The Securities and Exchange Commission, Nigeria

(As At March 24, 2010)

Rule 40. Methods/Types of registerable securities

(A) All securities offered through the following medium are subject to registration by the Commission:

(a) offer for subscription;

(b) offer for sale;

(d) bonus issue;

(e) private placement by public companies;

(f) securities arising from conversion of company to public limited company (P.L.C.);

(g) debenture/loan stock;

(h) State and local Governments bonds;

(i) offer by introduction.

(j) Book-building (March 12,2009)

(B) Registration Requirements

(1) A security shall be registered with the Commission by the issuer filing an application on Form S.E.C. 6 as provided in Schedule III to these Rules and Regulations accompanied by—

(i) a copy of the resolution(s) by the general meeting authorising the offer and certified by the company Secretary;

(ii) 2 copies of the Memorandum and Articles of Association (including amendments thereto) of the issuer certified by the C.A.C.;

(iii) a copy of Certificate of Incorporation of the issuer certified by the C.A.C.;

(iv) a signed copy of audited accounts for the preceding five years or number of years for which the issuer company has been in operation, (if less than five years) or audited statement of affairs (in the case of a new company) disclosing the following information:

(a) financial statements;

(b) date of incorporation;

(d) paid-up capital which shall not be less than the minimum subscription level prescribed by the Companies and Allied Matters Act (C.A.M.A.);

(e) profile of promoters/directors;

(f) profile of management staff;

(g) a summary of the objectives and business of the company;

(h) The latest audited accounts shall not be more than nine months old for corporate bodies or twelve months old for states, local governments and Federal Government agencies and Supranational bodies. (March 24,2010)

(v) 2 copies each of the draft Prospectus and abridged Prospectus;

(vi) 2 copies of the draft Trust Deed, where applicable;

(vii) 2 copies of the underwriting agreement and sub-underwriting agreement, where applicable;

(viii) 2 copies of vending agreement, between issuer and the issuing house. Where there are joint issuing houses, the terms of their relationship should be incorporated in the vending agreement;

(ix) letters of consent given by the parties to the issue, sworn to before a Notary Public/Commissioner for Oaths. Where the consent is contained in a power of attorney, executed and stamped copy of the power of attorney;

(x) notarised letter of consent signed by named individuals from the parties to the issue. Where the consent is contained in a power of attorney, it shall be executed and stamped;

[SECRR(A) 2006 (1), s. 12.]

(xi) evidence of technical agreement (if any) reached between the issuer and technical partner(s), advisers/consultants;

(xii) a letter from the issuer opting out of underwriting where the issue is not to be underwritten;

(xiii) a copy of C.A.C. form containing the particulars of Directors, certified by C.A.C.;

(xiv) a mandate letter by the issuer to the issuing house;

(xv) evidence of payment of registration and filing fees;

(xvi) a certificate of exemption from a recognised stock exchange;

(xvii) a feasibility report on the project to be financed (for debt issue);

(xviii) State Government Official Gazette or local Government by-law containing the instrument authorising the issue of the bond (applicable to State and Local Government bonds);

(xix) Irrevocable Standing Payment Order (I.S.P.O.);

(xx) rating report by a registered rating agency (applicable to a debt instrument);

(xxi) any other document required by the Commission under these Rules and Regulations.

[SECRR(A) 2005, s. 23.]

(2) All securities required to be registered pursuant to the Act shall be registered with the Commission by the issuer filing an application as in sub rule (1) above and the application shall in addition contain information to indicate the type and general character of the securities including the following:

(i) the nominal value, the rate of dividends if fixed and whether cumulative or non-cumulative;

(ii) a brief description of the preference shares if any;

(iii) in the case of debts instruments, the rate of interest, the date of maturity or if the issue matures severally, a brief indication of the serial maturities;

(iv) if the payment of principal or interest is contingent, an appropriate indication of such contingency, a brief indication of the priority of the issue and if convertible, a statement to that effect;

(v) the organisational and financial structure and nature of business of the company, including any risk factors;

(vi) the directors, officers and underwriters if any, and each security holder of record, holding more than 5 percent of any class of any equity or ₦50,000 in value of whichever is higher;

(vii) the bonus and profit sharing arrangements;

(viii) the management and service contracts;

(ix) write up from the issuing house on the issue;

(x) schedule of claims and litigation;

(xi) bridging loan agreement and schedule of other material contracts where applicable;

(xii) evidence of property ownership or transfer;

(xiii) any other document or information required by the Commission from time to time.

(3) Where the issuer had already filed such documents with SEC (e.g. Memart or certificate of incorporation or certificate of increase in share capital, etc.) such issuer need not file the documents in subsequent transactions provided, there is an undertaking that there is no change in the document already filed with the Commission. (March 24,2010)

(4) The copies of the approved Prospectus shall be signed by the directors of the issuer and other parties to a public offer and together with other documents of offer, shall be forwarded to the Commission for registration within 48 hours of the signing of the Prospectus. Where a party will not be available to sign the Prospectus, he shall execute a stamped power of attorney in favour of any other available party to sign on his behalf. This shall be filed with the offer documents.

(5) Where the securities registered by the Commission under this Part will not be offered to the public within a period of six months after the registration, the issuer shall revert to the Commission for a revalidation of the registration before it is offered to the public.

(6) Any other material information.

Definition

(1) Shelf Registration is a filing undertaken by issuers intending to access the market in the near future. It permits issuers to disclose certain information in a core disclosure document that is updated on a regular basis.

Scope of Securities

(2) Shelf Registration shall be applicable to all types of registrable securities as defined in section 273 of the Investments and Securities Act, 2007Eligibility for use of the Shelf Registration

(3) (a) Unless otherwise indicated by the Commission, all public companies listed on a recognized Securities Exchange for a minimum period of twelve months are eligible to issue, offer for subscription or purchase, or issue an invitation to subscribe for or purchase securities in accordance with a shelf registration.

Provided that there shall be full disclosure of:

(i) any prosecution commenced against either the issuer or any of its subsidiaries in respect of any breach of any securities or banking laws or the Companies and Allied Matters Act, 1990;

(ii) any action taken against the listed company by a recognized Securities Exchange in respect of any breach of the listing requirements of the Exchange;

(b) An issuer shall not be eligible for shelf registration where the issuer or any of its subsidiaries has breached any terms and conditions in respect of borrowed monies which has resulted in the occurrence of an event of default and an immediate recall of such borrowed monies, during the twelve calendar months immediately preceding the date of application to the Commission for registration of the shelf prospectus.

Transaction requirement

(4) The value of the issue on offer under shelf registration shall not be less than ₦5 billion.

Requirement for Shelf Prospectus and Supplementary Shelf Prospectus

(5) (i) A person may issue, offer for subscription or purchase, or make an invitation to subscribe for or purchase securities under a shelf registration where at the time of the issue, offer or invitation, there is in force a shelf prospectus as updated by a supplementary shelf prospectus, both of which have been registered by the Commission;

(ii) A shelf prospectus shall be effective for a period of two years from the date of its issue and it shall not be renewed.

Contents of Shelf Prospectus and Supplementary Shelf Prospectus

(6) (a) A shelf prospectus shall—

(i) comply with the general form and contents of a prospectus as set out in sections 71 to 87of the Investments and Securities Act 2007 and rules 53 to 58 of these Rules and Regulations;

(ii) state that the shelf prospectus has been registered by the Commission;

(iii) state that the registration of the shelf prospectus and supplementary shelf prospectus shall not be taken to indicate that the Commission endorses or recommends the securities or assumes responsibility for the correctness of any statements made or opinions or reports expressed therein;

(iv) contain a statement that no securities will be allotted or issued on the basis of the shelf prospectus read together with the supplementary shelf prospectus later than two years after the date of the issue of the shelf prospectus;

(v) if it contains any statement made by an expert or contains what purports to be a copy of or an extract from a report, memorandum or valuation of an expert, state the date on which the statement, report, memorandum or valuation was made and whether or not it was prepared by the expert for incorporation in the shelf prospectus;

(vi) disclose any prosecution commenced against either the issuer or any of its subsidiaries, during the twelve calendar months immediately preceding the date of application to the Commission for registration of the prospectus in respect of any breach or contravention of any securities or banking laws or the Companies and Allied Matters Act, 1990 or the listing requirements of a recognized Securities Exchange;

(vii) contain the relevant disclosures that neither the issuer nor any of its subsidiaries has, during the twelve calendar months immediately preceding the date of application to the Commission for registration of the shelf prospectus, breached any terms and conditions in respect of borrowed monies which has resulted in the occurrence of an event of default and an immediate recall of such borrowed monies; and

(viii) set out such other information as may be specified by the Commission.

(b) A supplementary shelf prospectus shall—

(i) state such information as may be specified in these Rules and Regulations on Contents of Prospectus;

(ii) state the offer period which should not be longer than 28 working days from the date of the issue of the supplementary prospectus or such longer period as may be allowed by the Commission;

(iii) disclose information such as:

(a) where a matter has arisen and information in respect of that matter would have been required by the Investments and Securities Act, these Rules and Regulations or any listing requirements of a recognised Securities Exchange, to be disclosed in the prospectus if the matter had arisen at the time the shelf prospectus was prepared;

(b) where there has been a significant change affecting a matter disclosed in the shelf prospectus;

(d) where the shelf prospectus contains a statement or information from which there is a material omission;

(e) any prosecution commenced against either the issuer or any of its subsidiaries during the twelve calendar months immediately preceding the date of application to the Commission for registration of the shelf prospectus and during the effective period of the shelf prospectus, in respect of any breach or contravention of any securities or banking laws or the Companies and Allied Matters Act, 1990 or the listing requirements of a recognized Securities Exchange;

(f ) that neither the issuer nor any of its subsidiaries has, during the twelve calendar months immediately preceding the date of application to the Commission for registration of the shelf prospectus and during the effective period of the shelf prospectus, breached any terms and conditions in respect of borrowed monies which has resulted in the occurrence of an event of default and an immediate recall of such borrowed monies;

(g) that the supplementary shelf prospectus has been registered by the Commission and that a copy has been lodged with the Securities Exchange where the securities are listed.

General Duty of Disclosure in Shelf Prospectus and Supplementary Shelf Prospectus

(7) (a) For the purpose of determining whether a shelf prospectus or supplementary shelf prospectus contains any statement or information which is false or misleading, or from which there is a material omission, regard shall be had to whether the shelf prospectus and supplementary shelf prospectus contain all such information that investors and their professional advisers would reasonably require, and expect to find in the shelf and supplementary shelf prospectus, for the purpose of making an informed assessment of—

(i) financial position and prospects of the issuer;

(ii) the rights if any, attaching to the securities; and

(iii) the merits of investing in the securities and the extent of the risk involved in doing so.

(b) The information that investors and their professional advisers would reasonably require and reasonably expect to find in the shelf prospectus and supplementary shelf prospectus under paragraph (a) is information—

(i) which is known to all or any of the parties to the issue of shelf prospectus and supplementary shelf prospectus, or

(ii) which any of the persons referred to in subparagraph (i) would have been able to obtain by making such enquiries as were reasonable in the circumstances.

(c) Without prejudice to the generality of sub-rule (6) (a) or (b) above, in determining the information that is required to be included in a shelf prospectus and supplementary shelf prospectus under these rules, regard shall be had to—

(i) the nature of the securities and business of the issuer of the securities;

(ii) the persons likely to consider acquiring such securities;

(iii) the fact that certain matters may reasonably be expected to be known to any professional adviser whom investors may reasonably be expected to consult; and

(iv) whether the persons to whom an issue of, offer for subscription or purchase of, or invitation to subscribe for or purchase of securities is to be made are the holders of securities in the company, and if they are, to what extent (if any) relevant information has previously been given to them by the issuer under any law, any requirement of the rules or listing requirements of a recognized Securities Exchange or otherwise.

Issuing of Shelf Prospectus

(8) Upon the registration of the shelf prospectus by the Commission, the issuer is allowed to issue the shelf prospectus, provided that—

(a) securities are only to be issued upon the registration of a supplementary shelf prospectus by the Commission; and

(b) the form of application which would facilitate the issue of, offer for subscription or purchase of, or the making of an invitation to subscribe for or purchase of securities on the basis of the shelf registration is attached to the supplementary shelf prospectus and not the shelf prospectus.

Delivery of Shelf Documents to the Public

(9) All shelf documents shall be made accessible to the public at the offices of the Issuer and Commission and by publishing same on the websites of the Commission and the Issuer.

Fees for Shelf Registration

(10) All Issuers of a shelf prospectus shall pay a filing fee of ₦50,000 and a vetting fee of ₦200,000 at the time of placement of documents on the shelf and the appropriate fees for registration of securities as provided in these Rules and Regulations at the time of the issuance of the securities.

[SECRR(A) 2006 (2), s. 4.]

Regulation of Borrowing by States, Local Governments and other
Government Agencies

Rule 306. Registration of State, Local Government, etc., bonds securities

State/Local Government and other Government agencies’ bonds or securities shall be registered with the Commission by the issuer filing an application on Form S.E.C. 6 as provided in Schedule III to these Rules and Regulations.

Rule 307.

(1) Requirements for registration:

(i) a copy of the feasibility report on the specific project to be financed;

(ii) counterpart copy of original of the irrevocable letter of authority from the Local Government/State Accountant-General or other Government agencies authorising the Accountant-General of the Federation to deduct the principal and interest amount directly from statutory allocation in case of default;

(iii) letter of confirmation from the Accountant-General of the Federation of receipt of the irrevocable letter of authority to deduct the principal and interest from statutory allocation of the State/Local Government in case of default;

(iv) two copies of the resolution of the State/Local Government Legislative Assembly authorising the issue of the bond;

(v) audited account of the State/Local Government or other Government agencies for preceding 5 years or such number of years in existence (if less than 5 years);

(vi) two copies each of draft Prospectus and abridged Prospectus;

(vii) two copies of the State Government Gazette or Local Government by-laws containing the instrument authorising the issue of the bond;

(viii) two copies of underwriting agreement(where applicable);

(ix) two copies of Trust Deed;

(x) two copies of vending agreement;

(xi) the reporting accountant’s report;

(xii) rating report by a registered rating agency;

(xiii) a write-up on the issue;

(xiv) schedule of claims and litigations;

(xv) bridging loan agreement if any;

(xvi) material contracts;

(xvii) letters of consent of the parties to the issue;

(xviii) State and Local Government shall publish their audited annual financial statements in at least two (2) national newspapers throughout the life of the bond. Also, the rating of the state and local government bonds shall be reviewed annually provided that the rating shall be no more than 12 months apart and shall be published in at least two national newspapers;

(xix) State and Local Government shall publish information funds utilization annually in at least two (2) national newspapers. The publication shall be subject to clearance by the Commission;

(xx) Underwriting shall be at the discretion of the Issuer. In the event that the Issuer and its financial adviser decide that there shall be no underwriting, the minimum level of subscription shall be in line with the provisions of Rule 70 (6) (ii);

Provided that, where an issue not underwritten is undersubscribed, the Commission shall be informed of the source of the funding gap and such information shall be filed together with the proposed basis of allotment;

(March 24,2010)

(xxi) any other document or information required by the Commission from time to time.

[SECRR(A) 2005, s. 61.]

(2) The total loans outstanding, including the proposed bond, shall not exceed 50% of the actual revenue of the issuer for the preceding year.

[SECRR(A) 2005, s. 61.]

(3) (a) In the event of default by the issuer the trustee shall, within six months of such default take necessary steps to ensure that the Accountant-General commences direct deduction from the issuer’s statutory allocation.

(b) The trustee shall within 30 days of such default notify the Commission and file a copy of the letter to the Accountant-General in (a) above, with the Commission.

(4) A copy of the irrevocable letter of authority shall be lodged with the trustee not later than 5 days before the issue is open to the public.

(5) The Registrar to the issue shall issue a bond certificate to the bondholders within two months of the allotment of the securities in accordance with rule 200 of these Rules and Regulations.

(6) Where the Commission is satisfied with the securities offered by the issuer, it shall on an application by the issuing house waive the requirement for an irrevocable letter of authority provided that the Issuing House shall not revert to the use of the irrevocable letter of authority to the office of the Accountant-General of the Federation for the recovery of the loan.

The following conditions shall be satisfied by the issuer:

(a) The Internally Generated Revenue (IGR) of the issuer shall not be less than 60% of its total revenue of the state for the preceding year.

(b) Investment in the Bond issue not backed by an irrevocable letter of authority shall be restricted to Qualified Institutional Investors and High Networth Individuals as defined under these rules and regulations.

(d) In addition to the issuer’s Internally Generated Revenue

(IGR), the issuer shall provide a third party guarantee from

a bank, insurance company, supranational institutions,

international financial institutions or any other acceptable

to the Commission, to cover payment of the principal and

interest in the event of default.

(e) The guarantor shall be the primary banker of the issuer

for the purposes of its IGR through the tenure of the

debt issue.

(f) in the event of default by the issuer, the trustee shall within

three months of such default request the guarantor to pay

the principal sum and interest outstanding on the debt issue.

Notice of the request by the trustee to the guarantor shall be

filed with the Commission.

(g) the trustee shall within thirty days of such default notify the Commission and outline further steps it intends to take in the matter.

(h) A duly executed copy of the third party guarantee shall be lodged with the trustee not later than 5 days before the issue is open to the public.

The issuer shall disclose in the prospectus that the bond issue is not backed by an irrevocable letter of authority. This shall be boldly printed on the front cover of the prospectus

Rule 307A: Corporate Bonds

These rules shall apply to all bond issuance by any public company, foreign public companies and supranational bodies.

Documents/Information Required:

In relation to any issue, offer or invitation made pursuant to these rules, the following documents shall be filed along with the registration statement:

(a) Duly completed form SEC 6;

(b) Appropriate filing and Registration Fees;

(d) Two copies of the Memorandum and Articles of Association of the Issuer certified by the Corporate Affairs Commission;

(e) A copy of Certificate of Incorporation of the Issuer certified by the Company Secretary;

(f) A signed copy of the Issuers latest audited accounts for the preceding three (3) years, with the latest account not more than nine months old;

(g) Reporting Accountant report;

(h) Consent letters of the parties to the offer;

(i) Two copies of the draft vending agreement between the issuer and the issuing house;

(j) Draft underwriting agreement (where applicable);

(k) Rating report by a registered rating agency;

(l) A letter of No Objection from the relevant regulatory body (where applicable);

(m) Two copies of draft Trust Deed;

(n) A draft prospectus, Right Circular, Placement memorandum or any form of information memorandum shall contain the following information:

i. Background information on the Issuer and/or Originator in the case of Asset-Backed Securities (ABS) issue including Mortgage Backed Securities (MBS);
ii. Profile of Directors of the Issuer;
iii. A description of the transaction and structure of the issue;
iv. Details of the utilization of proceeds. If proceeds are to be utilized for project, details of the project;
v. Details of estimated expenses for the issue;
vi. Conflict of interest situations, risk factors and mitigating factors;
vii. For issuances made for the purpose of refinancing an existing debt, information on the existing debt should be provided;
viii. Coupon rate, the date of maturity or if the issue matures severally, a brief information on the serial maturities;
ix. Names, telephone numbers and facsimile number and the e-mail addresses of principal officers of the issuer and Principal Advisers of the issue;
x. Terms and conditions of the issue;
xi. Any other material information in relation to the issue.

(o) Declaration by the Issuer on compliance with all requirements of the Act;

(p) Such other material information as may be required by the Commission.

2. Condition for Approval

The Issuance of Bonds by Public companies and supranational bodies shall be subject to the following conditions:

(a) Eligibility of Debt Offering

i. Any public company, foreign public company or supranational body is eligible to issue corporate bonds;
ii. All necessary approvals (where applicable) in relation to the issue, from other regulatory authorities shall be obtained and filed with the Commission together with the registration statement. Any conditions imposed by such regulatory authorities, shall be complied with throughout the tenor of the bond;
iii. All issues of corporate bonds shall be rated by a rating agency registered with the Commission and disclosed in the offer documents. The rating shall be reviewed annually throughout the tenor of the bond and published in at least two national newspapers;
iv. For a bond that will be issued through public offering, the credit rating shall not be below an investment grade;
v. No Issuer shall offer bond if it is in default of payment of interest or repayment of principal in respect of previous debts issuance for a period of more than six (6) months.

(b) Mode of issue

Corporate bonds may be issued by way of an offer for subscription, rights issue or private placement.

There shall be a resolution by the general meeting authorizing the issue of the bond.

(d) Disclosure and creation of charge

Where the debenture is secured, the Issuer shall ensure the assets on which the debenture is secured are adequate and this should be specifically stated together with the ranking of the charge(s) in the offer documents.

In case of second or residual charge or subordinated obligation, the offer documents shall clearly state the risks associated with such subsequent charges by giving details.

Bond related rules

Share this: