Multiple Subscribers to Public Offers Risk Prosecution

Investors in the Nigerian capital market with multiple subscriptions for the same public offer may forfeit their investment and may be persecution going by the recommendations of a committee set up to look into the matter and decisions reached by the Capital Market Committee.

The Securities and Exchange Commission at its last CMC approved the report of the market wide committee on formulating a uniform position for the treatment of multiple subscriptions to public offers.

According to SEC, the Nigerian capital market cannot and should not be seen to reward the wrongful acts/illegality of the perpetrators, saying the move was to ensure the global sustainability of the Nigerian capital market’s integrity and reputation.

SEC in a circular noted that one major source of unclaimed dividend remains the use of non-existent identity to make multiple subscriptions to public offers.

The Committee reported that the action of submitting multiple applications for the same public offer was, in every consideration, illegal and was done under false pretense.

The report described two groups of investors involved in multiple subscriptions. The first group (Group A) of investors actually existed but joggled their names in different forms to enable them purchase more than the permitted units of shares on offer. While, the second group (Group B) is the class of investors that did not actually exist but used fictitious names for the purpose of purchasing more than the permitted number of shares during public offers.

The report agreed that both groups had fraudulent intentions and their actions were collectively illegal.

Consequently the CMC recommended that Group ‘A’ above should be considered for a level of forbearance by giving them a grace period up to September 1, 2017 within which to come forward and expressly prove their individual identities, subject to highest know-your-client(KYC) criteria, to be defined by the SEC.

Those owners, whose identities are established, would then be allowed to consolidate their accounts. After the expiration of the timeframe, unclaimed dividends, traceable to this category that have not been identified and consolidated, along with their securities shall be transferred to the Nigerian Capital Market Development Fund NCMD.

On the other hand, since category ‘ B’ refers to those securities with non-existent owners, the unclaimed dividends and related securities of this category cannot be ascribed to anyone, both the unclaimed dividends and securities shall be transferred to the NCMD.

It was resolved that going forward, anybody who engages in the wrongful act of multiple subscriptions for the same public offer, shall be prosecuted.