Since the amendment of Chapter 17 of the NGX rulebook in 2021, every listed issuer on the NGX must provide the exchange with timely information. This is to enable the exchange to perform its function of maintaining an orderly market. Such disclosed information must adhere to the highest standards and be accurate.

Given the current market fluctuations and macroeconomic state of the Country, this is expected to be a vital tool for NGX-listed companies in the fight against misinformation and insider trading/ dealing. Various companies have used the Rules in Chapter 17 to provide clarifications on reports that were detrimental to their share value and to provide crucial information to the public that may be affected.

This article will examine the major tools in Chapter 17 that listed companies may employ in preventing insider trading and sabotage and provide accurate information to the public on the company’s operations.

Highlights of Chapter 17 of the NGX Rulebook and Implications for Issuers

Below are the notable provisions of Chapter 17 of the NGX rulebook that listed companies may utilize:

1. Disclosure of Material Market information to Investors and the Public

This duty is imposed by several rules in Chapter 17 of the NGX rulebook including rules 17.2, 17.3, 17.6, 17.10, 17.11, and 17.12.

Rule 17.2 mandates issuers to ensure that investors and the public are kept fully informed of all factors that might affect their interest or may have a material effect on market activity in, and the prices or value of, listed securities.

More importantly, Rule 17.10 mandates an issuer who becomes aware of any rumor or report, true or false, in the press or the media, which is likely to have a bearing on an investor’s investment decisions and the value of the shares to make a public statement that clarifies its position if such report is false or misleading.

These mechanisms have been used recently by Seplat Energy Plc to clarify its position to investors and the public.

2. Disclosure of financial position to Investors and the Public

This requirement can be deduced fully from a combined reading of Rules 17.14, 17.20, and 17.25 of the NGX rulebook.

To summarise, issuers must maintain a publicly accessible website with all relevant documents, including financial statements, announcements, circulars, and listing documents. This ensures easy access for investors to assess the company’s financial health

For example, the public can easily access the financial statements and corporate statements of Unilever Nigeria Plc, on its website.

3. Dealing with Insider Information

Several rules in Chapter 17 of the NGX rulebook prevent insider trading by restricting access to sensitive information. Such information includes changes in directors, financial results, and potential acquisitions or divestments. The rules on protecting insider information and preventing insider trading are spelled out in Rules 17.4, 17.5, 17.8, and 17.9.

These provisions ensure that where there is any suspected case of insider trading, the suspected individual can be easily traced and duly prosecuted in line with the provisions of the Investment and Securities Act, 2007.

Rule 17.4 specifically mandates an Issuer to establish effective arrangements to deny access to insider information to persons other than those who require it for the exercise of their functions within the Issuer’s company.

Rule 17.5 provides that price-sensitive information may include changes in directors, annual and interim results, decisions on dividends, profit warnings or changes in financial forecast or expectation, proposed capital raising or restructuring exercise a notice of takeover or mergers, or acquisitions or tender offers or divestments.

Rule 17.8. provides that every Issuer shall maintain a list of employees with access to insider information as well as the contact details of any other relevant person who also has access to insider information.

4. Disclosure of Closure Period and Period of Closure to Investors and the Public

Rule 17.17 states that any period during which trading is restricted shall be termed as a closed period and no person shall deal in the securities of the Issuer when the trading window is closed. The closure period shall be the period before the declaration of price-sensitive information as listed in Rule 17.5.

A recent example of compliance with the Closure period was Wema Bank Plc’s closure of trading before the release of its unaudited Financial Statements for the third quarter ended September 30, 2022.

Conclusion

Clearly, chapter 17 of the NGX Rulebook contains comprehensive provisions that prevent market manipulation and protect investors’ interests. Under Rule 17.24, all issuers are mandated to comply with the Rules and Regulations of the NGX Exchange. Quoted NGX companies are therefore advised to ensure compliance with the above Rules to avoid penalties for non-compliance.