REGULATING
FINANCIAL INFORMATION
The
growth of Investor relations (IR) in Public Relations reemphasises the mandatory adherence to statutory regulations governing
financial communication by listed companies. Since financial performance appeals to the investing public, especially as it
relates to annual statements of account, stock prices and other market determinants, corporate conglomerates are urged to
abide by the rules of information dissemination that are intended to persuade investors to deposit their funds with them.
Andrew
Hawkins, Director General of United kingdoms’ Investors Relations Society, in his article “Wising up to Global
IR” in Frontline Quarterly, observes that it has certainly taken enough time for listed companies to realise
just how important it is to look after their investors – afterall, good IR should enhance a company’s brand value
and ultimately, make it cheaper to finance borrowing. He argued: “the changes in UK financial regulation will no doubt
be the roles of the in-house IR practitioner being enhanced, as companies face a regulatory minefield supported by an enforcement
regime eager to bare its teeth. It certainly concentrates the minds of a company’s board of directors to see the prospect
of being sued for selective disclosure of sensitive financial information. So, good IR Officers will be able to put a premium
on their service. And it is difficult to envisage the regulatory environment getting easier.”
A
very distinct character of financial public relations is the rules and regulations guiding the participants in the financial
environment on public disclosures and pronouncements. It is not a matter of just waking up and dishing out information anyhow.
There are several laws in place on what, how, when and where sensitive financial statements should be made. In fact, the Central
Bank of Nigeria, the Securities and Exchange
Commission, Nigerian Stock Exchange and National Insurance Commission have stipulated guidelines on the way and manner information
should be made public. Even adverts sometimes are expected to pass through regulatory authorities. A company that flouts the
law is adequately penalised.
The
Securities and Exchange Commission (SEC) is empowered by the Investment and Securities Act (ISA) of 1999, which allows it
to make general and specific rules governing securities exchanges, capital market operators, securities offered, mergers and
acquisitions, collective investment schemes, investors’ protection fund and borrowing by the tiers and agencies of government.
In the said Act, Section 85 and Rule 190 are specific on information dissemination and all forms of communication. They also
state penalties on untrue statements of a material fact, which are otherwise false or misleading. The Commission’s rules
and regulations provide all the participants in the capital market on their expectations in the system. It spells out the
Code of Conduct and provides fairness and equality, among others.
According
to the Head of Corporate Affairs of SEC, Mr. Iliasu Dhacko the act also deals with activities related with securities trading,
ranging from market rigging, manipulation to issuance of false or misleading statements and fraudulently inducing trading
through dissemination of illegal information or insider dealings. Various penalties including fines, suspensions and prosecution
from the market are specified to serve as deterrent.
In
the Banks and other Financial Institutions Decree No 40 of 1999, Section 40 precisely deals with the general restrictions
on advertisements by banks. Any bank that proposes to issue any advertisement must deliver the text with the latest published
accounts to the Central Bank of Nigeria
for its consideration. Even though the word advertisement is used frequently in the decree instead of general publicity, it
states that it includes any form of advertising, whether in publication or by the display of notice, circular, exhibitions
of photographs, cinematography, sound broadcasting, and the likes. The contravention of the provision is an offence, which
is liable to a fine or imprisonment or both.
As
the Decree authorises the Central Bank of Nigeria
to make laws for the banking industry, so also is the National Insurance Commission Decree of 1997 gives NAICOM the instruments
to ensure effective administration, supervision, regulation and control of the insurance industry. The Commission also establishes
standards for the conduct of insurance business in Nigeria.
With the approval of the Minister of Finance, it makes regulations as to the forms and contents of insurance advertisements,
which in the same Decree, has the feature and forms of advertising as stated in Decree No 40 of 1999. Apart from a Section
on advertisements, it has another on ‘Misleading Statements’ which stipulates penalties for statements, promises
and forecasts which may be false, deceptive, or dishonest concealment of material facts or by reckless making of any statement
with the intention to induce another person to enter into or offer to enter into any contract of insurance with an insurance
company.
The
essence of the rules is to guide the investing public from deceitful and fraudulent information. Therefore, organisations
need to take note of the following before any serious public disclosure of their financial positions is made:
a. Central Bank of Nigeria
Decree No 24 of 1991 as amended by Decree 41 of 1999;
b. Banks and other Financial
Institution Decree No 25 of 1991 & its amendment Decree no 40 of 1999;
c. Investment and Security
Act (ISA) No 45 1999;
d. SEC Rules and Regulations
Pursuant to the (ISA) act;
e. Nigeria Deposit Insurance
Corporation (Decree No 22) 1988; and
f. National Insurance
Commission Decree 1997.
