Capital Market Editor Taofik Salako examines the intrigues and underlying pressure that put SEC’s independence to test.
This, in my opinion, would put to rest the question of how the shareholders’ funds of the company have been managed by persons appointed to do so for the shareholders.
“The Commission, therefore, as the apex regulator of the Nigerian capital market, has the responsibility to ensure that a thorough, independent and transparent process is put in place to unravel the true financial status of the company.
“Honourable Minister ma, may I restate that it is in the best interest of the Nigerian capital market and our recovering economy for the forensic audit of Oando Plc to be carried out, as reneging on same at this time would result in the following:
- Ridicule the regulators and project it to the global investment community as inefficient and lacking of integrity;
- Completely erode investors’ confidence in the market;
- Send wrong signal to all market participants both locally and globally;
- Discourage foreign investors from investing in our jurisdiction, and;
- Portray the absence of independence of the regulators.
“The Commission, in Section 13 (cc) of the Investments and Securities Act 2007, is mandated to advise the Honourable Minister of Finance on all matters relating to the securities industry.
“Thus, this advice proffered is as a result of our obligation to properly guide you on the best approach to take on capital market issues and it is strongly our recommendation that it should be adopted.
“Honourable Minister, my request to seek for a written directive is not in any way meant to disrespect your person, but stems from the basis that every decision or directive of the Board to the management of the Commission are always documented to enable ease of implementing such directive.
“Given your current capacity as the Board of the Commission. It is only proper that you be guided on the necessary procedure to adopt.”
Many informed sources told The Nation that Gwarzo, while not absolving him of allegations against him, was a victim of a high-level lobbying group that included powerful traditional institutions and political power brokers, who claimed to be close to the Presidency. The power brokers and related parties in favour of Oando’s case had mounted pressure on the minister to intervene in the investigation and rein in supposedly “stubborn” SEC director-general.
After the Federal High Court struck out Oando’s suit and SEC prepared to launch the forensic audit, the lobbyists mounted more pressure, leading to the meeting between Adeosun and Gwarzo, it was learnt.
With Gwarzo’s insistence on the forensic audit, Mrs. Adeosun moved the next day, suspending Gwarzo on the basis of the 11-month-old petition. However, the Ministry of Finance has denied any link between Oando’s investigation and Gwarzo’s suspension, noting that the director-general was suspended because of allegations that he was carting away documents to undermine a petition against him.
Zero tolerance stand of SEC on infractions
SEC, under Gwarzo, has shown strong commitment to enforcement. It recently indicted the Managing Director of Partnership Investment Plc, Mr Victor Ogiemwonyi, banning him from engaging in capital market activities and from holding directorship position in any public company in Nigeria. It has also withdrawn the operating licenses of his companies. The Commission also suspended the chairman of the companies – Mr. Henry Omoragbon from engaging in capital market activities in the Nigerian capital market for a period of five years. Ogiemwonyi and his companies allegedly engaged in unauthorised sale of clients’ shares, failure and refusal to resolve clients’ complaints, performance of a capital market function without registration, non-compliance with the Code of Corporate Governance of the Commission, filing of false and misleading information and non-compliance with the Commission’s rules relating to assets-mix ratio.
Earlier this year, SEC had in another high-profile case banned ebullient investment banker, Mr. Albert Okumagba and Mr. Chibundu Edozie and their companies, BGL Assets Management Limited and BGL Securities Limited from ever participating in the Nigerian capital market. Both Okumagba and Edozie were also banned for life from holding office in any public company in Nigeria.
The Commission had also dissolved the board of directors of Ikeja Hotels Plc and ordered a forensic investigation into the affairs of the hospitality and tourism company.
The capital market regulator said it took the decision to sack the board due to unresolved internal crisis, involving some majority shareholders of Ikeja Hotels Plc, in apparent reference to the squabbles within the Ibru family, which was holding the largest shareholdings in the company.
Ikeja Hotel, incorporated in 1972 and quoted on the NSE in 2007, controls a chain of hotels directly and through other subsidiaries and affiliates, including Tourist Company of Nigeria (TCN) Plc and Capital Hotel Plc. Ikeja Hotel owns Sheraton Hotel, Ikeja, Lagos.
TCN owns Federal Palace Hotel and Capital Hotel owns Abuja Sheraton Hotel. The Ibru family owns the single largest individual shareholding.
“Having failed to resolve its lingering crisis, the Commission, exercising the powers conferred on it by the Investment and Securities Act, 2007, to protect investors and the integrity of the securities market, hereby approves the appointment of an interim Board for the company with Chief Anthony Idigbe, SAN as interim chairman,” SEC stated in the case of Ikeja Hotel.
It charged the interim board to oversee the conduct of a forensic investigation into the affairs of the company among other responsibilities.
The zero tolerance stance of SEC appeared to be impacting positively on the capital market as level of infractions has dropped by about 88 per cent over the past 18 months. The number of reported cases of infractions in the capital market has reduced from 291 in first quarter 2016 to 36 in the third quarter of 2017. Also, the number of enforcement cases has also dropped from 49 to 30 within the same period.
Few days to his suspension, Gwarzo had fired what many viewed as a warning shot, reiterating his commitment to wield the big stick against any major capital market operators and companies that violate the ethics of the market or engage in activities that infringe on investors’ confidence.
Gwarzo said the zero tolerance of the apex capital market regulator knows no size, name or colour and all operators would be held to accounts in line with extant capital market rules.
“Whoever you are, whatever your size is, when you cross the red line, the letter will be on you. So, I think that the message has been sent to everyone. In the past, it is only the smaller ones that have been dealt with, but now, we have shown example that whoever you are, it doesn’t matter to the SEC, your size doesn’t matter. And I think the few actions we have taken on big companies have sent a strong signal to the market,” Gwarzo said.
Other voices against Gwarzo
On Wednesday, the trade union arm of SEC endorsed Gwarzo’s suspension. The Association of Senior Civil Servants of Nigeria (ASCSN), in a press statement commended President Muhammadu Buhari for what it described as “timely intervention”, arguing that the suspension was long overdue. Isaac Ojemhenke, who acknowledged the press statement, told The Nation that the SEC officials were overjoyed when they heard of the development on Gwarzo.
Also, the Centre for Anti-Corruption and Open Leadership (CACOL), visited the Economic and Financial Crimes Commission (EFCC), to defend its petition against Gwarzo. CACOL’s Executive Chairman Debo Adeniran, who spent about one hour with the head of investigating team at the Capital Market Unit of the anti-graft agency, aid CACOL responded to the invitation of the EFCC to adopt and defend its petition against Gwarzo.
He said: “We are delighted that the EFCC responded promptly, and that it is enthusiastic to investigate the subject of our petition. We intend to follow through with this process and we will not be distracted by all the attempts by Gwarzo and his cronies to make us back down, drawing on absurd and unconnected straws to whip up sentiment in the media. Those who know us know, we do not just take up a cause, when we do, we are tenacious in our pursuit and we approach our campaigns with independence of mind,” CACOL said.
A Senior Advocate of Nigeria (SAN), Mr. Festus Keyamo, called for thorough investigations of the allegations against Gwarzo and Oando.
He said: “Whilst Nigerians anxiously await the report of all the investigations into the Securities and Exchange Commission, I also urge the relevant agencies to continue the transparent and thorough probe of the issues surrounding Oando Plc.
‘The Oando Plc probe should not be scuttled on account of the investigation of the suspended DG of SEC because the Oando probe and the SEC investigation are mutually exclusive despite the attempts to link them together.”
House of Representatives weighs in
Before the endorsement of Gwarzo’s suspension by the SEC unit, the House of Representatives had directed the Finance minister to reinstate Gwarzo.
In an unanimous voice vote, the House directed that the status quo be maintained until the outcome of the investigation to be carried out by the House of Representatives Committee on Capital Market & Institutions within two weeks. The motion was unanimously adopted after it was put to a voice vote by Speaker Yakubu Dogara.
The decision of the House followed the adoption of a motion of urgent national importance by Diri Duoye (PDP, Bayelsa), who alleged that the conflict between the minister and Gwarzo over Oando forensic audit and corruption allegation were major factors in the events that led to the suspension.
Diri said: The conflict has led to the suspension of the SEC director-general, alongside the heads of Legal Department and Media on the 29th of November, 2017.
“It has also led to the set up of an administrative panel of inquiry and appointment of an Ag director-general by the minister of Finance. It is worthy of note that the conflict has allegedly lingered for several months between Ministry of Finance and Securities and Exchange Commission, but, the matter of disagreement brought it into the public domain.”
According to him, there were allegations of interference by the Ministry of Finance in the discharge of SEC’s responsibilities, with the Oando forensic audit matter being largely responsible for Gwarzo’s suspension.
He noted that the intervention by the House will put the matter into proper perspective and contribute to the amicable resolution of the conflict in order to protect the image of the Securities and Exchanges Commission in the interest of both local and foreign investors.
In his contribution, Toby Okechukwu (PDP, Enugu), said a thorough investigation was necessary to forestall the ugly past experience that led to the stock market crisis in the past.
“Nigerians should know why the director-general was sacked. A total panel of inquiry is needed in SEC,” Okechukwu said.
In his remarks, Sani Kaita (APC, Katsina) pointed out that SEC is a very sensitive and very important organisation to Nigeria and the international community and that the House should be involved in the investigation of the issues.
As Gwarzo goes through the eye of the storm, many capital market stakeholders believe that the suspended director-general was a victim of his administrative agenda-zero tolerance against infractions and in-house reforms.