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Tag: FRC

  • Senate Committee charges FRC on intervention funds

    The Financial Reporting Council of Nigeria (FRC) has been charged to investigate how banks utilise intervention funds

    This challenge was posed by the Senate committee on Trade and Investment during an oversight visit to the Council in Lagos at the weekend.

    The Chairman of the committee, Senator Fatimat Raji Rasaki, charged the FRC to go after the banks handling intervention funds to ensure that they give proper accounts.

    Unimpressed with how some of the intervention funds meant for dedicated sectors are being used, Rasaki said the FRC by its position as the body which receive financial reports of banks, should use its expertise to curb abuse of the funds.

    While commending the body for its work on maintaining of accounting and other financial standards, the committee chairman called for increased funding of the FRC to ensure adequate performance of its role without compromising standards.

    Briefing members of the committee, the Executive Secretary of the FRC, Mr Jim Obazee, said work has already advanced in the production of a new uniform code of corporate governance for the country.

    He, however, noted that work has been slowed down by legal challenges by some stakeholders, while projecting that the code would be functional by the third quarter of the year.

    He said the code would correct lapses such as insiders dominated boards, non-independent corporate boards of companies, absence of minority voices on boards, inadequate board monitoring and supervision of the executive as well as compromisable and ineffective audit function and committees.

  • Fed Govt loses N1tr to non-remittance of operating surpluses, says FRC

    Fed Govt loses N1tr to non-remittance of operating surpluses, says FRC

    • CBN: releasing N6tr budget fund ‘ll worsen inflation

    The Fiscal Responsibility Commission (FRC) has raised the alarm that the Federal Government may be losing over N1 trillion due to the non-remittance of operating surplus by revenue generating agencies.

    Its Acting Chairman, Mr. Victor Muruako, who spoke yesterday at the first edition of the Nigerian Economic Stakeholders Summit in Abuja, said government agencies had perfected their art of defrauding the country through deliberate wrong computations, express diversion of funds, and application of wrong accounting standards.

    Muruako said the commission “will ensure that every kobo of government is well utilised; we have decided to monitor the payment of operating surpluses by revenue generating agencies into the CRF.”

    He said has attracted N367 billion into the Consolidated Revenue Fund (CRF) from operating surplus of revenue generating agencies since 2009.

    Meanwhile, the Central Bank of Nigeria (CBN) has warned that if the N6trillion budgeted for this year is released into the economy over a seven month period, it will worsen the inflation situation in the country.

    Its Director, Monetary Policy Department, Mr Moses Tule in a paper presented at the event urged the government to avoid the mistake it made in passing the 2016 budget late, stressing that with its implementation starting about five months into the year, it would be difficult to ensure full implementation.

    Tule said even if the government were to release the N6 trillion it budgeted for the year, the economy does not have the capacity to absorb such huge spending over a seven month period.

    Since the fund was planned to be utilised over a 12 months period, he warned that “any plan to release it within seven months would only worsen the level of inflation in the country.

    He added that this æould only be effectively managed through fiscal and monetary coordination.

    The Minister of State for Budget and National Planning, Mrs Zainab Ahmed who was represented by the Director, Macroeconomic Department in the Ministry, Mr Tunde Lawal said the Federal Government was “implementing a roadmap to stimulate investment into the solid mineral sector and plug revenue leakages in the sector.”

    The government she said, “is also determined to set a three year deadline for the country to be self sufficient in refined petroleum products and become a net exporter.”

    To achieve this, she said the Federal Government would ensure the speedy passage of the Petroleum Industry Bill (PIB).

  • FRC ignores CBN’s contributions to Corporate Governance Code

    FRC ignores CBN’s contributions to Corporate Governance Code

    The war between the Central Bank of Nigeria (CBN) and Financial Reporting Council of Nigeria (FRC) is far from over. The apex bank complained at the weekend that the Council did not consider its recommendations on the ongoing review of the National Code of Corporate Governance.

    In a circular signed by CBN’s Director, Financial Policy & Regulations, Kelvin Amugo, titled: ‘Exposure Draft of the National Code of Corporate  Governance Issued by the Financial Reporting Council of Nigeria,’ he said most of the CBN’s input/observations, submitted during the public hearing which it considered critical to the smooth operation of the banking industry were not considered in the released drafts.

    The FRCN, after a public hearing held on June 30, last year, released drafts on the National Code of Corporate Governance, for Private, Public Sectors as well as Not-for Profit Organisations, on December 29, 2015.

    The CBN said it also observed that other significant contributions from a number of banks and other financial institutions on the private sector code, were not also considered by the FRCN. “We advise on the need to ensure that relevant inputs that would enhance the status of the codes, as well as facilitate the efficient and effective operation of the financial system are factored-in by the FRCN before the codes are finalised,” he said.

    The apex bank is, therefore, asking banks “to forward their input and/or concerns on the National Corporate Governance Codes to the Director, Financial Policy and Regulations Department by March 29, 2016 to enable us articulate a common position for the banking industry and to engage with the FRCN in respect thereof.”

    FRCN Executive Secretary, Jim Obazee, had during the hearing explained that modern society believes that the era of very weak and persuasive corporate governance codes is long gone due to stiff competing environment for foreign direct investment; of which binding regulation is a major factor being considered by investors and stakeholders, hence the need for new code.

    He said provisions have been made for the development and enforcement of a National Code of Corporate Governance in the Financial Reporting Council of Nigeria Act No. 6, 2011.

    He said that Section 50 of the FRC Act, 2011 provides that the objectives of the Directorate of Corporate Governance shall be to develop principles and practices of corporate governance ; promote the highest standards of corporate governance; promote public awareness about corporate governance principles and practices; on behalf of Council, act as the national coordinating body responsible for all matters pertaining to corporate governance  and promote sound financial reporting and accountability based on true and fair financial statements duly audited by competent independent Auditors.

    Obazee said the Council shall enforce and approve enforcement of compliance with accounting, auditing, corporate governance and financial reporting standards in Nigeria.

  • FRC holds financial reporting summit

    The Financial Reporting Council of Nigeria will hold the 12th Annual Corporate Financial Reporting Summit and Dinner next week in Lagos. The theme for this year’s summit is “National Code of Corporate Governance for Nigeria: A new Dawn in Compliance.”

    In a statement, Financial Reporting Council stated that the summit which is a follow up to the recently held public hearing on the national code of corporate governance for public and private organization as well as for the not-for-profit sector, would address issues revolving around compliance as the nation introduces a unified National code which would help strengthen good corporate governance system in Nigeria.

    The five major presentations at the summit will include national code of corporate governance: developments from public hearing; imperatives of good corporate governance compliance in entrenching credible financial reporting; national code of corporate governance: a new dawn for public sector entities; national code of corporate governance: a new dawn for private sector entities; and national code of corporate governance: a new dawn for not-for-profit organizations.

  • Court dismisses Stanbic IBTC, KPMG’s suits against FRC

    Court dismisses Stanbic IBTC, KPMG’s suits against FRC

    The Federal High Court in Lagos on yesterday dismissed separate suits filed by Stanbic IBTC Holdings Plc and KPMG Professional Services challenging the sanctions imposed on them by the Financial Reporting Council of Nigeria (FRC).

    Stanbic IBTC had filed its suit following the suspension of its chairman, Mr. Atedo Peterside, and three directors by FRC, over alleged irregularities in their financial statements for 2013 and 2014.

    KPMG and its partner Ayodele Othihiwa challenged FRC’s ‘regulatory decision’ against them following their role in the controversial financial statements.

    They challenged the suspension of Othihiwa by FRC for alleged complicity of KPMG in the financial statements.

    Justice Ibrahim Buba dismissed the N100m fundamental rights enforcement suit filed against the council and its Executive Secretary, Mr. Jim Obazee, by KPMG.

    Justice Buba resolved all the issues raised by Stanbic IBTC in its suit in favour of FRC and dismissed the suit for lacking in merit.

    The judge said it was up to the court to protect Nigeria and non-Nigerian investors when capital flight was becoming a problem.

    “This court is unable to answer all the questions set by the plaintiff in favour of the plaintiff; rather against the plaintiff in favour of the defendants.

    “All the issues argued are resolved against the plaintiff. This court must purposely, through judicial creativity, interpret our legislation meaningfully in these days of gross capital flight.

    “Nigerian courts must protect Nigerian and non-Nigerian investors. This court is unable to agree with the plaintiff’s position” the judge held.

    Before the main suit was heard, Justice Buba had restrained FRC from obstructing the operations of Stanbic IBTC.

    The judge barred FRC from preventing the plaintiff or its subsidiaries “from carrying on their lawful businesses.”

    Justice Buba ruled on an motion on notice for orders of injunction against FRCN and the National Office for Technology Acquisition and Promotion (NOTAP).

    The plaintiff said FRC, since August 3, had been investigating its audited accounts for the year ended December 2014.

    The investigations concern liabilities accrued in the plaintiff’s 2014 accounts in respect of franchise fees owed to Standard Bank of South Africa, the registration of which it said has been pending before NOTAP since 2011.

  • FRC sanctioned us illegally, KPMG alleges

    FRC sanctioned us illegally, KPMG alleges

    An accounting firm, KPMG Professional Services and its Partner, Ayodele Othihiwa, yesterday alleged that the Financial Reporting Council of Nigeria (FRC) imposed sanctions on them without due process.

    Arguing a suit they filed at the Federal High Court in Lagos against FRC and its Executive Secretary, Mr. Jim Obazee, their lawyer Mr. Babatunde Fagbohunlu (SAN) said the respondents did not comply with the law.

    FRC, in an October 30 letter, conveyed its ‘regulatory decision’ to the applicants, following their role in the controversial financial statements of Stanbic IBTC Holdings Plc for 2013 and 2014.

    The council said it had suspended Othihiwa “until the investigation as to the extent of the negligence of KPMG Professional Services is ascertained.”

    But Fagbohunlu said FRC came to a damaging conclusion against his clients and imposed punishment on them without fair hearing.

    According to the lawyer, Section 62 of the FRC Act provides that where a complaint is made against an accounting professional, and where the council investigates the complaint, it must notify the professional.

    “There was no complaint, no notification and no summons. They have not tendered one single shred of evidence to show that we were invited,” he said.

    But FRC’s lawyer, Norrisson Quakers (SAN) urged the court to strike out the suit for lack of jurisdiction.

    He said Obazee was not a necessary party to the suit, adding that “the matter can be determined without his presence.”

    Besides, he said there was no evidence that the Executive Secretary acted in bad faith towards the applicants.

    Quakers urged the court to strike out the suit on the basis that FRC merely performed its statutory duties.

    “Essentially, they are asking the court to apply shackles to our hands,” he said.

    The senior advocate said contrary to KPMG’s claim, the applicants were given fair hearing, documents having been requested from them to aid investigation.

    On KPMG and Othihiwa’s suspension, Quakers said: “A body has a right to suspend a member until investigation is concluded. They were invited but never showed up after some shareholders complained about infractions in Stanbic IBTC’s accounts which they prepared.”

    The council is contending that the applicants’ Originating Motion discloses no cause of action against it.

    FRC said it merely performed its statutory functions and duties and cannot be stopped from doing so.Justice Buba adjourned till December 14 for ruling.

  • FRC urges court to dismiss KPMG’s suit

    FRC urges court to dismiss KPMG’s suit

    • Case to be heard Monday

    The Financial Reporting Council of Nigeria (FRC) has urged the Federal High Court in Lagos to dismiss a suit filed against it by KPMG Professional Services.

    The firm and a partner, Ayodele Othihiwa, are praying the court to stop FRC from sanctioning them over their role in the financial statements of Stanbic IBTC Holdings.

    Hearing in the suit could not go on yesterday after the plaintiffs’ lawyer Mr. Babatunde Fagbohunlu (SAN) informed Justice Ibrahim Buba that he filed a new application.

    The application, he said, is a further affidavit opposing FRC’s Notice of Preliminary Objection.

    The respondent’s lawyer, Mr Norrison Quakers (SAN), said he needed time to respond.

    “I’ve just been served. I’ll not be opposing the application,” he said.

    FRC is praying the court to dismiss the suit in its entirety because the court lacks jurisdiction to entertain it.

    The council is contending that the applicants’ Originating Motion discloses no cause of action against it.

    FRC said it merely performed its statutory functions and duties and cannot be stopped from doing so.

    The council said the plaintiffs did not appeal to FRC’s Technical and Oversight Committee or exhaust laid down procedures for resolution of disputes before filing the suit.

    In effect, it said the plaintiffs did not comply with “a condition precedent before initiating, instituting or commencing legal action.”

    Besides, FRC said the applicants’ right to fair hearing was not infringed on because KPMG was “given the opportunity for fair hearing.”

    Justice Buba had on November 6 restrained FRC from imposing any sanction on KPMG until the firm’s suit was determined.

    He barred FRC’s Executive Secretary Mr. Jim Obazee from sanctioning Othihiwa.

    FRC, in an October 30 letter, conveyed its ‘regulatory decision’ to the applicants, following their role in the financial statements of Stanbic IBTC Holdings Plc for 2013 and 2014.

    The council said it had suspended Othihiwa “until the investigation as to the extent of the negligence of KPMG Professional Services is ascertained.”

    KPMG and Othihiwa said the FRC’s decision was published and issued without informing or notifying them of the nature of the allegations made against them, nor were they invited to respond to the allegations.

  • FRC recovers over N360bn from MDAs

    FRC recovers over N360bn from MDAs

    The Fiscal Responsibility Commission (FRC) Monday said it recovered over N360 billion from the operating surpluses of Ministries Departments and Agencies (MDAs).

    The chairman of the commission, Victor Muruako said this during a 2day training tour of Ebonyi State Fiscal Responsibility Commission to FRC Abuja.

    His words: “As part of our mandates, we have gone out to look for these revenues from agencies that have been hiding their report and we have retrieved over N360billion by our activities from the consolidated revenue funds”.

    Adding that the commission at present has embarked “on investigative visits to several agencies which prompt them to do what is right.”

    According to him, “a lot of government agencies ordinarily won’t pay the operating surpluses which they are now paying.” While noting that the money is not being paid to them but they (MDAs) pushed it to the consolidated revenue funds of the federal government.

    Addressing the Ebonyi State FRC members, he said, “That is where you have a role to play. You must find ways and means to trigger those state companies and parastatals that over the years rather collect money from the federal government. If you investigate some of them you find out that they are making so much money.

    “For example, the state housing corporations most times collect land from people free; they collect money from state government; they will build and sell and will never declare profits. They are always complaining. If you visit their offices, it won’t seem as if much is going on whereas a lot is going on.”

    Muruako urged  the Ebonyi State FRC tourists “to encourage their state government to look inwards because the truth is that if the continuous dwindling of the revenue persists for the next six months and our allocation continues being this slow,   it’s either we get the right attitude to do the right thing or we will be on the floor.

    “The truth is that some state governments have refused to develop alternative means of raising cash. We are not praying for such, that is why they should see you as partners to help them.”

    The FRC chairman maintained; “that every state of the federation should establish fiscal responsibility agencies and should not continue to shy away from this reality.”

    On the benefits of this commission, he said: “fiscal responsibility agencies all over the world have been use to transform countries like India, Singapore, Asia, Canada, Switzerland, and other countries. All the countries that stopped today have themselves to blame. For instance, when the US suspended Fiscal responsibly, they saw the results. Also Argentina and few other countries that abandoned FR initiatives and what it led them to.”

    Muruako said “citizens should take the benefits of these agencies to encourage their state governments to key into the new regime of fiscal responsibility commission by adopting their own laws to suit their convenience and also setting up a commission that will also discharge their mandates just like the federal government have done theirs.

    Muruako said the newly inaugurated Ebonyi State FRC members may face challenges ranging from finance and relationships, even stepping on big toes while adding that debts and borrowings have become the biggest problems.

    He urged them to be bold to ask governor’s questions on their budgets and make sound inputs because that is the reason for their appointment.

    The chairman of the Ebonyi State FRC, Nwaigbo Vincent Mbanu who led the tourists to Abuja said that Ebonyi state is keying with the federal government in line with the present situation of fighting corruption in all facets and hopes that after the training, they will be equipped with more knowledge to work harder.

  • FRC seeks time to respond to KPMG’s suit

    FRC seeks time to respond to KPMG’s suit

    The Federal High Court in Lagos yesterday adjourned a suit by KPMG Professional Services and a partner, Ayodele Othihiwa, against the Financial Reporting Council of Nigeria (FRC) till November 19.

    FRC’s lawyer Mr. Norrison Quakers (SAN) said his client needed time to respond.

    He said: “I’ve just been briefed. The processes were given to me yesterday (Tuesday). I observed that this court had made an interim order. I’ll need time to study the processes and file the requisite responses.”

    Counsel to the plaintiffs Mr. Babatunde Fagbohunlu (SAN), said he had no objection to the application for an adjournment.

    Justice Ibrahim Buba last Friday restrained FRC from imposing any sanction on KPMG until the firm’s suit was determined.

    He barred FRC’s Executive Secretary Mr. Jim Obazee from sanctioning Othihiwa.

    FRC, in an October 30 letter, conveyed its ‘regulatory decision’ to the applicants, following their role in the financial statements of Stanbic IBTC Holdings Plc for 2013 and 2014.

    The council said it had suspended Othihiwa “until the investigation as to the extent of the negligence of KPMG Professional Services is ascertained.”

    KPMG and Othihiwa said the FRC’s decision was published and issued without informing or notifying them of the nature of the allegations made against them, nor were they invited to respond to the allegations.

    They claimed the FRC’s decision not only violated their right to fair hearing, but flouted Section 62(2) of the FRC Act, which spelt out the procedure to be adopted in investigating a professional body for any ‘complaint or dishonest practice, negligence, professional misconduct or malpractice’.

    The section states that FRC “shall notify the professional, whose conduct, act or omission is under investigation of the nature of the complaint and it shall summon or hear the professional.”

  • FRC vs Stanbic IBTC: CBN’s timely intervention

    The financial services industry has recently been engrossed with the news of the regulatory action taken against Stanbic IBTC Holdings Plc by the Financial Reporting Council of Nigeria (FRCN). The intervention of the Central Bank of Nigeria (CBN), however, came in the nick of time as it helped to restore sanity to a disturbing situation.

    One of the most important lessons from this episode include the need for regulators to weigh their actions carefully before making pronouncements, for such pronouncements have the potential of not only affecting investors confidence in the market, but could also erode shareholders’ investments, as it was evident with Stanbic IBTC’s stock on the floor of the Nigerian Stock Exchange. Immediately the CBN intervened, the stocks stopped their losing streak and have been steadily regaining value.

    If the FRCN had been a little more circumspect, it would have been able to trace the genesis of the issue which it delved in and realised that it was a dispute among shareholders and not necessarily an infraction as it alleged. Based on media reports, the entire episode would appear to have been triggered by the National Office for Technology Acquisition and Promotion (NOTAP) over the payment of franchise fees by Stanbic IBTC. However, investigations indicate that the entire episode was orchestrated by some Indians who are minority shareholders of Stanbic IBTC. The Indians are alleged to be the ones pulling the strings behind some shareholders who have as little as 500 shares in Stanbic IBTC.

    According to reliable sources, Stanbic IBTC’s growth had necessitated a further injection of capital as it was fast approaching the minimum capital adequacy ratio prescribed by the CBN. The financial institution planned to increase its capital through a scrip dividend issue and a rights issue. One of the Indians, it was alleged, was not ready to pay for more shares through either issue, but did not want his holdings to be diluted either.

    His real aim was to use the courts and/or regulators to hold up the rights issue until some point in the future when he would be in a position to subscribe. The Indians searched for everything to delay the scrip or right issue and the only straw they could find was the franchise fees. The Trusted Shareholders Association of Nigeria then came into the picture with its petition to NOTAP. Subsequently, NOTAP officials stopped approving any payments to Standard Bank. The stoppage was based on a petition from the Trusted Shareholders Association of Nigeria. The shareholder group also petitioned the FRCN.

    Citing NOTAP’s refusal to approve the fees, the FRCN then jumped into the fray and claimed that NOTAP’s failure to grant approvals for those remittances meant that Stanbic IBTC’s audited accounts for 2013 and 2014 were inaccurate because it had made accruals for these payments.

    FRCN then claimed to be investigating Stanbic IBTC in order to find out if its 2013 and 2014 audited accounts needed to be restated. Both Stanbic IBTC’s management and KPMG (its external auditors) told FRCN that this was absurd because non-remittance of a payment to a creditor does not extinguish a liability, and so the only prudent thing to do was to recognise the amounts owed to Standard Bank in its financials.

    However, the Securities and Exchange Commission, SEC, had earlier approved, in principle, Stanbic IBTC’s scrip dividend issue and rights issue, but turned around to place both on “hold” based on a letter from FRCN to that effect. Also, the Trusted Shareholders Association of Nigeria had gone to court to try and stop Stanbic IBTC’s Extra-ordinary General Meeting that was called to approve the rights issue. They failed to get an injunction. However, what they failed to get from the courts, they obtained from SEC when the Commission turned around to place both the scrip dividend issue and the rights issue on “hold”, citing FRC’s investigation. Stanbic IBTC’s engagement with SEC on the issue failed to yield any positive outcome.

    Subsequently, FRC proceeded to hand down a hefty N1 billion fine and announced the suspension of accounts-approving powers of some Directors of Stanbic IBTC, the Audit Committee Chairman and KPMG Partner, even when its investigations were not concluded and Stanbic IBTC was not given the opportunity to defend itself. It was reported that FRC fixed a meeting with Stanbic IBTC for 11am to continue the engagement process. Before the meeting could hold, the council summoned a world press conference at 8.0 am to announce sanctions it had imposed on Stanbic IBTC, much to the surprise of stakeholders in the finance sector.

    In what has been widely celebrated as common sense intervention by the CBN, the apex bank debunked all the allegations made by the FRC after going through Stanbic IBTC’s itemised response to the allegations supported by facts and figures. CBN also sent a team of examiners to Stanbic IBTC to double-check on all supporting documents before the CBN Governor wrote decisively to FRCN dismissing the council’s findings, methods (including not following due process) and sanctions it imposed on the financial institution and its directors.

    In the most dismissive statement yet, the CBN Governor stated that, “In the light of the foregoing facts, which clearly show that FRCN did not follow due process, the bank regrets to inform you that it is unable to accede to FRCN’s request to take disciplinary action against SIBTCH to obey the sanctions meted by the FRCN”.

    After all is said and done, the next logical steps will be for SEC to clear the way for Stanbic IBTC’s scrip issue since its actions were tied to FRCN’s ill-fated regulatory action. It is curious that SEC tied its oversight of the capital market and when a quoted company can raise capital to the adventures of the executive secretary of the FRCN. What SEC needed to do was to ensure that full disclosures were made regarding any and all disputes that Stanbic IBTC was involved in when publishing a prospectus or rights circular. With the CBN’s intervention, SEC is expected to lift the temporary suspension it imposed on the scrip and rights issue.

     

    • Obi is an Abuja-based research analyst