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Market Infractions: Nigerian Exchange sanctions Julius Berger Plc over ‘inappropriate insider dealing’

Julius Berger Nigeria Plc Head Office, in Abuja, FCT

*The Authorities on the Nigerian Exchange (NGX) have sanctioned Julius Berger Nigeria Plc for engaging in ‘inappropriate insider dealing’ in shares, violating provisions on ‘closed period’, in breach of the construction company’s commitment to adhering to listing rules and standards

Isola Moses | ConsumerConnect

The Authorities on the Nigerian Exchange (NGX) have sanctioned Julius Berger Nigeria (JBN) Plc for engaging in what the Exchange has described as “inappropriate insider dealing” in shares.

ConsumerConnect learnt that JBN, Nigeria’s leading construction company, was sanctioned for “insider dealing during closed period” on the Exchange, according to an NGX document.

Incorporated in 1970, Julius Berger Nigeria headquartered in Abuja, FCT, with additional permanent locations in Lagos and Uyo respectively, became a publicly quoted building and construction company in 1991, and has over 10,000 shareholders.

The company offers holistic services covering the planning, design, engineering, construction, operation and maintenance of buildings, infrastructure, and industry projects in the West African country.

Julius Berger is equally known for constructing most of Nigeria’s infrastructure, major expressways, and even some residential buildings, including the Lagos Third Mainland Bridge, Centra Bank of Nigeria Headquarters Building, and Abuja National Stadium, among others.

How the company breached market listing rules and standards: NGX

NGX Regulatory Company (NGX RegCo), the self-regulatory organisation (SRO) that regulates activities on the NGX, stated that JBN breached certain provisions of the listing rules and was thus sanctioned accordingly.

According to NGX RegCo, JBN violated provisions on “closed period”, in breach of the construction company’s commitment to adhere to listing rules and standards.

The NGX had tightened its rules and regulations to checkmate boardroom intrigues and block information arbitrage that tend to confer advantages on companies’ Directors.

The amendments expanded the scope and authority of corporate financial reporting while eliminating gaps that allowed companies to sidetrack relevant rules in stage-managing corporate compliance.

The enhanced framework provided clarity and greater disclosures on directors’ trading in shares, corporate liability for accuracy and compliance of financial statement, dissuade bogus dividend payment and other sundry boardroom’s maneuverings that tend to favour insiders.

The amendments came on the heels of noticeable increase in violations of rules on ‘closed period’, a period when Directors are banned from trading in the shares of their companies.

Rule 17.17 of the NGX disallows insiders and their connected persons from trading in the shares or bonds of their companies during the ‘closed period’ or any period during which trading is restricted.

This period is mostly at a period of sensitive material information, like prior knowledge of financials, dividends or major corporate changes, which places Directors and other insiders at an advantage above other general and retail investors, according to the Nigerian Exchange.

A review of the disclosure violations at the stock market had shown that all violations in 2021 were related to violation of Rule 17.17 on ‘closed period’.

Under the amendments, in addition to the provisions of relevant accounting standards, laws, rules and requirements regarding preparation of financial statements, companies are now required to include several specific declarations on securities transactions by Directors, changes in shareholding structure, self-assessment on compliance with corporate governance standards and internal code for Directors on securities transactions among others.

According to the rules, to securities transactions by Directors, a company shall disclose in its quarterly financial statements, full year audited financial statements, and in corporate governance report contained in its annual report whether the company has adopted a code of conduct regarding securities transactions by its Directors on terms no less exacting than the required standard set out by the market.

Besides, the construction giant is required to disclose, having made specific enquiry of all Directors, whether its Directors have complied with, or whether there has been any non-compliance with, the required standard set out in the Exchange’s rules and in code of conduct regarding securities transactions by Directors.

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