Friday, May 26, 2006

Breach of Disclosure Regulations by Sam Woode Ltd. - Letter to S.E.C.


C/o #28/1 Castle Rd., Adabraka Tel/Fax: 00-233-21-271086

P. O. Box AD233 Mob: 00-233-20-8157566

Adabraka, Accra E-mail:

May 26, 2006

The Director-General

Securities & Exchange Commission

1st Floor, SEC Bldg.

PMB, Ministries Post Office


Attn: Dr. Nii Kwaku Sowa

Dear Sir,



We wish to bring to your attention for immediate redress, a breach of SEC Regulations, 2003 (L.I. 1728) by Sam Woode Ltd., one of the listed companies in respect of their reporting obligations under law.

On Thursday, May 18, 2006 and on Wednesday May 24, 2006, the Daily Graphic Newspaper carried on pages 26 and 45 respectively, publication by Sam Woode Ltd. of its preliminary 1st quarter unaudited results for the financial period ended March 31, 2006. The said publication is a clear breach of the provisions of L.I. 1728 and consequently a breach of the disclosure requirements of that company under applicable securities regulations.

The GSE Listing Regulations bind Sam Woode Ltd. as a listed company. However, as you are doubtless aware, the reporting regimes in the market have been fundamentally altered by the promulgation of the SEC Regulations, 2003 (LI 1728). Regulation 55(1) of LI 1728 is instructive. Under the old GSE reporting regime, listed companies were obliged to disclose half-year results not later than 3 months after the end of the relevant period. Preliminary financial results were to be published not later than 3 months after the end of the relevant financial year. A fully audited annual report was expected to be published not later than 6 months. Under L.I. 1728, an annual report was to be published not later than 3 months from the end of the relevant financial year (regulation 54 of L.I. 1728). However, regulation 55 introduced a new quarterly reporting regime such that quarterly financial statements in defined form were to be filed with the regulators and published not later than one month from the end of the relevant quarter.

ThinkGhana particularly wishes to reiterate that in terms of content, disclosure requirements have also been fundamentally altered by L.I. 1728. It is also important to note that where the GSE Listing Regulations conflict with L.I. 1728, L.I. 1728 would prevail. The reporting requirements under L.I. 1728 entail a much more detailed disclosure regime than under the requirements of the GSE Listing Regulations. L.I. 1728 has broadened the depth of information to be provided under the Continuing Obligations of listed companies. Regulation 56 on contents of quarterly financial statements reads:

(1) The quarterly financial statements shall comprise either a complete set of financial statements or a set of condensed financial statements but the statements shall include at least

a. A balance sheet

b. An income statement for the period on a year to date basis;

c. A statement where relevant showing either

i. Changes in equity

ii. A statement of recognized gains and losses, changes in equity, except those arising from capital transactions with owners and distribution to owners;

iii. selected explanatory notes as specified in this

regulation; or

iv. a condensed cash flow statement.

You will recall that in an earlier petition to the SEC on the acquisition of Ghana Breweries Limited by Guinness Ghana Breweries Limited, ThinkGhana had cause to point out exactly the same problem of continuing breaches of the securities laws by non-disclosure of information and to draw attention to continuing inaction on the part of the regulators. ThinkGhana is therefore distressed to note that regulators seem to allow some listed companies to flout laid-down regulations in such a blatant manner without taking any steps to either stem such breaches or sanction for such breaches. Shareholders and indeed the entire investing market have a right to information which can only be fulfilled when the rules are applied without fear or favour. As you are fully aware, confidence is the glue that holds stock markets together and confidence is engendered by prompt and adequate disclosure of information. The publications which have been attached to this communication for ease of reference clearly show that Sam Woode Ltd. used the old format under the GSE Listing Regulations in purported compliance with LI 1728. Such condensed reports are no longer allowed on the Ghanaian market. ThinkGhana is therefore very distressed that even in the wake of our petition against Guinness on self-same issues, such publications are being sanctioned in purported compliance with disclosure requirements when in actual fact they are clear breaches of the law. The SEC’s continuing inability to stem such practices on the Ghanaian market may damage investor confidence on the market with dire consequences for all investors and the listed companies. We dare ask whether these actions are calculated to prevent the true state of the financial position of the companies concerned being disclosed to shareholders. Only yesterday, Messrs Kenneth Lay and Jeffrey Skilling were found guilty of major infractions of corporate law in the Enron scandal. We must as developing economies, take stock and learn lessons from such incidents. No jurisdiction allows such continuing breaches to recur on its market. There are a lot of listed companies that are working very hard to meet their disclosure obligations. We therefore call on the SEC to ensure that such breaches cease forthwith and appropriate sanctions applied to defaulters. Indeed, we do hope that the mistakes in the Guinness case have not been repeated by allowing the publication which is in breach of the rules to be issued as a press release through the Ghana Stock Exchange already. Again, it seems both the GSE and the SEC have allowed these breaches of fundamental disclosure obligations to pass. We are hopeful that steps will be taken to withdraw the said publications with apologies to Ghanaian investors and the appropriate sanctions applied. We also call on the SEC to intensify its public education campaign on the rules and regulations applicable to Ghana’s securities markets. ThinkGhana also calls on the SEC to ensure that the Ghana Stock Exchange improves its surveillance and compliance capabilities to prevent such unfortunate situations from recurring on our markets. Finally, we call on the SEC to ensure that the GSE takes steps to remove the offending sections from its Listing Regulations as they have a potential to confuse market operators and the investing public on the true state of the disclosure requirements of listed companies.

We will be grateful for information on the steps taken to resolve the issues that we have brought to your attention for redress, please.

Ghana Deserves Better!

Thank you.

Yours faithfully,

Cc: The Managing Director

Ghana Stock Exchange



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