By Joy Baba-Yesufu
In recent times, there has been a spate of large-volume trades in the NGX. On October 14, Africa Capital Alliance’s CAPE IV sold off about N13.9 billion worth of Aradel Holdings shares in a single trade.
Also, between September 23 and 25, Femi Otedola, FBNH Chairman purchased N16 billion worth of FBN Holdings shares.
According to the proposed amendments to the trading license holders’ rules, “block divestment” has been redefined. Block Divestment will be defined as a “transfer of shares amounting to five percent (5percent) or more of the company’s total listed shares within one year from the date of first transfer or acquisition of shares.”
Previously, block divestments were defined as a “transfer of shares amounting to thirty percent (30percent) or more of the company’s total listed shares and the transferee shareholder intends to take control of the listed company;”
The proposed rule change stipulates that a licensed NGX dealing member assigned to execute a block divestment must seek prior approval from the Exchange before proceeding. Additionally, traders uncertain about whether a transaction qualifies as a block divestment are advised to consult with the Exchange for clarification.
According to the draft regulations, traders or dealing members must submit a formal application to the Exchange in the form of a letter. The letter should notify the Exchange of the divestment mandate and request approval to proceed.
Initially, electronic copies of the application letter and supporting documents may be submitted, but hard copies must be filed with the Exchange within 10 business days.
The submission must also outline the transaction’s key details, such as the number of shares and the transaction price, supported by the applicable checklist.
Additionally, fees for block divestments will be calculated based on a rate determined by the Exchange. This rate will apply to the higher of either the agreed transaction price or the market price. For transactions executed outside the prevailing market price, dealers are required to include a document explaining the rationale behind the pricing methodology.
Dealers must also pay a non-refundable processing fee of 0.2 percent of the transaction value upfront and provide evidence of payment with the application.
The proposed rule recommends a penalty of a 10-business-day suspension and a fine of no less than 5 percent of the block divestment’s value for traders who proceed with such transactions without obtaining prior approval from the Exchange.
According to NGX Regulation Limited (NGX RegCo), these proposed amendments were necessitated by the “circumventing” of the rules by some market traders.
