…Regulators watch helplessly
By Omodele Adigun
The battle to restore investor confidence may have, for the umpteenth time, suffered a severe blow following the explosion of scandals in the capital market.
First, it was the case of BGL Securities Ltd, and its sister company, BGL Asset Management Ltd., whose principal officers, Albert Okumagba, Managing Director, and his Deputy, Chibundu Edozie, incurred the wrath of the Securities and Exchange Commission (SEC) over their “failure, refusal and or/neglect to liquidate their investments in both the Guaranteed Consolidated Dated Notes and Guaranteed Premium Notes, among others.”
Then came the case of the former Managing Director of Ideal Securities & Investment Limited, Mr. George Nchedo Okafor, who was also hammered by SEC for engaging in acts capable of eroding public confidence in the market, by obtaining bank loans of N500 million with forged board resolution; conversion of his company’s funds for personal business; refusal to carry out client’s instructions; supply and paying fictitious clients as creditors of the company, among others.
Now the latest: the case of Partnership Investment Company Limited (PICL) and its Managing Director, Victor Ogiemwonyi, who is being accused of scamming no fewer than 300 investors of N4.8 billion. Apart from that, Ogiemwonyi is said to be currently in Ikoyi Prison awaiting trial on three-count charge of stealing over N1.2 billion and $80,000 belonging to Arnold Ekpe (SAN), one of his clients.
Commenting on these scandals, Mr Ariyo Olushekun, the former President of the Chartered Institute of Stockbrokers(CIS), lamented that the ugly incients, particularly the ones involving Partnership Investment, could pull down the market.
According to him, prompt report of any operators’ infractions could have saved the day. He explained: “It is unfortunate that this has happened. But the lesson everybody should learn is that, if people keep quiet, that kind of thing would continue to happen and it will get worse. If you give money or documents to somebody, and it didn’t give it back to you, and you didn’t report to the police. The police will not know.They wont be able to do anything.”
Apportioning blames, Olushekun said:
“The market has enough control, checks and balances that should have prevented what happened. But unfortunately, the client himself was negligent. If you fill a form and opted for direct cash settlement, which means that you want the money to be paid into your account directly, and you did not get trade alert, telling you that your transaction has been done.Or you know that in two or three days time, you should be expecting the money in your account. If you didn’t get it in your account, then you should have raised the alarm. So the clients in question, about 80 of them did not get trade alert for more than two months or over a nine or 10-week period. And they didn’t do anything.
“You asked a man to sell at N16, the man sold at an average of N13.49.He didn’t complain to anybody because they were friends. So what else do you expect? Do you expect the authority to do magic when you didn’t do what you are expected to do? Everything is on the ground. That’s why they give you alert so that you know when the shares are sold. You can then calculate how much you are expecting in your bank. The man didn’t get any money and he kept quiet. I understand that the first set of shares he sold was worth N600 million. If you were expecting N600million to enter your account and you did not get it. And you kept quiet because you were friend with the guy. When your friend has betrayed you, you now put the blame on the authority and making so much noise about it. He wants to spoil the market and he wants it to affect everybody. He is not being fair to other investors because other investors will now lose. Some may leave the market when prices begin to come down.I am not in any way saying what Partnership Investment did was right. No! Partnership was extremely wrong, and what it did was even criminal. We can say there was an intent to defraud. The damage would not have been this much if the man had done what he was supposed to do.”
In its own response, SEC, in advertorials, promised that no stone would be left unturned to recover for investors monies illegally converted by market operators.
The advertorial reads: “The attention of the Securities and Exchange Commission has been drawn to various publications in the national dailies alleging that investors in the Nigerian capital market have recently been defrauded by a licensed member of the Nigerian Stock Exchange (NSE).
“As the apex regulatory authority of the Nigerian capital market, the commission would do everything within the confines of the Investments and Securities Act (ISA) 2007 and the Rules and Regulations made pursuant to the Act, to ensure the protection of investors and their investments in the market.
“The commission has established a robust framework for investigating complaints received from investors. The commission also has an excellent enforcement mechanism and continues to maintain zero tolerance to any form of infraction in the market. Furthermore, the commission adopts a risk-based monitoring and supervision of operators and institutions in the market to forestall potential systemic collapse.
The commission imposes stiff sanctions on erring operators to serve as a deterrent within the limits permitted by law, while infractions with elements of criminality are referred to the law enforcement agencies for prosecution as provided under Section 304 of the ISA 2007. In furtherance of this, the commission has developed a thriving partnership with the Nigerian Police Force (NPF) and the Economic and Financial Crimes Commission (EFCC) to prosecute these matters.
The question many Nigerians are asking today is why, despite their huge investment in information technology, neither the NSE nor SEC could nip any of the mega infractions in the bud until investors’ monies had been siphoned.
The commission is only assuring all investors and stakeholders of its commitment to ensuring the continued development and stability of the capital market, while no stone is being left unturned to recover for investors monies illegally converted by market operators.
But a public analyst, Mr. Jude Fejokwu, said in a blog that SEC’s response was largely defensive and pacifying rather than providing clarity and answering questions. “Why did the media have to break a story more than four months after SEC knew about it? Now, SEC wants to respond and feel it is being proactive and transparent. This issue will be buried before you can dig six feet.”
However, to be fair to the commission, on the case of BGL, for instance, SEC banned Okumagba and Edozie from participating in capital market activities for 20 years. The commission also ordered Okumagba’s companies to refund to investors over N2 billion.
The APC decided that by their actions and/or omissions BGL Securities Ltd, BGL Asset Management Ltd., Okumagba, Edozie and 22 respondents engaged in acts capable of adversely affecting investors’ confidence in the capital market.
It added that the APC decided that the registration of BGL Securities and BGL Assets Management be cancelled, while Okumagba and Edozien be banned from capital market operations for a period of 20 years.
It stated further that the two companies would also pay a fine of N25 million for breaching Rule 1(iii) of the Code of Conduct for capital market operators.
“Other than Okumagba and Edozie, Peter Adebola and Ashley Osuzoka was banned for five years and four years respectively,” the commission added.
The APC, apart from the ban placed on them and some monetary fines, directed the companies to refund N24.03 million to the National Open University Staff Cooperative Multipurpose Society.
It also directed the companies to pay Delta State Ministry of Finance N1.88 billion; Azort Nigeria N204.83 million; Prof Ojuah Umunnakwe the sum of N10.97 million; N3.04 million to Orsule Awase and N10.74 million to Mahmoud Usman.
Okumagba was also removed as the President of Chartered Institute of Stockbrokers (CIS).
As for Okafor, the former Managing Director of the Ideal Securities & Investment Limited, was also banned from capital market activities in the country.
In the summary of the APC decision in the matter of APC/2/2016: Ideal Securities & Investment Limited Vs Mr. George Nchedo Okafor, made available to Daily sun, SEC stated that, “on September 12, 2008, the commission received a petition from the complainant – Ideal Securities & Investment Limited – alleging various misconducts against the Respondent – Mr. George Nchedo Okafor.
“Upon conclusion of the hearing, the SEC APC has reached a final decision which has been approved by the relevant authority. The decisions of the Committee are as follows:
“That the Respondent engaged in acts capable of adversely affecting the investing public’s image of, and confidence in the capital market.
“That the Complainant should take appropriate steps to recover whatever monies it lost as a result of the Respondent’s conduct.
“The Respondent used the company’s portfolio of blue chip companies as security/collateral in obtaining the unauthorised margin facility.”
As for Ogiemwonyi, news report had it that in a letter to the Chief Executive Officer of the NSE, Mr. Oscar Onyema, Ekpe, through his solicitors, McPherson Barristers & Solicitors, told the management of the Exchange that Ogiemwonyi has abused his office as a stockbroker by acting in excess of his client’s instruction and by appropriating monies due to a client in clear breach of the securities’ laws and regulations in Nigeria.”
It added that the extant rules in the market stipulate a direct cash settlement into an investor’s account, which means that once an investor chooses to receive his payment directly from the sale of a security, his account will be credited with the net proceeds of the sale transaction.
“Our client opted for a direct settlement into his account and gave no contrary instruction to Ogiemwonyi to warrant him holding on to proceeds of the sale of his shares.
“Our client has suffered unquantifiable distress over the protracted matter and it is worried at the impunity with which Mr. Victor Ogiemwonyi has withheld the sum of N1.2 billion and $80,000.”