, a founding
member, Nigeria Shareholders Solidarity Association, said that instead
of placing the fines on the companies, the Board and management of the
companies concerned should be penalised, adding that it would call them
to order.
“If they flout regulatory directives, they should pay, but I will
appeal to the regulatory authorities not to always fine the company but
to fine the management because they are being paid to do certain things
and when they are not doing the right thing and the regulatory authority
fines the corporation, it is the company that pays; the management
staff don’t feel the pain.
“If there is a way they could make those in the helm of affairs to
pay, that will ginger them to do the right thing. They don’t feel the
pain when the company pays because they don’t pay from their pocket,”
Olufemi insisted. Speaking further, he said: “Every assignment in all
companies is attached to a particular directory and they know those that
are in-charge of the directory, so those that are paid to do the job
should be fined.
“Before, we were shouting that the regulatory authorities are
imposing too much fines on companies, but if these people are not fined
and they are flouting the rules, the shareholders will suffer it. And
don’t forget, the regulatory authorities have more power on these
companies than we do because they see their books more than the
shareholders. We don’t see their books; it is what they decide to show
us that we see.
“The regulators go there for examinations, so, they have more
authority over them than us though we are the owners of the companies.
So, my appeal is that they should be imposing the fines on the
management instead of the companies because if they fine the companies,
the offenders will not feel the pain.” In his own contribution, Amb.
Olufemi Timothy, National President, Renaissance Shareholders
Association of Nigeria, said: “All these sanctions, especially in the
last five months in 2015, are very terrible and we are not happy about
it because they will have adverse effect on the margins of the
companies.” He, however, cautioned the regulators, saying that heavy
fines could hamper the ability of companies to declare good profit and
pay dividends.
“Look at what happened in Skye Bank Plc, (N4 billion fines at a go by
the CBN), are you telling me that it will not affect the bank’s profit
next year. It will definitely affect that bank and shareholders’ cash
dividend. So, we are looking into it and very soon, we will address the
issue.” He further stated that imposing huge fines would jeopardise the
going concern of such business, adding that it is disincentive to
investment. He also noted that such officers should be suspended and
should lose their entitlement for the period the suspension lasted.
…As CBN fines 4 banks N241.53m for sundry offences – 2014
…Another 33 firms get N63.8m fines from NSE
…Shareholders want concerned boards, management sanctioned
By Nkiruka Nnorom
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