In a move that reflected the resolution of a long-standing legacy issue concerning FBN Registrars, the FBNH Board has taken decisive action to appoint a new custodian of its shareholder records. In response to unfolding developments concerning old and new stakeholders in FBN Holdings (FBNH), the Holdco’s Directors, in a Board meeting held on Thursday, October 27, 2021, approved the appointment of Meristem Registrars as a replacement for First Registrars and Investor Services Limited. The appointment will take effect from December 1, 2021. The corporate decisions of FBNH’sBoard set the tone for a broader response to industry-wide corporate governance integrity and credibility.
The Holdco’s denial and reversal recently reflected the shimmering fluidity of the situation around its shareholding and the rapidly moving parts of a high-stakes corporate chess game. The outcome has since become known, but the consequence is indeterminable.
The change of Registrar appears to be an intelligent and inevitable first response to concerns about the transparency of the Holdco’s shareholding structure, painted in all shades of grey. The exact quantity of shares owned by significant stakeholders is still a mystery and this compromises the stock market’s complete disclosure responsibility and integrity. The asymmetric nature of market information concerning the present shareholding structure of the financial Holdco is a challenge to the market’s commitment to the highest professional standards of transparency. However, FBNH’s Board’s decision to use a new and, hopefully, independent Registrar is thus commendable. Nevertheless, this is one of several steps to navigate FBNH towards institutional best governance practices (see illustration 1 below).
Illustration 1 FBNH: Registrar Blues-From New to Old
The Matters Arising – In Whose Interest?
Beyond a change of Registrar, FBNH’s Board will have to go further and clarify to the Nigerian Exchange Limited (NGX) and minority shareholders the following matters:
The exact number and percentage of shares held by the Holdco’s significant shareholders with shares above 5%;
Determine when these shares were acquired;
Establish when regulatory authorities were informed of the acquisitions when the 5% threshold was met;
Lift the ‘veil’ from indirect shareholding interests to identify who owns these shares or who has controlling influence over the stocks as required by the Corporate Affairs Commission (CAC) and NGX rules;
Clarify the response to the NGX concerning compliance with rules (cited in the response) relating their October 18, 2021 letter to the exchange. Would it be correct to assume that since regulatory notice must occur within ten (10) days of acquiring such interest, the subject director/shareholder bought/acquired the decisive shares between October 8, 2021, and October 17, 2021?; and
Go the full hog to internally ensure that other directors of FBNH, in the interest of best corporate governance practice, should equally disclose the size of their direct and indirect shareholdings in the Holdco, including in entities such as trusts where they exercise considerable influence or control for records purposes.
A Time for Rebirth
The challenges with FBNH’s shareholding disclosures are not unique, nor do they represent the challenges of a troubled institution. These are natural pangs that arise when a system receives a jolt; in the case of FBNH, it has received a few, which has challenged the system and equally opened opportunities to learn, resolve legacy issues and refocus on banking fundamentals.
Beyond FBNH, these issues reflect the state of practice in the industry, and the regulators are now required to assume an industry approach to a review of rules, conventions, and requirements.
Analysts believe this may be the appropriate time for the capital market’s regulatory bodies to clean the Augean stable of clandestine shareholdings by taking a detailed look at the ownership structures of other banks listed on the NGX. The need for the exercise becomes particularly important as many of the NGX’s tier 1 banks have taken an impressive decision to grow their balance sheets continentally.
With more Nigerian banks going continental, the CBN, NGX, CAC, and SEC must protect the integrity of the financial system and lending institutions by ensuring that publicly available information is not only reliable, credible but provides a true and fair representation of corporate facts; especially in the disclosure requirements subject to professional liability claims.
Nigeria’s capital market regulators cannot afford to drop the regulatory ball against the background of the African Continental Free Trade Agreement (AfCFTA), the African Exchanges Linkage Programme (AELP) and other growth-related and investment attraction schemes and policies of the government.
The fast-paced realities of continental equity and debt market growth over the next few months require a rebirth of equity market clarity, consistency and integrity. FBNH is simply a case study; the rules around market conduct are deeper and broader, with regulators required to ride the waves of new developments like a Badagry beach surfboard pro.
ADAPTED FROM PROSHARE