Kenya’s Capital Markets Regulator (CMA) has said it will begin taking harder positions on companies that persistently issue late profit warnings.
In a circular sent to all market participants of the Nairobi Securities Exchange, the watchdog noted, “The authority notes that issuers who issue their profit warnings either at the same time they release their audited accounts or immediately prior to releasing their audited accounts shall be deemed to be in breach of the listing requirements.”
CMA further said, “Good corporate governance governance practices dictate that companies prepare prudent periodic management accounts and projections and a company’s management and board ought to be aware of the declining levels of profits well before commencement of external audit.”
The regulator said the management and board of the companies shall be held into account should any risks arise due to the late warnings. Companies are required to issue a profit warning within 24 hours of the board of directors becoming aware that returns will fall by more than 25 per cent compared to the previous financial year. Under the capital markets listing regulations, the penalties for late filing are capped at a maximum of Sh 50, 000.
Cracking down on late profit warnings may also be a way of showing that the regulator is responding to criticism over regulatory failure in recent cases such the National Bank, Express Kenya among others.
Interestingly, Mr Sunil Sanger had this to say on twitter;
@kenyanwalstreet I guess the concept of "projected earnings" and "current financial year" are too difficult for some companies listed on @NSEKenya to grasp. pic.twitter.com/5fIBiJlRPa
— Sunil Sanger (@Sang252) May 2, 2017
What purpose does a "warning" about events that occurred 4 months ago serve? Indeed, can it even be called a warning? https://t.co/RiVklIGGj7
— Sunil Sanger (@Sang252) April 28, 2017
While @nicbankkenya has published 2017 Q1 results, some companies listed on @NSEKenya are still struggling to publish 2016 FY results. https://t.co/7SYy8yEakh
— Sunil Sanger (@Sang252) May 4, 2017
Long overdue – I have been tweeting for the last 3-4 years about @nsekenya listed companies abusing the Profit Warning provisions https://t.co/a6pMt8Gzc6
— Sunil Sanger (@Sang252) May 5, 2017
Profit Warning – "projected earnings" & "current financial year" are terms ignored by @NSEKenya listed cos. pic.twitter.com/lokXbuyo4J
— Sunil Sanger (@Sang252) February 18, 2015
