The main committee of the Botswana Stock Exchange (BSE) has approved changes to the listing rules, which include the introduction of a disciplinary board and higher public float requirements, Mmegi Business has established.
In a response to emailed enquiries, the bourse’s deputy CEO, Thapelo Tsheole said the committee had approved the new rules on January 31 and these would now be sent to the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) for final approval.
He added that they anticipated that this would happen before the end of 2015.
According to Tsheole, the consultative process, which ran from February to May last year, resulted in changes to the original draft of the rules, following feedback from stakeholders who included listed entities and brokers.
Stakeholders rejected a proposal to introduce quarterly reporting as well as the requirement to produce solvency certificate from auditors at each dividend declaration.
Proposals debated and adopted into the final rules include the disciplinary or default board-where companies flouting the listing rules will have their securities transferred to the default board until they demonstrate compliance.
On the default board, the defaulting companies will be fined P500 every day, with the BSE issuing a public notice on the violation after one month and reserving the right to even tougher action, such as suspension and delisting, after three months.
Offences that can lead to a transfer to the default board include delays in publication of financial results or producing financial statements that are a subject of an audit qualification or disclaimer. Another offence is the failure to return the annual certificate of compliance within two weeks.
Prior to the start of the consultation period, some stakeholders had expressed misgivings about the new raft of disciplinary measures proposed in the original draft of the rules. “We are trying to understand the rationale for a default board, because it appears for a minor infraction, a counter can be thrown off the main board which will negatively impact investor sentiment,” an insider said at the time.
“The rules could be seen as unpopular at a time when the exchange is fighting illiquidity and also trying to attract more listings.
“At the same time, however, the BSE has always been very responsive to its members and everyone appreciates the need to protect investors’ interests through a better managed trading platform.”
Apart from the default board, listed entities violating the new rules will be liable to a fine not exceeding P250, 000 while brokers and registered advisers will face penalties not exceeding P50, 000. All errant entities and brokers also face the possibility of suspension or termination for violating the new rules.
Tsheole said the exchange had not received feedback suggesting the proposed new rules were tough, during its consultative period. He said, rather, certain aspects of the draft rules “were subjected to a fair level of debate by stakeholders”. These included proposed changes to the minimum public float requirement for the main and the venture capital board. “The final proposal is 30 percent for the main board and 10 percent for the venture board,” he said.
“Comments from stakeholders were about how this was going to be implemented and how much time companies which are already listed would be given to comply.
“The final proposal is that the implementation of the requirement shall be staggered.
Listed companies shall be allowed 18 months to move from 20 percent to 25 percent and then a further 18 months to move to 30 percent.
The listing rules of the BSE have remained unchanged since 1999 and had been superseded by modernity as well as the growth of the exchange.
In recent years, the local bourse has also fought to enforce compliance among listed entities, particularly in the area of timely reporting of financial statements. Currently, two companies have been suspended on the exchange for not publishing their financial statements in line with the listing rules.