A fortnight ago the Botswana Stock Exchange (BSE) held an open session where a coterie of industry titans from various listed companies gathered to probe the new BSE listing requirements. The new listing rules are expected to come into effect on June 1st 2016.
The interactive engagement was facilitated by the BSE Listings and Trading Manager Tsametse Mmolai. In his presentation which particularly highlighted the changes that have been made to the existing rules, Mmolai emphasised that the new rules, which have been available online since February, have been approved by the BSE Main Committee and the Non-Bank Financial Regulatory Authority (NBFIRA). More so, he stated that stage the rules will be adjusted where deemed necessary at a meeting anticipated to take place on May 31st 2016, a day before the new rules come into effect. Industry experts interrogated and pondered these new requirements and found fault with the listing rules saying they are not industry ready.
In terms of the conditions for listing which relate to directors and senior management, the rules state that they must have received favourable vetting results from NBFIRA. Amongst some of the arguments raised was the fact that the process of vetting by NBFIRA contravenes the Botswana Companies Act (2003) in that the Act entitles shareholders of a company to appointment directors and seems therefore to undermine the shareholders’ control of the company that they own. It was questioned whether NBFIRA without thorough understanding of the nature of business a company conducts will produce informed vetting results. NBFIRA was thus accused of regulating in an interventional way as opposed to a supervisory manner. The introduction of vetting by NBFIRA was considered a lack of legal justification. A contention was presented that there is increased regulation – the effect of which seems unclear.
Participants were of the view that the vetting process could discourage new listings given the slow turnaround time by NBFIRA. BSE responded by explaining that the rationale presented by NBFIRA is that by raising funds from the public, companies that wish to list introduce risk into the capital market thus making it necessary to determine if the key persons are fit and proper. In addition, it was highlighted that the Securities Act, which is yet to come into effect, expands the scope of NBFIRA to oversee all companies listed on BSE. The existing directors of listed companies under the current rules will also be required to go through the vetting process.
On the subject of sanctions, the rules state that where a company has been delisted by the local bourse, the company and its directors shall not directly or indirectly be materially associated with a company seeking listing on the BSE for a period of 10 years from the date of delisting. The argument put forward was that the equal length of a ban imposed on individual directors as is on the company is a disproportional punitive action. Furthermore sanctions against registered advisers, which state that in the event that the BSE suspects that a registered adviser may be in breach of its responsibilities, the bourse shall conduct a preliminary investigation to establish if there’s any transgression. It was argued to that regard that the basis of the suspicion is not definitive and poses the danger of accusation when the adviser could have acted entirely based on expertise unaware that such action could be in breach of the regulations. It was also questioned if the BSE is the right regulator in that regard. BSE responded that the basis of suspicion shall be derived from reports of the listed companies that deal with the registered adviser, citing that investigations will be based on concerns raised. The matter, as was mentioned, will also be referred to an appropriate regulator for advisory. In addition, the registered adviser will be given an opportunity to present the matter to the bourse.
From the discussions it emerged that listed companies will not be in a position to fully adhere to all the changes. Mmolai to that regard acknowledged that the listed companies may not be ready to fully comply with the new rules but should however be seen to progress towards compliance. This suggests that the process of transition by listed companies will happen at the same time as compliance is demanded from them. This implies that the new rules will as a matter of fact come into actual effect over a period of time than they will at the specified date.