NASD Urges Companies To Comply With SEC Rules

The NASD OTC Exchange has urged public limited companies to adhere to the Securities and Exchange Commission’s (SEC) regulations mandating the trading of unlisted securities exclusively on SEC-registered Over-the-Counter (OTC) exchanges.

According to the SEC’s rule, the purchase, sale, and transfer of unlisted securities are prohibited outside a registered stock exchange to ensure transparency and protect investors. These transactions must occur on a registered OTC platform, as public companies are required to register their securities with the SEC upon creation. The Commission retains the authority to penalize non-compliant entities under the provisions of the Investment and Securities Act (ISA).

The rule explicitly mandates that all securities of unlisted public companies must be bought, sold, or transferred only through systems approved by the SEC under specified terms and conditions. Any transactions involving unlisted securities conducted outside a registered OTC exchange will attract penalties. These penalties begin at ₦100,000 for the first violation, with an additional charge of ₦5,000 for each day the non-compliance persists.

Despite the regulation, the NASD noted that many unlisted public companies still avoid trading their securities on SEC-registered OTC platforms. This practice limits the Commission’s ability to oversee and monitor these companies’ activities as part of its investor protection strategy.

The NASD emphasised the benefits of compliance, stating that enforcing the rule would enhance market transparency and accessibility. It would make unlisted securities available to a broader range of investors, improve share liquidity, and reduce underhand dealings. Such measures are expected to curb fraudulent activities and strengthen investor confidence in the Nigerian capital market.

Moreover, trading on SEC-registered OTC platforms facilitates price discovery through market-driven forces, offering investors greater opportunities for portfolio diversification. This trusted platform allows participants to access securities across various economic sectors, promoting a more robust and equitable market environment.