This manual sets out the FCMB Group Plc. (FCMB)'s policy on the sale and purchase of its shares by its directors and employees. It is the intention of FCMB to encourage its directors and employees to be long-term holders of FCMB's shares. However, it is pertinent that due care and diligence is required in the timing of any purchase or sale of such shares. This policy provides a basic explanation of what constitutes insider trading and FCMB's policy to prevent it, including:
- a description of what conduct may constitute insider trading;
- a description of the acceptable times for directors and employees to buy or sell securities in FCMB in order to minimise the risk of insider trading; and
- the steps for directors and employees to take when buying or selling securities in FCMB.
2. What is insider trading?
Securities and Exchange Commission Rules and Regulations (SEC)(2013)’s Rule 17 defines insider trading as “Directors of public companies, their immediate families, that is spouse, son, daughter, mother or father, and other insiders as defined under Section 315 of Investments and Securities Act (ISA) and Rule 400 (3) of the Securities and Exchange Commission (SEC) Rules and Regulations, in possession of price sensitive information or other confidential information, shall not deal with the securities of the company where such would amount to insider trading as defined under the Investment and Securities Act (ISA) 2007”.
Thus, for the purposes of this policy:
“Close Associates” means:
- family members who could be expected to be influenced by a Director or employee in their dealings with FCMB’s securities (this would include a Director or employee’s partner and dependents);
- superannuation funds or trusts under which a Director or employee or a family member of a Director or employee is a trustee or beneficiary; and
- companies controlled by a Director or employee or their family.
“Dealing” includes applying for, acquiring or disposing of, or entering into an agreement to apply for, acquire or sell, securities, and “deal” has a corresponding meaning.
“Securities” means FCMB shares, options, warrants or any other security, or financial products issued or created over or in respect of FCMB securities (e.g. derivatives), whether or not they are traded on the Nigerian Stock Exchange.
2.1 Confidentiality and Inside Information
A person in possession of inside information (i.e. price sensitive information or other confidential information) about FCMB has a duty to keep that information confidential and must not in any way disclose or communicate that information to any person.
2.2 General Prohibition
In general terms, a person will be guilty of insider trading if:
a. That person or group of persons who is in possession of some confidential and price sensitive information not generally available to the public, utilizes such information to buy or sell securities for his/its own account and for his benefit or makes such information available to a third party (either knowingly or unknowingly)who uses it for his benefit; and
b. that person:
i. buys or sells securities in FCMB (which includes shares, options and warrants);
ii.procures someone else to buy or sell securities in the company; or
iii. passes on that information to a third party where that person knows, or ought reasonably to know, that the third party would be likely to buy or sell the securities or procure someone else to buy or sell the securities of the company.
2.3 Additional Restrictions on Trading – Directors and Senior Management
Directors and certain employees whose positions expose or are likely to expose them to inside information regarding FCMB (Senior Management of FCMB) are subject to additional restrictions on trading in company’s securities during the closed periods outlined below, unless exceptional circumstances apply.
For the purposes of this policy, the Senior Management of FCMB includes:
a) members of the Board of Directors (the Board);
b) the Managing Director (MD) of FCMB, and anyone that directly reports to the MD;
c) anyone else who directly reports to the Chairman, MD, Chief Financial Officer (CFO) and the Company Secretary;
Dealing in FCMB’s securities by the persons listed above and their Close Associates is prohibited during Closed Periods (i.e. the period from the end of a financial year or half financial year to the time of release of the annual or half year results of that particular financial year), unless prior clearance has been obtained from the Company Secretary (in the case of Senior Management other than the Chairman) or the Board (in the case of the Chairman). Senior Management must take reasonable steps to ensure that their Close Associates inform them of any proposed dealing in FCMB’s securities during a Closed Period, so that they can seek prior clearance on behalf of their Close Associate.
Prior clearance to deal during a Closed Period will only be given in exceptional circumstances, such as severe financial hardship, compulsion by court order or any other circumstance that is deemed exceptional by the Company Secretary or the Board
To illustrate the prohibition described above, the following are possible examples of price sensitive information which, if made available to the market, may be likely to affect materially the price of FCMB's share:
(i) FCMB's financial results or dividend information, which may materially exceed (or falling short of) the market's expectations.
(ii) FCMB’s plan for the acquisition, expansion or disposal of an interest in a major transaction or investment;
(iii) the threat of major litigation by or against FCMB;
(iv) a substantial change to the terms of the corporate structure of the group and any of its subsidiary; and
(v) any other information that may be reasonably considered as materially sensitive to the market.
2.5 Dealing through Third Parties
A person does not need to be a director or employee of FCMB to be guilty of insider trading in relation to securities in FCMB. The prohibition extends to dealings by directors and employees through nominees, agents or other associates, such as family members, family trusts and family companies.
2.6 Irrelevance of Information Source
It does not matter how or where the person obtains the information - it does not have to be obtained from FCMB to constitute inside information.
Directors and all employees may at any time acquire ordinary shares in FCMB:
a) by conversion of securities giving a right of conversion to ordinary shares;
b) under a bonus issue made to all holders of securities of the same class;
c) under a dividend reinvestment, or top-up plan that is available to all holders or securities of the same class;
d) acquire, or agree to acquire or exercise options under a company share option plan;
e) as a result of the exercise of options held under an employee option scheme;
f) as a result of a share purchase plan available to all retail shareholders; or
g) as a result of an equal access buy-back
h) an investment in, or trading in units of, a fund or other scheme (other than a scheme only investing in FCMB’s securities) where the assets of the fund or other scheme are invested at the discretion of a third party;
i) undertakings to accept, or acceptance of, a takeover offer
However, the prohibition does apply to the sale of shares acquired under an employee share scheme and also to the sale of shares acquired following the exercise of an option granted under an employee option scheme.
Insider trading is a criminal offence. The criminal penalties for a breach of the insider trading prohibition according to Sections 115/6 of The Investments and Securities Act 2007 as referenced by SEC Rules and Regulations (2013) include:
a) in the case of a person not being a body corporate, to-
(i). a fine of not less than N500,000 or an amount equivalent to double the amount of profit derived by him or loss averted by the use of the information obtained in contravention of any of the provisions of this part; or
(ii). to imprisonment for a term not exceeding seven years; or
b) In the case of a person being a body corporate, to a fine not less than N1,000,000 or an amount equivalent to twice the amount of profit derived by it or loss averted by the use of the information obtained in contravention of any of the provisions of this part.
c) In addition, the insider trader, and any other persons involved in the contravention may also be liable to compensate third parties for any resulting loss.
4.0 Policy Guideline for Trading in FCMB's Securities
4.1 General Requirement
Directors and employees of FCMB must not buy or sell securities in FCMB when they are in possession of price sensitive information which is not generally available to the market.
4.2 Safest Times to Deal in FCMB's Securities
The factual and strict test is whether, at any particular time, a director or employee is in possession of, or has access to price sensitive information which is not generally available in the market. If any employee has access to such information, then such employee should refrain from dealing in FCMB’s securities at such a time.
As a matter of best practice, however, the following periods are the most appropriate times for directors and employees to deal in FCMB securities:
- in the four (4) weeks following the release of the annual results;
- in the four (4) weeks following the release of the half-yearly results;
- in the four (4) weeks following the annual general meeting.
Even at these times, it is important to be cautious and aware that there may be some occasions when it is not proper for directors or employees to deal in FCMB's securities because of the privileged information in their possession, their knowledge of impending or actual developments which are not known in the market place. There are, of course, times when a company is considering a major event (such as those referred to in Section 2.4 above) and will not advise the market of this until the occurrence of the event is more certain.
4.3 Restrictions on Trading in FCMB's Securities
Directors and employees must not trade in any of FCMB's securities during a "close" period. A "close" period is the period from the end of the financial year or half financial year to the time of release of the annual or half-year results.`
4.4 No Short-term Trading in FCMB's Securities
It is also against FCMB policy for directors and employees to be engaged in short-term trading of FCMB's securities (i.e. buy and sell within a 12 month period).
5 Material Transactions by Directors
Where a trade by a director in FCMB’s securities either personally or through a trust or company structure associated with the director is in excess of one million shares or represents more than 10% of that director’s then current securities holding, the director has the responsibility to notify the Chairman or Company Secretary at least 48 hours prior to engaging in any transaction in FCMB’s securities. Transactions in excess of one million shares should not be sold through normal day trading in order to minimise risk to the market price. This notification obligation operates at all times (even during the periods specified in Section 4.2 above).
6 Notification by directors
(i) SEC Rule (401) requires that directors and other insiders of public companies shall notify the Commission of the sale of their shares in FCMB or any purchase of shares in FCMB not later than 48 hours after such activity. Directors have agreed with FCMB to provide notice of such dealings to FCMB as soon as possible after such dealings to enable FCMB to comply with its obligations under the SEC Rules.
7 view and Compliance Monitoring
Whilst the company secretariat has the responsibility for tracking the trading activities of the directors and employees on the shares of FCMB, compliance checks with this policy shall be the functions of the Risk Management and Compliance Unit and the Internal Audit Unit.