Accra, Nov 9, GNA - The Securities and Exchange Commission (SEC) on Tuesday said it did not allow CAL Bank to increase the amount on offer to 100 billion cedis because such a move would have violated the terms of the offer on which applicants had based their decision to apply for shares.
In a statement in Accra, Dr Charles Asembri, Director-General of SEC said, to allow CAL Bank to keep more money than it had demonstrated, a need for in its prospectus would also have been contrary to the standard requirements in the securities industry worldwide, which required companies that raise money from the public to disclose the terms of the offer.
These terms include the amount required, the intended use of the funds, what will happen in the case of over-subscription, among others as clearly spelt out in SEC regulations 2003, LI 1728.
"The primary objective of the SEC is to protect the interest of the investing public and SEC would continue to do this according to the Law and ensure that adequate disclosures are made to the public," the statement said.
SEC explained that CAL bank wanted to raise 54 billion cedis. However, it stipulated that it would increase the amount to 63 billion cedis if there was an over-subscription. It further undertook to refund the entire amount to the subscribers if they were unable to obtain at least 27 billion cedis.
The statement said the managers of the offer did not also comply with their undertaking to refund by registered mail monies to unsuccessful subscribers within two weeks after the offer closes on October 1, 2004.
On the use of the proceeds, CAL Bank said the money was to enable it to undertake retail banking operations through the opening of retail branches in Accra, Tema, Kumasi and Takoradi with ATM facilities connected to the branches, as well as allow some existing shareholders to realize their investment by offloading some of their shares. "Nowhere was there reference to the 70 billion cedis stated capital requirement by the Bank of Ghana for Universal Banks, one of the reasons given by CAL Bank for not wanting to refund the full amount of the over-subscription," the statement said.
SEC said the process of going public entails serious planning, preparation, and discussions between the issuer, manager and the regulators and asked issuers of securities to give careful thought to the decision to raise capital, the use of funds and the amount needed. "While developing our markets, it is important that we do not set precedents that will allow issuers to vary terms of offers at will to the detriment of the investment public," the SEC said.
"The overwhelming number of applications should not be the main reason why an issuer should choose to keep excess funds and to expect the SEC to condone such market unfriendly conduct," it added.