Joint CMA NSE Circular No. 1 of 2017: Continuing Obligations for Issuers of Securities

Wednesday, 26 April 2017 Circular No. 1 of 2017 TO: Chief Executives of Issuers of Securities RE: Continuing Obligation for Issuers of Securities

Background Regulation 19 of the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002 (The Regulations) mandates every issuer whose securities have been offered to the public to comply with the Continuing Obligations specified in the Fifth Schedule of the Regulations. Paragraph B06 and B20 of the Fifth Schedule specifically requires issuers to prepare and publish their interim and annual financial statements within specified timelines.

It has been observed that although most of the issuers comply with the requirement to prepare and publish financial statements within the stipulated timelines, the information published does not meet the minimum required level of disclosure envisaged by the Regulation.

In this regard, kindly note that all issuers of securities to the public, whether listed or not, are required to prepare and publish their Annual and Interim financial statements in at least two (2) Newspapers of National circulation within four and two months of the close of the financial year respectively. The financial statements to be published shall include the following components, at the minimum: (a) Balance sheet (Statement of Financial Position); (b) Income statement & Statement of comprehensive Income; (c) Statement showing either - (i) All changes in equity; or (ii) Changes in equity other than those arising from capital transactions with owners and distributions to owners (statement of recognized gains and losses); (d) Cash flow statement; and (e) Selected notes, including the Audit opinion and a summary of Key Audit Matters raised by the Auditor.

Further, the Authority and the Exchange would like to reiterate the following reporting obligations relating to public announcements and the respective content and timelines, as stipulated in the Fifth Schedule of the Regulations:

PUBLIC ANNOUNCEMENT	TIMELINES AND CONTENT
Material Information and Cautionary announcement	Within 24 hours of the event, simultaneously to the Authority and the securities exchange at which the issuer’s securities are listed, if applicable, and to the public during non-trading hours.
Announcements of dividends and/or interest payments on issued securities	Within 24 hours following the Board’s resolution in the case of an interim dividend or recommendation in the case of a final dividend, by means of a press announcement. The resolution must be at least 21 days prior to the closing date of the register and shall contain at least the following information: (a) the closing date for determination of entitlements; (b) the date on which the dividend or interest will be paid; and (c) the cash amount that will be paid for the dividend or interest. Where the shareholders at the annual general meeting do not approve a dividend recommended by the Board, this fact shall be announced by the Board by means of a notice within 24 hours following the annual general meeting. Notification of non-declaration of dividends or payment of interest must be published either in the interim or quarterly report, the annual financial statements or by way of a press announcement or where the issuer is listed on the Growth Enterprise Market Segment, on the issuer’s website.
Payment of Dividend	Dividends declared by an issuer shall be paid out within ninety (90) days of the date of the books closure in case of interim dividends, and ninety (90) days of approval of the shareholders in the case of the final dividend.
Books Closure date	Any intention to fix a book closing date and the reason thereof shall be notified to the Securities Exchange at which the securities are listed. The books closure date shall be at least twenty one (21) days after the date of notification to the securities exchange at which the securities are listed, in the case of an interim dividend, and in the case of a final dividend, the closure date shall be subject to the approval of the shareholders at the annual general meeting.
Quarterly returns	Arrangers of commercial papers and corporate bonds shall submit quarterly returns in the prescribed format by the 10th day of the month following the end of the quarter. The return in this case is expected to include the following information at the minimum: 1. The outstanding bond amount; 2. The names and holdings (In Kshs) of the different bond holders; 3. The Average Yield (%) on the bond; 4. A summary showing the percentage holdings by the following classes of investors: Banks, Insurance Companies, Fund Managers/Investment Companies, Individual investors.
Notice of Annual General Meeting	Every issuer shall, within six months after the end of each financial year and at least twenty-one clear days (including weekends and public holidays) before the date of the annual general meeting, distribute to all shareholders and holders of its debt securities: a) a notice of annual general meeting and annual financial statements for the relevant financial year; and b) the auditor’s report on the issuer's financial statements.
Shareholding	An issuer shall at the end of each calendar quarter, disclose to the securities exchange every person who holds or acquires 3% or more or in case of an issuer listed on the Growth Enterprise Market Segment, 5% or more of the issuer’s ordinary shares, and shall publish in its annual report the following information on its shareholding: (a) distribution of shareholders. (b) names of the ten largest shareholders and the number of shares in which they have an interest as shown in the issuer's register of members; (c) distribution schedule of each class of shares other than ordinary shares; (d) name and address of the company secretary; (e) address and telephone number of the registered office; and (f) address of each office at which register of securities is kept.

Please note that (a) An issuer whose securities are listed on more than one securities exchange must ensure that equivalent information is made available at the same time to the market at all such securities exchange. (b) Any announcement made by the issuer in respect of - (i) a dividend; (ii) a capitalization or rights issue; (iii) the closing of the books; (iv) capital return; or (v) sales or turnover; shall be issued so as to coincide with the release of the annual, interim or quarterly financial statement.

The purpose of this circular is to advice all issuers to observe compliance with the above requirements.