Level of Compliance and Free Float Deficiencies on NSE

Proshare

Tuesday, June 07, 2016 3.38 PM Opinion by Taiwo Ologbon-Ori  

Investors’ Confidence plays major role in market growth- this technically suggests that the market belongs to the investors and without sound investors’ confidence, market may suffer some setbacks.  

Also, investors' confidence reflects the level of optimism, trust, respect, integrity, protection and marketability that a Stock Exchange possesses. To build a sustainable market confidence, it is important that regulators ensure compliance to disclosure and transparency rules, which are critical in strengthening market corporate governance.  

On the Nigerian Stock Exchange, we have observed a shift in compliance due dates on some stocks with free-float deficiencies which is in line with NSE Rule 17:22 while an extension beyond reasonable period may not be too good for the market and investors’ confidence in my opinion. 

Rule 17:22 of the NSE Rule Book says;  

(a)    Where the free float falls below the minimum listing standard, the Issuer must as soon as  practicable announce that fact to The Exchange and The Exchange shall require the Issuer to obtain the required float within a specified period. The Issuer shall be required to notify its shareholders in writing within ten (10) business days of The Exchange’s decision that if the  required  float  is  not  obtained  within  the  specified  timeframe  The  Exchange  may suspend trading in the securities. 

(b) The Exchange may allow the Issuer a period of one (1) year or such longer period as The Exchange  may  agree  to  retain  its  listing  and  rectify  the  deficiency.  The Issuer may be delisted if it fails to restore the percentage of securities in public hands after the period allowed.’’

Currently, companies listed above have free float deficiencies in the Nigerian Capital Market. While a few of them gradually approach their compliance due date, a few of the companies have applied to the Exchange for an extension of time to comply.

I would like to state that market regulator may unknowingly deflate market confidence if continuous extensions of compliance date on public float are continually granted.

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