Uche Usim, Abuja and Chinwendu Obienyi

For two years running, the Securities and Exchange Commission (SEC) has been bugged down with a three-prong battle to retain its integrity as it seeks to secure and sustain investor confidence and mediate effectively in internal matters in the market without prejudice. 

To prove that the government was not prepared to toy with the integrity of the regulator, erstwhile Minister of Finance, Mrs Kemi Adeosun, suspended the former Director-General of the Commission, Mr Munir Gwarzo on November 29, 2017 and set up an Administrative Panel of Inquiry (API) to investigate allegations of financial impropriety levelled against him.

These actions the former Minister said were consistent with SEC’s mandate of maintaining high standards of corporate governance in the urgent task of growing the nation’s economy.

In 2008, corporate governance issues nearly ruined the capital market, forcing SEC then to wield the big stick by penalising some companies especially for violating post-listing requirements and other market infractions.

In April 2011, SEC unveiled a new Code of Corporate Governance to deepen discipline in public institutions in line with global best practices.

The new blueprint raised the bar in its monitoring capacity and capability in order to address issues arising from various market infractions in the market.

According to Nigeria’s first Professor of Capital Markets, Prof Uche Uwaleke SEC under Ms Mary Uduk, the Acting Director-General has worked hard in the area of implementing the 10-year capital market master plan which houses the new order.

He said: “Under her leadership, SEC has undertaken several investor protection measures including the clamp down on ponzi schemes and illegal investment companies. “Worried by the volatility in the stock market, plans are afoot by the Commission to introduce equity derivatives going by information obtained from its website. SEC is also partnering with Fintech companies with a view to enhancing market infrastructure and positioning our capital markets to be more competitive. I can also tell you that my interactions with staff of the Commission have shown that staff morale has greatly improved since her appointment as Ag DG”.

However, in 2017, Oando Nigeria Plc, a big player in the oil and gas sector and a listed company got enmeshed in controversies bordering on alleged breach of corporate governance and sharp dealings. Before the Annual General Meeting held on September 11, 2017 in Uyo, there was a petition before SEC alleging a breach of corporate governance by the management of Oando.

The AGM was marred by protests from aggrieved shareholders. But despite the agitation, Wale Tinubu was returned as the Group Chief Executive Officer in a tensed atmosphere.

After the AGM, shareholders from different parts of the country expressed their grievances at different fora, including the Nigerian Stock Exchange, Ibadan and the National Assembly, Abuja.

The shareholders, among other things called for a thorough investigation to be preceded by the suspension of SEC management and board to allow for a thorough and transparent exercise.

On top of the grievance list of shareholders is a N779 billion debt amassed by the management, which they said had blighted the growth of the oil firm.

To calm frail nerves and act as an unbiased arbiter, SEC launched an investigation into the activities of Oando following the receipt of two petitions in 2017 from shareholders.

The move was also to serve as sufficient deterrent to all real and potential culprits of corporate standard abuse.

In what appears to be a validation of the allegations levelled against Oando Plc by the shareholders, on the 18th of October 2017, SEC released a circular in response to the petition written to it by Ansbury Incorporated. The regulatory body discovered among other things that Oando had breached the provisions of the Investments & Securities Act 2007. The company has also breached SEC Code of Corporate Governance for Public Companies and also have discrepancies in its shareholding structure. It was discovered that there were suspected insider dealings with related party transactions not conducted at arm’s length.

Consequently, the Commission directed the immediate suspension of the trading of the company’s shares on the floor of the Nigerian Stock Exchange.

Similarly, the regulator constituted a forensic audit team comprising auditors, lawyers, stockbrokers and registrars to clinically X-ray Oando’s activities.

But it did not suspend or sack the management and board to ensure a hitch-free assignment and this was greeted by several protests from shareholders.

Based on the preliminary findings of SEC, the forensic audit became necessary, at least to ascertain the extent of the anomalies that have been uncovered in Oando; as there was certainly no form of exoneration in sight. To further compound the woes of the company, the Johannesburg Stock Exchange suspended trading of Oando stocks until further notice.

Last Friday, SEC under the leadership of the Acting Director-General, Ms Mary Uduk, announced that it has concluded investigations of Oando Plc that had lasted close to two years and with the management in place.

However, it was a soothing development for anxious shareholders and other stakeholders who had waited impatiently for the regulator to bare its fangs and whip the defaulting management into line.

SEC directed among others  the immediate resignation of  Group Chief Executive Officer of Oando Plc, Wale Tinubu, his deputy, Omamofe Boyo and other directors of the company.

The apex regulator also barred the Group Chief Executive Officer (GCEO) and the Deputy Group Chief Executive Officer (DGCEO) from being directors of public companies for a period of five years.

The Commission further directed the convening of an Extra-Ordinary General Meeting on or before July 1, 2019, to appoint new directors.

These among others the SEC stated, are part of measures to address identified violations in the company.

According to SEC, “Following the receipt of two petitions by the Commission in 2017, investigations were conducted into the activities of Oando Plc (a company listed on the Nigerian and Johannesburg Stock Exchanges).

“Certain infractions of Securities and other relevant laws were observed. The Commission further engaged Deloitte & Touche to conduct a Forensic Audit of the activities of Oando Plc.

“The general public is hereby notified of the conclusion of the investigations of Oando Plc. The findings from the report revealed serious infractions such as false disclosures, market abuses, misstatements in financial statements, internal control failures, and corporate governance lapses stemming from poor board oversight, irregular approval of directors’ remuneration, unjustified disbursements to directors and management of the company, related party transactions not conducted at arm’s length, amongst others”.

SEC also directed the payment of monetary penalties by the company and affected individuals and directors, and refund of improperly disbursed remuneration by the affected Board members to the company.

As required under Section 304 of the Investments and Securities Act, (ISA) 2007, the Commission said it would refer all issues with possible criminality to the appropriate criminal prosecuting authorities.

In addition, SEC stated that other aspects of the findings would be referred to the Nigerian Stock Exchange (NSE), Federal Inland Revenue Service (FIRS), and the Corporate Affairs Commission (CAC).

“The Commission is confident that with the implementation of the above directives and introduction of some remedial measures, such unwholesome practices by public companies would be significantly reduced.

“Therefore, in line with the Federal Government’s resolve to build strong institutions, Boards of public companies are enjoined to properly perform their fiduciary duties as required under extant securities laws” the statement added.

The Commission, as the apex regulator of the Nigerian capital market, stated that it maintains its zero tolerance to market infractions, and reiterates its commitment to ensuring the fairness, integrity, efficiency and transparency of the securities market, thereby strengthening investor protection.

Three days later, SEC issued another statement appointing an interim management for the company.

SEC said in a statement, “Further to our press release on Oando Plc, dated May 31, 2019, the Commission hereby informs the public of the constitution of an interim management team headed by Mr Mutiu Olaniyi Adio Sunmonu, to oversee the affairs of Oando Plc, and conduct an Extraordinary General Meeting on or before July 1, 2019, to appoint new directors to the board of the company, who would subsequently select a management team for Oando Plc.

“The commission wishes to reiterate its commitment to maintaining the integrity of the market.”

However, the embattled oil firm vehemently refused to carry out the regulator’s order as its management refused to quit.

It accused the Commission of bias in the unfolding  investigation and ruling on the outcome of the forensic audit. It added that the alleged infractions and penalties were completely unsubstantiated, ultra vires, invalid and calculated to prejudice the business of the company.

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“The rumour swirling round that the Oando’s Management team and Board of Directors have changed today (Monday) is not true as we remain unchanged in that regard” the company tweeted.

Justice Mojisola Olatoregun sitting in Lagos granted an interim injunction following  an application by the embattled GCEO and DGCEO.

The oil company chiefs had applied  for enforcement of their fundamental rights.

The court also restrained SEC, its servants or agents from taking any step concerning the Commission’s letter dated May 31, in which it barred Tinubu and Boyo from being directors of a public company for five years.

It also restrained the Commission from imposing a fine of N91.13 million on Tinubu.

It also  ordered that SEC should restrain from all actions on the said letter pending  hearing and determination of the applicants’ motion for an interlocutory injunction.

The court also restrained Mr Mutiu Sunmonu from acting as the Head of Oando’s interim management team pending the hearing and determination of the motion.

It also urged the parties to maintain the status quo ante pending the determination of the motion.

The court adjourned the case until June 14.

Commenting on the issue, Mr Ambrose Omordion,  the Chief Operating Officer, InvestData Ltd. , insists that the suspension of the CEO and DCEO of Oando would send signal to other managing directors and executives in the market.

Omordion said that  the outcome of the forensic audit showed that SEC could bite and not only bark. He said that the investing public had been calling for change in the company’s management for a long time.

Omordion said that there would be sanity in the company when the new management takes over in July.

“Other companies and their directors will seat up seeing how Oando management and its directors ended up.

“SEC decision will further boost corporate governance and transparency in quoted companies at the same time investors confidence going forward,” Omordion stated.

He noted that the move would create an opportunity for discerning investors in the company with the coming of the new management.

But Kabiru Tambari who spoke on behalf of Sokoto shareholders of the firm said that SEC’s actions ‘defied logic’ and could kill the company.

“We are not happy at all with has happened. Wale Tinubu and his management team have suffered, they have put their resources; energy, time; to keep this company moving forward and now the SEC wants to take it away from not just them but us the shareholders as well.

“When the company was making losses the SEC didn’t bring up all these infractions and sanctions, but now the company is doing well, and has returned to profit and they’ve come with such drastic actions. This will foil the company’s attempt to pay us dividend at the end of the year. It is clear that the SEC wants to kill the company.

Malam Shehu Mikail, National President, Constance Shareholders Association of Nigeria,  expressed shareholders satisfaction to the commission’s decision.

Mikali said that the ban would instil transparency and corporate governance in the nation’s capital market.

The shareholder activist said that the outcome showed that nobody was above the law in the market.

He said that some companies had collapsed due to issue odu transparency and corporate governance.

Alhaji Gbadebo Olatokunbo, Shareholder Activist and co-founder, Nigeria now “NOBLE” Shareholders Solidarity Association in 1985 said as a shareholder of Oando, he does not believe that the company was very clean with most of the reports it had published so far to her shareholders.

“I have been suspecting that some people been playing a bad and very dangerous games with most of the reports & accounts of the company, therefore l am not surprised at all with the result published and the sanction by SEC.

“Oando is two companies in one,it’s an offshore/onshore oil company,yet every year in and out the annual report and accounts and dividends payments were nothing to commensurate the nature and size of the company.

“Check the performances of other companies in the same sector with that of Oando,then you will appreciate my point of view,that Oando is a great disgrace,disappointment and embarrassment to the corporate Nigeria,because no multinational company in it’s shoe would have performed so badly like the management and board of Oando did,to be candid it was a dent to the Nigeria Corporate World.

Olatokunbo said the management and board of Oando had taken their shareholders for a very rough ride for too long,before the intervention by SEC adding that it would serve as a deterrent to other companies in the same bad habit.

Before the matter got to a head, the Chairman, Trusted Shareholders Association of Nigeria, Alhaji Mukhtar Mukhtar, wondered why the government will leave the management of a company it investigated and found to have engaged in underhand dealings to remain in office during a forensic audit.

He alleged that the decision of the regulatory authorities (Finance Ministry and SEC) to leave Oando’s Managing Director, Wale Tinubu and other top management officials during an audit despite damning allegations against them, was capable of eroding investors’ confidence.

“How can you leave a management you investigated and found to have issues to clear on the saddle during a forensic audit. It’s never done anywhere. They are to be suspended pending the duration of the audit and if they are without blemish, they return but if guilty, let the law take its course.

“We all remember the former SEC DG who insisted on this forensic audit, they leveled some allegations against him and he was suspended pending the outcome of the Administrative Panel of Inquiry. Why can’t the Oando management be suspended? This smells of bias and we worried about it.

“Now, an acting SEC DG has been appointed but he seems scared to insist that the management be suspended pending the audit outcome. They said the audit is continuing but nothing is happening and we are here to put pressure on regulatory authorities to do the needful.

“Shareholders are dying one after the other. Shares we bought at N98/share has depreciated to N4.50k/share. Yet those responsible are living luxurious lives and flying in the best of private jets.

“This is unfair. They have sold the revenue-yielding arms of Oando like the downstream businesses to themselves or their cronies, leaving the liabilities to us. And yet they can’t be suspended for a full unhindered audit. This is unacceptable”, Mukhtar lamented.He also expressed worry over huge debt of N779 billion, which gulps N26 billion interest annually”.

This development has also seen the company’s stock recording a 18.28 per cent drop in value in the last two trading session (May 31 and June 3, 2019) costing shareholders of the company approximately about N11 billion of their wealth.

Checks done by Daily Sun show that company’s stock closed last Monday (June 3, 2018) at N3.80 per share at N47.239 billion in market capitalisation as against the opening share price of N4.65 per share at N57.809 billion last Thursday (May 30, 2019) before SEC released its decision on the company, depicting a loss of N10.567 billion or 18.28 per cent.

Investment analyst and shareholder activist, Nona Awoh said SEC’s was based on the outcome of a forensic audit by Deloitte & Touche, a firm of international external auditors, except the company (Oando Plc) can prove otherwise.

“Much more important, investors themselves need to learn to protect themselves, which means they must begin to ask the right questions and taking up management of public companies.

Chief Executive Officer, Cowry Asset Management, Johnson Chukwu, however disagreed with the view of Adebisi, stating that SEC is carrying out its duties as a market regulator.

“For me, investors in Oando will be worried and we are likely going to see dumping of their shares and i believe they will no longer wait for the outcome in the sense that the allegations are quite huge.

I do not think SEC is becoming overbearing, they are merely discharging their duties and this situation is not the first to happen, as in 2006, the board of Cadbury removed the MD and ED for wrong disclosures and in 2008, SEC imposed a fine of N21 million on Cadbury for presenting false financial statements to the market. SEC has banned some operators for life and it is the duty of SEC to enforce compliance to rules and regulations of the market”, Chukwu said.