Securities and Exchange Commission (SEC), Nigeria’s apex capital market regulator, has described the conviction of an illegal investment scheme operator, Mariam Moses Ventures Limited, as a warning to operators of illegal schemes.
The Federal High Court, Kaduna division, had handed down a five-year imprisonment term against one Moses Samanja, managing director of Marian Moses Ventures Ltd. The court also ordered that the Corporate Affairs Commission (CAC) should wind up the company and use the funds in its accounts to restitute its clients.
Mariam Moses Ventures Ltd was convicted for soliciting and collecting deposits from unsuspecting members of the public with unrealistic return on investment without any registration by SEC or the Central Bank of Nigeria (CBN).
“The conviction of this illegal operator serves as warning to perpetrators of illegal investment schemes that regulators will not ‘fold their arms’ in the fight against the activities of illegal fund and investments managers,” SEC stated.
The Commission advised the investing public to always demand a SEC Registration or CBN licence before making deposit or subscribing to any scheme being promoted by any firm.
Tag: SEC
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SEC hails conviction of illegal operator
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SEC: No longer at ease with capital market fraud
In its determined quest to sanitise the capital market, the Security and Exchange Commission (SEC), which is the apex regulatory body in the sector, has had to wield the big stick in recent times by fishing out the bad eggs in the system, reports Ibrahim Apekhade Yusuf
The famous wisecrack by President Muhammadu Buhari, “If we don’t kill corruption this corruption will kill us,” which gained traction during the political hustings in the run up to the 2015 general election, is the premise upon which the anti-corruption war of the current administration is being fought. Which is just as well.
Expectedly, one body which has also adopted the same mantra is the Security and Exchange Commission, SEC, the apex regulatory body for capital market operators in the country. The body has zero-tolerance for corruption and naturally expects every player in the sector to play by the rules
Thus it has had no qualms in enforcing its extant rules when the need arise, especially against operators deemed to have run afoul of the law.
No hiding place for errant capital market cabals
The Nation can authoritatively report that SEC had turned the heat on some operators in the capital market in the last 18 months with a view to rid the sector of those perceived as a bad influence in the system.
Interestingly, those on SEC watch list had been those perceived in some quarters as sacred cows and the untouchables.
Expectedly, one of the case that served as a litmus test for SEC was its celebrated case with Albert Okumagba, the Group Managing Director of BGL Group.
SEC had suspended Okumagba and BGL from operating in the market a year ago, and has since been investigating the complaints. He was also removed as the President of Chartered Institute of Stockbrokers (CIS).
Okumagba was also banned from operating as a Registered Sponsored Individual with SEC.
It may be recalled that SEC had last year expelled the BGL Group from the capital market after receiving over 30 petitions from aggrieved investors who claimed to have been defrauded by the company.
The BGL Group was allegedly involved in N28.9bn fraud and malpractices for which the Economic and Financial Crimes Commission (EFCC) had arrested Okumagba.
Specifically, the commission had grilled Okumagba over alleged diversion of N28.9bn being proceeds of private placements of 4.3bn ordinary shares of 50k each at N7.00k per share in 2007.
The company, whose subsidiaries include BGL Capital, BGL Private Equity, BGL Security and BGL Asset Management, allegedly lured 50 investors from across the country into subscribing to the company’s shares, promising them options of liquidity and exit within two years.
The Nation also learnt that the investors were not able to liquidate their assets contrary to the promise made to them and that an alleged promise that BGL would be listed on the Securities and Exchange Commission two years after the offer in 2008 was not fulfilled.
According to SEC, in a bid to obtain justice for the complainants and grant all parties fair hearing, the matter was presented before the Administrative Proceedings Committee (APC) of the commission, which sat on February 6, 2016. During the proceedings various parties tendered testimonies and documentary evidence. SEC said upon the conclusion of the proceedings, its APC arrived at a decision, which has been approved by the relevant authority.
The APC decided that by their actions and/or omissions BGL Securities Limited, BGL Asset Management Limited, Okumagba, Edozie, 5th, 6th, 7th, 8th, 9th, 10th, 11th, 12th, 13th, 14th, 15th, 16th, 17th, 18th, 19th, 21st and 22nd respondents engaged in acts capable of adversely affecting the investing public’s image of, and confidence in the capital market.
However, the BGL Group, through its counsel, Mr. Kemi Pinheiro (SAN), on May 27, 2015, obtained an interim injunction by Justice Saliu Saidu, stopping SEC from effecting the ban.
But Justice Mohammed Yunusa of Federal High Court in Lagos had vacated the interim injunction barring SEC from expelling BGL Group.
With a prima facie case already established against the promoters of BGL Group, SEC handed down what some observers considered a poetic justice of sort.
According to a document obtained by The Nation, a summary of the decision of the SEC Administrative Proceedings Committee in the Matter of APC/1/2015: Rivers State Ministry of Finance & 31 Others V. BGL Plc & 31 Others, showed that the Commission received 32 complaints between 2012 and 2015 against the 1st to 4th respondents over certain conducts in relation to operations of their Guaranteed Consolidated Notes (GCN) and Guaranteed Premium Notes (GPN). Investigations revealed that the 1st to the 4th respondents had through the 5th to 32nd breached some provisions of the Investment and Securities Act (ISA) 2007 as well as the SEC Rules and Regulations, which resulted to a loss of about N5,769,993,553.67 for 32 innocent investors.
To ensure the innocent investors obtain justice; while also granting all parties fair hearing, the Commission invited all parties before its Administrative Proceedings Committee (APC). Having properly issued hearing notices, the APC sat on December 8, 2016 to hear the matter. In the course of the hearing, testimonies and documentary evidence were tendered by various parties.
Upon conclusion of the hearing, the SEC APC reached a final decision which has been approved by the relevant authority. Consequently, the Committee passed sanctions on Okumagba and several others.
Those slammed with life bans include Mr Albert Okumagba, the Group Managing Director, BGL Group and his deputy, Mr Chibundu Edozie.
Other officials of BGL sanctioned include Mr Peter Adebola, who was banned for five years, Joseph Ashley-Osuzoka was banned for four years with a fine of N100,000, Joshua Sesan Adetiloye and Ms Mshelia Bittinger were banned for one year respectively.
Others are Nkechi Azubuike, Victor Inyang, Hilary Eludu, and Andre Ewubare who were slammed with two-year ban with a fine of N100,000 each, while Anthony Nwozor was banned for one year with a fine of N100,000.
Also, Okumagba and Edozie were directed to pay N100,000 fine each, while BGL Assets Management Ltd and BGL Securities Ltd., were directed to pay N23.2million and N10.1million respectively. The circular stated that another BGL company, BGL Plc, was directed to pay a fine of N5million.
Gale of ban
The Nation also gathered that while Okumagba’s case was yet to be decided, the SEC did not rest on its oars as it redoubled efforts to rid the market of unscrupulous operators in the system.
Last year, SEC handed over life bans to Mr. Taofik Lawal and Mrs. Iyabode Lawal from operating in the Nigeria capital market for mismanagement of stocks and unauthorised sale of shares.
In a statement obtained from SEC’s website, the Commission noted that in the exercise of its powers under Section 13 of the ISA, 2007, it investigated complaints against WT Securities Limited and its Directors (Mr. Taofik Lawal and Mrs. Iyabode Lawal) and found them culpable of mismanaging the stocks of Mrs. Opral Mason Benson, and the unauthorised sale of the Nigerian Breweries Plc. shares belonging to Ngozi Onyekwere Nwachukwu.
“The actions of WT Securities Limited and the aforementioned Directors are in violation of Section 110 of the ISA 2007 and Rule 65 (1) of the Commission’s Consolidated Rules and Regulations 2013.
“Consequently, in accordance with Section 13 (bb) of the ISA 2007, Mr. Taofik Lawal and Mrs. Iyabode Lawal have been banned and blacklisted from operating in the Nigerian Capital market for life.
“In view of this, the investing public is hereby advised to desist from dealing with the named persons in any capital market related capacity,” the commission said.
Besides, SEC had suspended Heritage Capital Markets Limited, a stockbroker and dealer on the NSE, for alleged fraudulent sale of investor’s shares.
In a circular, SEC stated that it suspended Heritage Capital Markets “in connection with unauthorised sale of shares belonging to an investor,” using the capital market term for shares fraud.
SEC also suspended the directors and sponsored individuals of the company, including two former presidents of Institute of Chartered Accountants of Nigeria (ICAN), Mr. Chidi Ajaegbu and Mrs. Ibironke Osiyemi. Ajaegbu is the Managing Director of Heritage Capital Markets Limited while Osiyemi chairs the board.
According to SEC, Heritage Capital Markets failed to comply with the Commission’s directives to restitute the affected investor.
“In view of the above, the general public is hereby informed that the suspension is indefinite and shall remain in force pending the resolution of the matter against the operator,” SEC stated.
Other suspended directors included Dr Elijah Ogbuokiri, Prof Emmanuel Emenyonu and Oluseyi Olanrewaju. Suspended sponsored individuals included Paul Onalo, chief compliance officer and Oyafemi Titus, a stockbroker.
The latest suspension came on the heels of the expulsion of three stockbrokers and an accountant for shares fraud by the council of the Nigerian Stock Exchange (NSE) last month. The expulsion earlier in December brought the number of stockbrokers that had been expelled in 2016 to about 10 as the Exchange seeks to protect the market integrity against the tempting recourse to illegal shares sale by hard-pressed stockbrokers.
The three stockbrokers, who were members and authorised dealer on the Exchange, were stripped of their registration and authority to trade on the NSE for selling shares belonging to their clients without the mandate and consent of the clients.
New rules of engagement to curtail shares’fraud
With the stock market downtrend and economic recession fuelling temptations to sell investors’ shares in their custody, the NSE had recently started the implementation of newly amended rules aimed at tightening the noose on unauthorised sale and transfer of shares by unscrupulous stockbroking firms and traders.
Under the amended rules, the Exchange could withdraw the dealing licence of any erring stockbroking firm and trader as well as impose fines not less than N1million on any offender.
According to the rule, no dealing member shall sell or transfer any securities without the authorisation of the owner.
“A dealing member that has sold or transferred any securities without the authorisation of the owner shall not be permitted to keep any benefits accruing from such transaction, including but not limited to bonuses, rights, commissions, cash dividends, capital appreciation, and any profit accruing therefrom whatsoever,” the rule stated.
Ban! Ban!! Ban!!!
In what has since been termed a purge in the system, SEC had last week banned a capital market operator, Mr. George Nchedo Okafor, from being employed anywhere in the capital market.
Okafor was also banned from holding the position of director in any corporate entity operating in the Nigerian capital market.
A copy of the decisions of the SEC Administrative Proceedings Committee (APC) in the matter of APC/2/2016: Ideal Securities & Investment Limited V. Mr. George Nchedo Okafor, obtained by The Nation revealed that Okafor was handed over to the anti-corruption agencies for further action.
In the statement which reads in part, SEC noted that: “Pursuant to Section 304 of the Investments and Securities Act 2007 all information on the issues of forgery of board resolution and issuance of dud cheques be and is hereby referred to the appropriate law enforcement agencies.”
According to SEC, the Commission on September 12, 2008 received a petition from the complainant alleging various misconducts against the respondent. Pursuant to this complaint, the Commission conducted investigations and observed that the respondent had carried out actions which were in breach of the provisions of the Investment and Securities Act 2007, as well as the SEC Rules and Regulations.
To afford all parties fair hearing, the Commission on December 7, 2016 convened an Administrative Proceedings Committee (APC) sitting to hear the matter. During the hearing, testimonies and documentary evidence were tendered by the parties.
Upon conclusion of the hearing, the SEC APC reached final decision that Okafor “engaged in acts capable of adversely affecting the investing public’s image of, and confidence in the capital market.”
SEC also directed the complainant to take appropriate steps to recover whatever monies it lost as a result of Okafor’s conduct.
The plot gets thicker
Just last week Victor Ogiemwonyi, Managing Director/CEO, Partnership Investment Company Plc, was arraigned before a Federal High Court sitting in Lagos sequel to a petition by the Nigerian Stock Exchange (NSE), which accused him of fraudulent misappropriation of the sum of N 1,237,245,000 and US$80,000.00 and for sundry offences including stealing and dishonest conversion of proceeds of share sale.
Some of the defrauded investors had revealed that over 300 investors of Partnership Investment Company Plc (PIC) were swindled of over N4.8 billion.
Some of the victims whose shares were in the deal include former Managing Director of Ecobank Transnational Incorporated, ETI, Mr. Arnold Ekpe with over N1.237 billion worth of shares; Mr. Godwin Anono, Chairman Standard Shareholders Association of Nigeria N160 million; Mr. Alabi Olushola Ibrahim, N12.540 million; Mr. Solesi Samuel, N40 million worth of shares. Also among the victims is a widow with over N4 million worth of shares and other investors scattered across the country.
A partnership that works
It is however instructive to note that the renewed tempo of enforcement by SEC is a function of the synergy of cooperation between the Commission and the anti-graft agencies.
Speaking in an interview in Abuja recently, Mounir Gwarzo, the Director-General of SEC said the collaboration with EFCC has been tremendous.
Gwarzo said going by its law, SEC did not have the power to prosecute criminal matters.
He said the law limited SEC to only civil cases whereas about 99 per cent of cases in the capital market had some criminal elements.
He said: “The best we normally do is after our investigation, we ban or suspend the operator as an individual, we also either suspend or revoke the licence of the operator as a company.”
Gwarzo explained that SEC had been handling civil cases and “we had achieved a lot of progress but with the EFCC coming in, they would be able to also handle criminal matters.”
He reiterated that the EFCC boss had pledged commitment to ensure that the hallmark of the collaboration was achieved.
Worries over SEC’s perceived witch-hunt
As to be expected, SEC has come under scrutiny by those who perceive it is purely on a vendetta mission. The Nigeria Employers Consultative Forum last year took the Commission to the cleaners over what it said was the latter’s overbearing attitude.
However, SEC in a response obtained from its website gave plausible explanations on its modus operandi.
While reacting to the accusations over what was termed SEC’s obtrusiveness, the management said “SEC records between the years 2008 and 2011 showed a dismal level of compliance from listed companies. On the average, less than 25% of quoted companies regularly filed statutory reports with the SEC. The Commission in discharge of its statutory mandate applied the penalties required by law to all the defaulting public companies.
“In consideration of pleas for waiver of penalties from these defaulting companies, coupled with SEC’s mandates to develop the market, the Commission’s Board magnanimously granted significant waivers (by as much as 60%) to companies willing to take corrective steps.”
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SEC: No longer at ease with capital market fraud
In its determined quest to sanitise the capital market, the Security and Exchange Commission (SEC), which is the apex regulatory body in the sector, has had to wield the big stick in recent times by fishing out the bad eggs in the system, reports Ibrahim Apekhade Yusuf
The famous wisecrack by President Muhammadu Buhari, “If we don’t kill corruption this corruption will kill us,” which gained traction during the political hustings in the run up to the 2015 general election, is the premise upon which the anti-corruption war of the current administration is being fought. Which is just as well.
Expectedly, one body which has also adopted the same mantra is the Security and Exchange Commission, SEC, the apex regulatory body for capital market operators in the country. The body has zero-tolerance for corruption and naturally expects every player in the sector to play by the rules
Thus it has had no qualms in enforcing its extant rules when the need arise, especially against operators deemed to have run afoul of the law.
No hiding place for errant capital market cabals
The Nation can authoritatively report that SEC had turned the heat on some operators in the capital market in the last 18 months with a view to rid the sector of those perceived as a bad influence in the system.
Interestingly, those on SEC watch list had been those perceived in some quarters as sacred cows and the untouchables.
Expectedly, one of the case that served as a litmus test for SEC was its celebrated case with Albert Okumagba, the Group Managing Director of BGL Group.
SEC had suspended Okumagba and BGL from operating in the market a year ago, and has since been investigating the complaints. He was also removed as the President of Chartered Institute of Stockbrokers (CIS).
Okumagba was also banned from operating as a Registered Sponsored Individual with SEC.
It may be recalled that SEC had last year expelled the BGL Group from the capital market after receiving over 30 petitions from aggrieved investors who claimed to have been defrauded by the company.
The BGL Group was allegedly involved in N28.9bn fraud and malpractices for which the Economic and Financial Crimes Commission (EFCC) had arrested Okumagba.
Specifically, the commission had grilled Okumagba over alleged diversion of N28.9bn being proceeds of private placements of 4.3bn ordinary shares of 50k each at N7.00k per share in 2007.
The company, whose subsidiaries include BGL Capital, BGL Private Equity, BGL Security and BGL Asset Management, allegedly lured 50 investors from across the country into subscribing to the company’s shares, promising them options of liquidity and exit within two years.
The Nation also learnt that the investors were not able to liquidate their assets contrary to the promise made to them and that an alleged promise that BGL would be listed on the Securities and Exchange Commission two years after the offer in 2008 was not fulfilled.
According to SEC, in a bid to obtain justice for the complainants and grant all parties fair hearing, the matter was presented before the Administrative Proceedings Committee (APC) of the commission, which sat on February 6, 2016. During the proceedings various parties tendered testimonies and documentary evidence. SEC said upon the conclusion of the proceedings, its APC arrived at a decision, which has been approved by the relevant authority.
The APC decided that by their actions and/or omissions BGL Securities Limited, BGL Asset Management Limited, Okumagba, Edozie, 5th, 6th, 7th, 8th, 9th, 10th, 11th, 12th, 13th, 14th, 15th, 16th, 17th, 18th, 19th, 21st and 22nd respondents engaged in acts capable of adversely affecting the investing public’s image of, and confidence in the capital market.
However, the BGL Group, through its counsel, Mr. Kemi Pinheiro (SAN), on May 27, 2015, obtained an interim injunction by Justice Saliu Saidu, stopping SEC from effecting the ban.
But Justice Mohammed Yunusa of Federal High Court in Lagos had vacated the interim injunction barring SEC from expelling BGL Group.
With a prima facie case already established against the promoters of BGL Group, SEC handed down what some observers considered a poetic justice of sort.
According to a document obtained by The Nation, a summary of the decision of the SEC Administrative Proceedings Committee in the Matter of APC/1/2015: Rivers State Ministry of Finance & 31 Others V. BGL Plc & 31 Others, showed that the Commission received 32 complaints between 2012 and 2015 against the 1st to 4th respondents over certain conducts in relation to operations of their Guaranteed Consolidated Notes (GCN) and Guaranteed Premium Notes (GPN). Investigations revealed that the 1st to the 4th respondents had through the 5th to 32nd breached some provisions of the Investment and Securities Act (ISA) 2007 as well as the SEC Rules and Regulations, which resulted to a loss of about N5,769,993,553.67 for 32 innocent investors.
To ensure the innocent investors obtain justice; while also granting all parties fair hearing, the Commission invited all parties before its Administrative Proceedings Committee (APC). Having properly issued hearing notices, the APC sat on December 8, 2016 to hear the matter. In the course of the hearing, testimonies and documentary evidence were tendered by various parties.
Upon conclusion of the hearing, the SEC APC reached a final decision which has been approved by the relevant authority. Consequently, the Committee passed sanctions on Okumagba and several others.
Those slammed with life bans include Mr Albert Okumagba, the Group Managing Director, BGL Group and his deputy, Mr Chibundu Edozie.
Other officials of BGL sanctioned include Mr Peter Adebola, who was banned for five years, Joseph Ashley-Osuzoka was banned for four years with a fine of N100,000, Joshua Sesan Adetiloye and Ms Mshelia Bittinger were banned for one year respectively.
Others are Nkechi Azubuike, Victor Inyang, Hilary Eludu, and Andre Ewubare who were slammed with two-year ban with a fine of N100,000 each, while Anthony Nwozor was banned for one year with a fine of N100,000.
Also, Okumagba and Edozie were directed to pay N100,000 fine each, while BGL Assets Management Ltd and BGL Securities Ltd., were directed to pay N23.2million and N10.1million respectively. The circular stated that another BGL company, BGL Plc, was directed to pay a fine of N5million.
Gale of ban
The Nation also gathered that while Okumagba’s case was yet to be decided, the SEC did not rest on its oars as it redoubled efforts to rid the market of unscrupulous operators in the system.
Last year, SEC handed over life bans to Mr. Taofik Lawal and Mrs. Iyabode Lawal from operating in the Nigeria capital market for mismanagement of stocks and unauthorised sale of shares.
In a statement obtained from SEC’s website, the Commission noted that in the exercise of its powers under Section 13 of the ISA, 2007, it investigated complaints against WT Securities Limited and its Directors (Mr. Taofik Lawal and Mrs. Iyabode Lawal) and found them culpable of mismanaging the stocks of Mrs. Opral Mason Benson, and the unauthorised sale of the Nigerian Breweries Plc. shares belonging to Ngozi Onyekwere Nwachukwu.
“The actions of WT Securities Limited and the aforementioned Directors are in violation of Section 110 of the ISA 2007 and Rule 65 (1) of the Commission’s Consolidated Rules and Regulations 2013.
“Consequently, in accordance with Section 13 (bb) of the ISA 2007, Mr. Taofik Lawal and Mrs. Iyabode Lawal have been banned and blacklisted from operating in the Nigerian Capital market for life.
“In view of this, the investing public is hereby advised to desist from dealing with the named persons in any capital market related capacity,” the commission said.
Besides, SEC had suspended Heritage Capital Markets Limited, a stockbroker and dealer on the NSE, for alleged fraudulent sale of investor’s shares.
In a circular, SEC stated that it suspended Heritage Capital Markets “in connection with unauthorised sale of shares belonging to an investor,” using the capital market term for shares fraud.
SEC also suspended the directors and sponsored individuals of the company, including two former presidents of Institute of Chartered Accountants of Nigeria (ICAN), Mr. Chidi Ajaegbu and Mrs. Ibironke Osiyemi. Ajaegbu is the Managing Director of Heritage Capital Markets Limited while Osiyemi chairs the board.
According to SEC, Heritage Capital Markets failed to comply with the Commission’s directives to restitute the affected investor.
“In view of the above, the general public is hereby informed that the suspension is indefinite and shall remain in force pending the resolution of the matter against the operator,” SEC stated.
Other suspended directors included Dr Elijah Ogbuokiri, Prof Emmanuel Emenyonu and Oluseyi Olanrewaju. Suspended sponsored individuals included Paul Onalo, chief compliance officer and Oyafemi Titus, a stockbroker.
The latest suspension came on the heels of the expulsion of three stockbrokers and an accountant for shares fraud by the council of the Nigerian Stock Exchange (NSE) last month. The expulsion earlier in December brought the number of stockbrokers that had been expelled in 2016 to about 10 as the Exchange seeks to protect the market integrity against the tempting recourse to illegal shares sale by hard-pressed stockbrokers.
The three stockbrokers, who were members and authorised dealer on the Exchange, were stripped of their registration and authority to trade on the NSE for selling shares belonging to their clients without the mandate and consent of the clients.
New rules of engagement to curtail shares’fraud
With the stock market downtrend and economic recession fuelling temptations to sell investors’ shares in their custody, the NSE had recently started the implementation of newly amended rules aimed at tightening the noose on unauthorised sale and transfer of shares by unscrupulous stockbroking firms and traders.
Under the amended rules, the Exchange could withdraw the dealing licence of any erring stockbroking firm and trader as well as impose fines not less than N1million on any offender.
According to the rule, no dealing member shall sell or transfer any securities without the authorisation of the owner.
“A dealing member that has sold or transferred any securities without the authorisation of the owner shall not be permitted to keep any benefits accruing from such transaction, including but not limited to bonuses, rights, commissions, cash dividends, capital appreciation, and any profit accruing therefrom whatsoever,” the rule stated.
Ban! Ban!! Ban!!!
In what has since been termed a purge in the system, SEC had last week banned a capital market operator, Mr. George Nchedo Okafor, from being employed anywhere in the capital market.
Okafor was also banned from holding the position of director in any corporate entity operating in the Nigerian capital market.
A copy of the decisions of the SEC Administrative Proceedings Committee (APC) in the matter of APC/2/2016: Ideal Securities & Investment Limited V. Mr. George Nchedo Okafor, obtained by The Nation revealed that Okafor was handed over to the anti-corruption agencies for further action.
In the statement which reads in part, SEC noted that: “Pursuant to Section 304 of the Investments and Securities Act 2007 all information on the issues of forgery of board resolution and issuance of dud cheques be and is hereby referred to the appropriate law enforcement agencies.”
According to SEC, the Commission on September 12, 2008 received a petition from the complainant alleging various misconducts against the respondent. Pursuant to this complaint, the Commission conducted investigations and observed that the respondent had carried out actions which were in breach of the provisions of the Investment and Securities Act 2007, as well as the SEC Rules and Regulations.
To afford all parties fair hearing, the Commission on December 7, 2016 convened an Administrative Proceedings Committee (APC) sitting to hear the matter. During the hearing, testimonies and documentary evidence were tendered by the parties.
Upon conclusion of the hearing, the SEC APC reached final decision that Okafor “engaged in acts capable of adversely affecting the investing public’s image of, and confidence in the capital market.”
SEC also directed the complainant to take appropriate steps to recover whatever monies it lost as a result of Okafor’s conduct.
The plot gets thicker
Just last week Victor Ogiemwonyi, Managing Director/CEO, Partnership Investment Company Plc, was arraigned before a Federal High Court sitting in Lagos sequel to a petition by the Nigerian Stock Exchange (NSE), which accused him of fraudulent misappropriation of the sum of N 1,237,245,000 and US$80,000.00 and for sundry offences including stealing and dishonest conversion of proceeds of share sale.
Some of the defrauded investors had revealed that over 300 investors of Partnership Investment Company Plc (PIC) were swindled of over N4.8 billion.
Some of the victims whose shares were in the deal include former Managing Director of Ecobank Transnational Incorporated, ETI, Mr. Arnold Ekpe with over N1.237 billion worth of shares; Mr. Godwin Anono, Chairman Standard Shareholders Association of Nigeria N160 million; Mr. Alabi Olushola Ibrahim, N12.540 million; Mr. Solesi Samuel, N40 million worth of shares. Also among the victims is a widow with over N4 million worth of shares and other investors scattered across the country.
A partnership that works
It is however instructive to note that the renewed tempo of enforcement by SEC is a function of the synergy of cooperation between the Commission and the anti-graft agencies.
Speaking in an interview in Abuja recently, Mounir Gwarzo, the Director-General of SEC said the collaboration with EFCC has been tremendous.
Gwarzo said going by its law, SEC did not have the power to prosecute criminal matters.
He said the law limited SEC to only civil cases whereas about 99 per cent of cases in the capital market had some criminal elements.
He said: “The best we normally do is after our investigation, we ban or suspend the operator as an individual, we also either suspend or revoke the licence of the operator as a company.”
Gwarzo explained that SEC had been handling civil cases and “we had achieved a lot of progress but with the EFCC coming in, they would be able to also handle criminal matters.”
He reiterated that the EFCC boss had pledged commitment to ensure that the hallmark of the collaboration was achieved.
Worries over SEC’s perceived witch-hunt
As to be expected, SEC has come under scrutiny by those who perceive it is purely on a vendetta mission. The Nigeria Employers Consultative Forum last year took the Commission to the cleaners over what it said was the latter’s overbearing attitude.
However, SEC in a response obtained from its website gave plausible explanations on its modus operandi.
While reacting to the accusations over what was termed SEC’s obtrusiveness, the management said “SEC records between the years 2008 and 2011 showed a dismal level of compliance from listed companies. On the average, less than 25% of quoted companies regularly filed statutory reports with the SEC. The Commission in discharge of its statutory mandate applied the penalties required by law to all the defaulting public companies.
“In consideration of pleas for waiver of penalties from these defaulting companies, coupled with SEC’s mandates to develop the market, the Commission’s Board magnanimously granted significant waivers (by as much as 60%) to companies willing to take corrective steps.”
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SEC, investors and protection of equities
The Securities and Exchange Commission (SEC) has taken a bold step towards protecting investors and making the capital market more attractive. Its institution of the N5 billion Investors Protection Fund (IPF), based on its Capital Market Master Plan, will boost investors’ confidence and grow market capitalisation. The coming of e-dividend, direct cash settlement and dematerialisation of transactions will strengthen the market and promote international best practices, writes COLLINS NWEZE.
Investors are interested in the security of their investments. They are attracted to markets where their interests are best protected and transaction processes seamless.
Aware of these facts, the Securities and Exchange Commission (SEC) is taking steps to guarantee investors’ confidence and build systems that will make transactions hassle free. Its institution of N5 billion Investors Protection Fund (IPF) to pay investors N200,000 for losses in line with the Capital Market Master Plan, is a measure to restore investors’ confidence in the capital market.
Also, the SEC, ain collaboration with the Central Bank of Nigeria (CBN), and in line with its statutory mandate of promoting and facilitating the development of efficient and effective systems for settlement of transactions, issued guidelines for the settlement of all types of securities.
Besides, in line with Part XIV of the Investment and Securities Act (ISA) 2007, the SEC established the IPF and appointed a board of trustees to administer it. The purpose of the fund is to compensate investors with genuine loss claims against dealing member firms, covered are losses resulting from these key areas – the insolvency, bankruptcy or negligence of a dealing member firm of the exchange; or offence committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received or deemed received by the dealing member firm in the course of its business as a dealing member firm.
The SEC’s Director-General, Mounir Gwarzo, said besides the IPF, the introduction of electronic dividend and direct cash settlement of investors were geared towards the successful implementation of the master plan.
“We have also done other things like the recapitalisation. We have instituted a corporate governance scorecard and introduced the IPF. The fund ensures that if there were some problems that led to loss of money, the investor would be compensated up to a maximum of N200,000. We have been talking about amending some of our laws in the capital market. We have also set up an advocacy group that will look at the market, and see how capital market can be on the front burner of the Nigerian economy,” he said.
Speaking further, he said in terms of the implementation of the master plan, SEC is doing quite well and has continued to raise the standards of the market.
According to Gwarzo, a board had been set up to help run the affairs of the fund and its members would ensure that complaints from investors were genuine.
“If you lodge any complaint, there are a lot of rigorous processes of verification to ascertain that your complaint is genuine and that you are actually the true owner of that investment. The beneficiaries would N200,000. The whole essence of giving the N200,000 is to temporally ease the financial pressure the person is going through. Early last year, we paid about 320 beneficiaries,” he said.
Analysts believe that the current low patronage of the Nigerian stock market is partly as a result of the losses they suffered during the 2008 and 2009 market downturn. Many of the investors believed the protection they got from regulators in the past was not enough and are therefore, reluctant to return to the market. However, the current market regulators have intensified efforts to protect investors in order to increase their participation in the market.
Measures to boost
investors’ confidence
For instance, the Nigerian Stock Exchange (NSE) signed a Memorandum of Understanding (MoU) in 2013 with the Economic and Financial Crimes Commission (EFCC). This MoU was aimed at tackling market infractions and curbing market abuses because of its zero-tolerance stance on infractions by dealing member firms and listed companies.
The partnership has successfully opened direct lines of communication and information sharing with the EFCC for reporting and investigation of incidents leading to a more proactive law enforcement and swift recovery of stolen securities.
The initiative has severally led to the arrest of individuals suspected of forgery, impersonation and fraudulent sale of shares.
However, the extent to which an investor can be protected is defined by the commercial laws and the enforcement of such laws, such that investors are protected from expropriation by company insiders.
In the capital market, investor protection is usually measured by indicators that quantify explicit protections awarded to shareholders and creditors by corporate, bankruptcy, and re-organisation laws, as well as the quality of law enforcement. Examples of such explicit protections are those that impact shareholders’ ability to vote down directors, including whether to allow shareholders to vote by proxy.
Analysts believe that the differences in investor protection across countries are substantial and are responsible for differences in the development of financial markets and ultimately, differences in economic development. In Nigeria, the Investment and Securities Act (ISA) 2007 provides the ways and manners investors are protected.
Other initiative
to protect investors
Apart from signing the MoU with EFCC, the NSE has also identified investors’ education as another veritable tool towards protecting investors in the capital market. The NSE kicked off its financial literacy programme in protecting investors in February 2012. This programme was designed to enhance investors’ understanding of the basics of investing around portfolio construction, asset allocation and risk diversification. In 2015, The NSE conducted over 172 programmes across Nigeria, including school outreach sessions, seminars and workshops to educate investors, market participants and the general public about responsible investing and sustainable capital formation, reaching about 15,000 people.
Corporate governance
rating system
To promote sound practices of corporate governance, the NSE introduced the Corporate Governance Rating System (CGRS), an initiative designed to rate listed companies on the exchange based on their corporate governance and anti-corruption culture, thereby improving the overall perception of and trust in Nigeria’s capital markets and business practices.
NSE Chief Executive Officer, Oscar Onyema, said the introduction of the CGRS would improve the overall perception of the capital markets and business practices of listed companies. He said: “It is expected that companies will enjoy tangible business advantages from risk-oriented and/or ethically sensitive business partners and investors. In addition, competitors would be challenged to establish the same level of good governance by setting standards of excellence. Companies would not only set themselves apart from their peers, but also contribute to improving the climate for doing business in Nigeria.”
Similarly, as part of efforts to protect investors by enhancing access to their cash as well as eliminating fraudulent activities in the Nigerian capital market, the NSE, in collaboration with the SEC and Central Securities Clearing System (CSCS), commenced the Direct Cash Settlement (DCS) . The initiative allows for the direct payment of proceeds of sale of securities into an investor’s nominated bank account.
The initiative is a great departure from former practice where proceeds from sale of securities are paid directly into the stockbroker’s account. Stockbrokers then deduct transaction fees and remit the balance to the client’s account. Historically, issues have arisen when the proceeds of sales were not remitted into the clients’ accounts, which necessitating the need for the initiative.
In terms of enhancing surveillance, the NSE equally acquired NASDAQ’s SMARTS Market Surveillance platform to power its compliance programme. The technology will provide the NSE with the surveillance expertise needed to grow and expand the market and equip the exchange with the surveillance tools necessary to monitor market manipulation, including spoofing and layering.
The NSE launched its whistleblowing portal (X-Whistle) in 2014, to enable operators, investors and other stakeholders disclose information on market infractions and abuse. The X-Alert, which allows the investing public to know when a transaction has been made on their account, has also been introduced. Explaining the importance of the initiative, the NSE said: “Each time investors buy or sell a security, an alert is sent via a text message to the recipient’s mobile phone or via an e-mail to the recipient’s mailbox.
“The initiative brought real time notification plus transparency to the market at market rates, while safeguarding against unauthorised sale or purchase of securities.”
To increase the level of market compliance, the NSE also launched the BrokerTraX, a tool that provides transparency of broker and brokerage firm compliance with the rules of the market. Not only this, there was an introduction of X-Compliance Report, a transparency initiative designed to help maintain market integrity by providing compliance related updates on all listed companies.
Recently, the exchange has again commenced the use of enhanced Compliance Status Indicator (CSI) codes on the ticker tape for listed companies as part of efforts to further improve market transparency and integrity, provide timely information for investment decision as well as enhance the protection of investors in the capital market.
Under this initiative, the exchange tags all listed companies with a three character code that indicates the compliance status of the listed company at any particular point in time. This compliance code will enable investors to make informed decisions while ensuring a transparent market guided by timely information.
Debt Management Office steps in
In a bid to ensure that retail investors benefit from the Federal Government Bonds (FGN Bonds), the NSE has collaborated with the Debt Management Office (DMO).
According to DMO Director-General, Dr. Abraham Nwankwo, there had been efforts to ensure that the FGN bonds were democratised for retail investors to participate since 2012. He said the organisation appointed Stanbic IBTC Stockbrokers to assist in the democratisation of the initiative to ensure that its services were not only for the upper class.
He said: “We wanted Stanbic IBTC to assist us in making sure that every retail investor with little money can also participate in the investment thereon. The NSE is not an elitist platform for only those who are millionaires and billionaires, but also for those with little money like N10, 000 to invest in the government bond and have it listed on the NSE.”
Nwankwo said the move had yielded some positive results, noting that the job was to encourage retail investors to buy FGN bonds and have their bonds traded on the NSE just as big investors.
Islamic bonds investors
also protected
The Central Bank of Nigeria (CBN), supported by SEC, is also keen on protecting investors’ confidence. The apex bank has set commercial banks’ investment in Islamic bonds issued by state governments to 10 per cent of the total amount on offer.
CBN’s Director, Financial Markets Department, Angela Sere-Ejembi, said the apex bank also fixed a maximum tenor of 10 years for the bonds.
“In view of the need to foster financial system and economic growth and development, as well as complement the efforts of government at various levels, the CBN has approved “Guidelines for Granting Liquid Asset Status to Sukuk Instruments issued by state governments”, to enhance the diversification of sources of funding for development at the sub-national levels,” she said.
She said financial deepening is gradually gaining ground in the Nigerian financial landscape with the introduction of new financial products, including non-interest financial instruments, to cater for the diverse financial needs of the populace and government at various levels.
The adoption of Sukuk issuance by state governments, as an alternative means of financing public expenditure, will contribute to the deepening of the financial system. In the same light, it is expected that other levels of government as well as interested supra-national financial organisations may get involved in Sukuk structuring at some time in the future.
She said to ensure the sustainability of this development, the CBN has considered the need to enhance the quality of Sukuk instruments, by issuing these guidelines to provide for eligibility for the grant of liquidity status to Sukuk issued by state governments at its discount window as well as for the purpose of liquidity ratio computation. This will further deepen the market and promote investment and secondary market activities.
The Sukuk issuance, she said, shall be backed by a law enacted by the relevant House of Assembly, specifying that a sinking fund to be fully funded from the consolidated revenue fund account of the state be established.
SEC, CBN promote efficient
settlement of transactions
The guidelines for the SEC/CBN settlement plan also set out the procedures for the settlement of securities, including the rights and obligations of the parties involved in every transaction. It also covers the settlement procedures and settlement cycle for the trades executed in the Nigerian Stock Exchange traded securities, FMDQ over the Counter (OTC) Securities, NASD Over the Counter (OTC) Securities, Nigerian Commodity Exchange (NCX) traded securities and Afex Commodities Exchange.
Parties to Securities Settlement include, but not limited to Capital Market Registrars, CBN, NSE, Central Securities Clearing System (CSCS) Plc (Central Securities Depository -Clearing & Settlement Agent), Deposit Money Banks (DMBs), Custodians, Dealing Members Firms Page, Discount Houses and Nigerian Commodity Exchange (NCX).
According to a release on the CBN’s website, the general rule is that any securities transaction must trade or be reported through a licensed Exchange in line with the standard settlement guidelines.
“After each day’s transaction (Day T), the clearing/settlement agent (CSCS) shall generate the financial obligations of each dealing positions of the dealing member firms based on their respective settlement banks to arrive at net position per settlement banks,” the statement said.
For Federal Government securities, the statement added that after each day’s transaction (Day T), the clearing/settlement agent shall generate the financial obligations of each dealing member firms. It added that the clearing/settlement agent shall generate the financial positions of the dealing member firms based on their respective settlement banks to arrive at net position per settlement banks.
On Federal Government securities (primary auction), the guideline directed that among other things, after the release of auction result, the government securities issuing agent shall notify each successful bidder (primary dealer) their financial obligations. The successful bidder shall fund its account with the government securities issuing agent for settlement on or before Day T+2.”
The aim of this guideline is to promote competitive, efficient, safe and sound post trading arrangements in Nigeria. This should ultimately lead to greater confidence in securities markets and better investor protection and should in turn limit systemic risk. In addition, the guidelines seek to improve the efficiency of the market infrastructure, which should in turn promote and sustain the integration and competitiveness of the Nigerian securities markets, according to the guideline.
Digital currency
Gwarzo is interested in unlocking the country’s economic potential and creating wealth for the people. It is more concerned about investors’ protection. While many agencies and investment companies began a campaign, urging investors to invest in digital currencies, such as Swisscoin, OneCoin, Bitcoin and such other virtual or digital currencies, SEC warned them about the risk of such investment.
In a statement, SEC said: “The attention of the SEC has been drawn to radio advertisements and other modes of solicitations of the public to invest in digital currencies. The public is hereby advised to exercise extreme caution with regards to digital as a vehicle of investments. This warning is in consonance with similar warnings issued by capital market regulators and central banks across the world over the past few years.”
The Commission alerted the public that none of the persons, companies or entities promoting the initiative has been recognised or authorised by it or by other regulatory agencies to receive deposits from the public or to provide any investment or other financial services in or from Nigeria. The public should also be aware that any investment opportunities promoted by these persons, companies or entities are likely to be risky in nature with a high risk of loss of money, while others may be outright fraudulent schemes.
Continuing, it said: “Given that these instruments and the persons, companies or entities that promote them have neither been authorised, nor any guidelines/regulations developed for them by any of the regulatory authorities in Nigeria, there is no protection available to users or investors in these virtual currencies from financial losses if the virtual currencies fail or the companies promoting them go out of business.
“The public and consumers of financial services are further advised that before making any investment or entering into any financial services transaction, they should ascertain that the entity with whom the investment or transaction is being made is authorised by the Commission or other financial services regulatory authority as applicable to provide such services.”
But the Managing Director, Nigeria Deposit Insurance Commission (NDIC), Umaru Ibrahim, said the corporation and the CBN had set up a committee to look into the trending “digital currency, ‘bitcoin’.
Ibrahim, who spoke at a media forum in Kaduna with “Economic Recession and the Nigerians Banking Sector: Opportunities, Challenges and the way Forward”, as theme, said the corporation had constituted a committee together with the CBN to have a deep study of the phenomenal bitcoin.
“We will look at it’s advantages and disadvantages, what it means for the payment system and what it means for safety and security of customers. We will also look at what it means for money laundering, anti corruption, crime and measurement of money/near money instrument for the economy. But we need a lot of education to do this,” he said.
Overtime, Gwarzo believes that the potentials of the local financial market are enormous and have to be unlocked early to create wealth for the nation, but it has to be done rightly and with the right information. The SEC boss is, therefore, implementing key policy initiatives meant to deepen the Nigeria financial market, secure investors’ confidence and drive investment with new technologies.
Like the CBN, SEC under Gwarzo is aware of the impact of bringing more people into the financial market net and creating seamless dealing platforms that raise confidence level in the market. These policies are not only sustaining investors’ interest, but deepening the financial market.
The e-dividend management system, which was launched last year by the SEC in collaboration with the CBN and the Nigeria Interbank Settlement System (NIBSS) to enable investors have direct access to their dividends, is already enjoying some level of compliance from the investing public.
The SEC boss said the Nigerian capital market has amazing potential to serve as a catalyst for financial inclusion. While most people identify capital markets as important sources of medium-to-long-term capital, a few realised their amazing potential to serve as catalysts for bringing so many people into the financial services sector in the interest of the economy.
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SEC throws weight behind Lagos Commodities & Futures Exchange
Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC), has expressed its readiness to give all necessary supports for the realisation of the proposed Lagos Commodities & Futures Exchange as part of efforts to mainstream the capital market into national development.
The proposed Lagos Commodities & Futures Exchange is expected to trade in currency, commodities, oil and gas and solid minerals.
Director General, Securities and Exchange Commission (SEC), Mounir Gwarzo said the Commission would support the Lagos Commodities & Futures Exchange and other similar initiatives as part of its overall responsibility of development of the Nigerian capital market.
Gwarzo spoke during a courtesy visit by the new executives of the Association of Stockbroking Houses of Nigeria (ASHON). ASHON is the main promoter of the Lagos Commodities & Futures Exchange.
Gwarzo however insisted on the December 31, 2016 deadline for stockbroking firms and other capital market operators to comply with new minimum capital requirements for their functions.
ASHON had requested for additional grace period of three months noting that stockbrokers carry equities in their balance sheet and prices of equities have gone down thus affecting their capital.
Chairman, Association of Stockbroking Houses of Nigeria (ASHON), Patrick Ezeagu had solicited for the possibility of increasing the grace period to six months to recapitalize or reclassify.
ASHON also noted with concern the proposed amendment of Rule 56(1), which will preclude brokers from providing investment advice to their clients and the investing public.
ASHON, while acknowledging not knowing the thinking behind the proposed amendment, solicited for the reconsideration of the proposal. The call is based on the backdrop of the value addition provided by brokers and dealers in providing investment advice to their clients.
ASHON argued that several stockbroking houses had well-established research desks that not only help to broadcast market information on a continuous basis but also carry out indepth analysis and provide opinions on complex financial issues to their clients.
The association also expressed its dismay on the Federal Government’s sole reliance and emphasis on monetary policy for macroeconomic management to the detriment of the capital market.
The association accepted to look at the Investment and Securities Tribunal funding proposal being championed by SEC and NSE.
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SEC, EFCC form alliance to protect investors
Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) and Nigeria’s main anti-graft agency, the Economic and Financial Crimes Commission (EFCC) have signed an alliance to tackle infractions at the capital market and protect investors.
While the EFCC has severally participated in capital market investigations in the past, SEC and EFCC have now signed a Memorandum of Understanding (MoU) that formally established the alliance between the two Commissions. The MoU, which was signed at the EFCC office in the Federal Capital Territory (FCT), Abuja, will serve as the framework for future capacity building and mutual investigations by the Commissions.
SEC’s Director-General, Mr. Mounir Gwarzo, signed on behalf of SEC while acting chairman, Economic and Financial Crimes Commission (EFCC), Mr. Ibrahim Magu, signed on behalf of the EFCC.
The MoU is expected to promote the efficient investigation and conclusion of all cases reported by either of the institutions to each other and to promote the integrity, efficiency and soundness of the Nigerian capital market and the economy in general.
It also seeks to promote collaboration in the areas of training and secondment of middle cadre officers of the SEC to the EFCC and those of the EFCC to the SEC; or in the alternative, the establishment of a liaison desk in both institutions as well as promote collaboration in other areas beneficial to both institutions.
According to the MoU, both Commissions shall provide each other with the utmost mutual assistance in any matter within their competences, including in particular the following areas: secondment of middle cadre officers, training to enhance the investigative skills and capacity of personnel of the institutions and consequently increase the general output and performance of the institutions and facilitate better understanding of each others’ functions through capacity building programmes and human capital development in the areas of investigation of fraud in the capital market.
Both institutions will also collaborate in the areas of exchange of information to assist the performance of the institutions’ respective functions, reporting, investigation and prosecution of fraudulent and manipulative practices in the Nigerian capital market and any other activity as agreed between the institutions from time to time.
However, the MoU serves as a basis of cooperation between the institutions and does not create any legal obligation, nor does it modify or supercede any laws, regulations or regulatory requirements in force or applying to the institutions. Furthermore, the MoU does not create any rights enforceable by third institutions nor does it affect any arrangement under other MoUs.
Gwarzo said SEC, which is saddled with investors’ protection, cannot discharge its responsibility effectively without collaborating with the anti-graft agency.
“We are by provision of our law mandated to protect investors on developing the market, but the way our law is structured we have limitations over criminal cases and that is why in the last 10 years there has been a very great collaboration between both agencies. We hope that when this MoU becomes fully operational, it will assist in reducing market infractions to the barest minimum,” Gwarzo said during a pre-signing visit to the EFCC.
He noted that the collaboration with the EFCC has been of tremendous benefit to the SEC, especially in areas of investigation and enforcement, adding that effective policing of the market is one of the ways of reviving investor confidence.
“One of our agenda is to bring back the retail investors to the market and there is no way they will agree to return if they are not sure of the safety of their investments,” Gwarzo said.
Magu expressed delight that the collaboration between both agencies has yielded enormous benefit for the growth of the capital market, adding that his agency will continue to provide assistance where required. -
SEC warns investors against virtual currencies
Securities and Exchange Commission has cautioned Nigerians against investing in digital currencies, otherwise known as crypto currencies.
The apex capital market regulators in a public alert at the weekend noted that crypto currencies such as Swisscoin, OneCoin, Bitcoin and such other virtual or digital currencies carry enormous risks with no official protection for anyone participating in such scheme.
According to SEC, none of the persons, companies or entities promoting crypto currencies has been recognised or authorised by the Commission or by other regulatory agencies in Nigeria to receive deposits from the public or to provide any investment or other financial services in or from Nigeria.
“The public should also be aware that any investment opportunities promoted by these persons, companies or entities are likely to be of a risky nature with a high risk of loss of money, whilst others may be outright fraudulent pyramid schemes,” SEC stated.
The Commission noted that given that these instruments and the persons, companies or entities that promote them have neither been authorised, nor any guidelines and regulations developed for them by any of the regulatory authorities in Nigeria, there is no protection available to users or investors in these virtual currencies from financial losses if the virtual currencies fail or the companies promoting them go out of business.
‘’The public and consumers of financial services are further advised that before making any investment or entering into any financial services transaction they should ascertain that the entity with whom the investment or transaction is being made is authorised by the Commission or other financial services regulatory authority as applicable to provide such services,’’SEC advised. -
SEC suspends Heritage Capital Markets for alleged share fraud
Securities and Exchange Commission (SEC) has suspended Heritage Capital Markets Limited, a stockbroker and dealer on the Nigerian Stock Exchange (NSE), for alleged fraudulent sale of investor’s shares.
In a circular, SEC stated that it suspended Heritage Capital Markets “in connection with unauthorised sale of shares belonging to an investor”, using the capital market term for shares fraud.
SEC also suspended the directors and sponsored individuals of the company, including two former presidents of Institute of Chartered Accountants of Nigeria (ICAN), Mr. Chidi Ajaegbu and Mrs Ibironke Osiyemi. Ajaegbu is the Managing Director of Heritage Capital Markets Limited while Osiyemi chairs the board.
According to SEC, Heritage Capital Markets failed to comply with the Commission’s directives to restitute the affected investor.
“In view of the above, the general public is hereby informed that the suspension is indefinite and shall remain in force pending the resolution of the matter against the operator,” SEC stated.
Other suspended directors included Dr Elijah Ogbuokiri, Prof Emmanuel Emenyonu and Oluseyi Olanrewaju. Suspended sponsored individuals included Paul Onalo, chief compliance officer and Oyafemi Titus, a stockbroker.
Incorporated in November 1997, Heritage Capital Markets Limited is licensed by the Nigerian Stock Exchange (NSE), SEC and FMDQ to operate as broker-dealer in the Nigerian capital market as well as offer brokerage services in fixed income securities. It has authorised share capital of N2 billion and shareholders’ funds of more than N1 billion.
The latest suspension came on the heels of the expulsion of three stockbrokers and an accountant for shares fraud by the council of the Nigerian Stock Exchange (NSE) earlier this month. The expulsion earlier in December brought the number of stockbrokers that had been expelled in 2016 to about seven as the Exchange seeks to protect the market integrity against the tempting recourse to illegal shares sale by hard-pressed stockbrokers.
The three stockbrokers, who were members and authorised dealer on the Exchange, were stripped of their registration and authority to trade on the NSE for selling shares belonging to their clients without the mandate and consent of the clients.
With the stock market downtrend and economic recession fuelling temptations to sell investors’ shares in their custody, the NSE had recently started the implementation of newly amended rules aimed at tightening the noose on unauthorised sale and transfer of shares by unscrupulous stockbroking firms and traders.
Under the amended rules, the Exchange could withdraw the dealing licence of any erring stockbroking firm and trader as well as impose fines not less than N1 million on any offender.
According to the rule, no dealing member shall sell or transfer any securities without the authorisation of the owner.
“A dealing member that has sold or transferred any securities without the authorisation of the owner shall not be permitted to keep any benefits accruing from such transaction, including but not limited to bonuses, rights, commissions, cash dividends, capital appreciation, and any profit accruing therefrom whatsoever,” the rule stated.
Any dealing member that sells or transfers securities without the authorisation of the owner shall be required to buy back the securities along with any accrued benefits within a period of 14 business days.
Besides, where the unauthorised sale transaction is worth N5 million and below in value, the erring stockbroking firm will be liable to pay a fine of N1 million or three times the value of the sale or transfer, whichever is higher, and N5,000 for every day from the day on which the dealing member is required to buy back the securities by the Exchange until the day the dealing member completes buying back the shares for the owner.
Where the illegal sale transaction is higher than N5 million in value or the dealing member has engaged in such unauthorised sale, or transfer of securities on a previous occasion, it shall have its dealing license withdrawn by the council of the Exchange and shall in addition be liable to pay a fine of N5 million or three times the value of the sale or transfer, whichever is higher and N5,000 for every day from the day of the sanction until the day the dealing member completes buying back the shares for the owner.
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SEC, EFCC mull greater protection for investors
Nigeria’s apex capital market regulator, Securities and Exchange Commission (SEC) and the anti-corruption agency, Economic and Financial Crimes Commission (EFCC) are considering a new collaborative investigation and enforcement framework that will enhance investors’ protection and the integrity of the capital market.
The two Federal Government agencies are already working on a Memorandum of Understanding (MoU) that will encapsulate the framework expected to step up the collaboration between the agencies and enhance the efficiency and effectiveness of capital market investigations and enforcements.
SEC Director-General, Mr. Mounir Gwarzo and acting chairman EFCC, Mr. Ibrahim Magu, met in Abuja over the weekend in furtherance of the collaboration.
Gwarzo noted that the Investment and Securities Act (ISA), which guides SEC operations, does not give the Commission powers on criminal cases, thus the need to work with a frontline agency such as the EFCC in order to effectively discharge its responsibility of investors’ protection.
“We are by provision of our law mandated to protect investors on developing the market, but the way our law is structured, we have limitations over criminal cases. That is why in the last 10 years, there has been a very great collaboration between both agencies. We hope that when this MoU becomes fully operational, it will assist in reducing market infractions to the barest minimum,” Gwarzo said.
He said there has been a close relationship between the SEC and the EFCC, noting that the collaboration with the EFCC has been of tremendous benefit to the SEC, especially in areas of investigation and enforcement.
According to him, effective policing of the market is one of the ways of restoring investors’ confidence.
“One of our agenda is to bring back the retail investors to the market and there is no way they will agree to return if they are not sure of the safety of their investments,” Gwarzo said.
Magu expressed delight that the collaboration between both agencies has yielded enormous benefit for the growth of the capital market, adding that the EFCC will continue to provide assistance where required.
He noted that the EFCC has been instrumental in the investigation of several cases of fraud in the capital market and recovered funds which were returned to investors.
He assured that the EFCC will continue to support the SEC in its efforts to protect investors and ensure the safety of investments in the Nigerian capital market.
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IFC, SEC to implement corporate governance scorecard
Securities and Exchange Commission (SEC) and the International Finance Corporation (IFC), a member of the World Bank Group, will begin the implementation of the Nigerian Corporate Governance Scorecard in January 2017.
In 2014, IFC and SEC partnered to develop the Nigerian Corporate Governance Scorecard which was launched in November 2015. Following the launch, both institutions have jointly trained various stakeholders to prepare for implementation. These stakeholders include chief finance officers, company secretaries, audit committee and board chairpersons. The training sessions generated awareness for the new disclosure requirements of SEC. These disclosures will be used annually to assess corporate governance practices of listed companies in the country.
Both SEC and IFC at the weekend confirmed that the implementation of the Nigerian Corporate Governance Scorecard will start in January 2017.
Director-General, Securities and Exchange Commission (SEC), Mounir Gwarzo said a major focus of the apex capital regulator is to provide regulatory oversight to ensure public companies comply with best practices in corporate governance and boost their performance.
“Having built considerable market awareness for the scorecard with IFC’s support, we hope that as companies comply, they will improve their performance and contribute to growth in the nation’s economy,” Gwarzo said.
According to him, the scorecard will identify strong performers through enhanced disclosure, strengthen investor confidence and encourage foreign investments in the country.
Country Manager, Nigeria, International Finance Corporation (IFC) Eme Essien Lore noted that IFC works with firms to attract and retain investment by promoting the adoption of good corporate governance practices and standards.
“We have partnered with SEC over the last two years, developing the corporate governance scorecard and sensitising stakeholders. We hope that as implementation begins in January 2017, the trained officials would translate progress made into ongoing processes that boost performance, attract investments and help the economy grow,” Essien Lore said.
Corporate governance refers to the structures and processes by which companies are directed and controlled. Companies become more accountable and transparent to investors, which encourages new investments, boosts economic growth, and provides employment opportunities.
Corporate governance scorecards are quantitative tools used to measure the level of observance of a code or standard of corporate governance. The scorecard was developed using indicators from the SEC code of corporate governance and will assess individual, sectorial and market-wide level of compliance with standards of best practices.
IFC’s Africa corporate governance programme is funded by the State Secretariat for Economic Affairs (SECO), Switzerland. IFC is the implementing partner for the programme.