The fast pace at which events are unfolding at the Securities and Exchange Commission (SEC) lately has put the capital market regulatory agency in eyes of the storm. Abdulwahab Isa reports
This isn’t the best time for the capital market regulator, the Securities and Exchange Commission (SEC). Its strength, efficacy and resoluteness both as regulator and apex supervisor of key segment of the economy are in public court for assessment.
The big stick wielded by SEC against Oando Plc in 2017 over alleged share manipulation and corporate governance issues has dovetailed into conflagration. In its wake, the crisis has swept two SEC’s chieftains from their top positions.
Regrettably, the current storm at SEC is compounded by absence of board of directors. The last board headed by Suleyman Ndanusa was dissolved four years ago. Like numerous government agencies without a board, SEC doesn’t have a board overseeing its affairs.
Genesis of crises
A former minister said to be sympathetic to Oando management had labored in vain to have SEC under Mounir Gwarzo rescind punitive measures preferred against the oil firm for a series of infractions. SEC had written to Oando management, revealing gross insider dealings and other alleged unwholesome practices.
In the letter addressed to Oando Chief Executive, Wale Tinubu, it stated clearly that there was outright disregard of laid down rules and regulations, especially the mis-statements in the 2013 and 2014 audited financial statements of Oando Plc, arising from the OEPL transaction.
According to SEC, “following the structuring of the OEPL transaction in contravention of the ISA 2007, Oando Plc recorded a profit of about N6 billion from the sale of OEPL that erased the operating loss of N4.68 billion leading to a profit of N1.4 billion for the year 2013.
“The company subsequently declared dividends from the profit. Having admitted that the action was in breach of the ISA 2007, Oando Plc, restated its 2013 & 2014 Audited Financial Statements, which contained material false and misleading information contrary to Section 60(2) of the ISA 2007.
“The commission finds from the Corporate Governance return submitted by the company for the period ended December 31, 2016 that the remuneration of the Group Executive Officer (GCEO) and the Deputy GCEO were approved by the Board while the GCEO was responsible for fixing the renumeration of other Executive Directors which is in violation of part 3, 14,3 of the SEC Code of Corporate Governance”. SEC explained that the last board evaluation of Oando Plc was done by KPMG in 2012, adding, “this is a violation of Part B, 15.1 of the SEC Code of Corporate Governance.”
Gwarzo was hell bent in wielding the big stick on the oil firm. A former Minister of Finance at the time, Mrs. Kemi Adeosun, whose ministry supervised SEC, waded into the matter. She labored in vain prevailing on Gwazo to drop the charges against Oando to no avail. SEC engaged services of forensic author (Deloitte) to proceed with the forensic audit while it froze trading on Oando shares and also put it on technical suspension.
In 2017, heap of allegations bordering on official misconduct were brought against Gwarzo. The Adeosun instituted administrative panel of inquiry. Gwarzo was held responsible for authorising severance payment to the tune of N1.7 billion to 44 SEC’s staff in 2015, an action said to have violated the commission’s 2015 budget provisions.
He was accused of paying himself over N100 million as severance package when he was commissioner, a position he held before his appointment as director-general.
In another case of insider abuse, the former DG was accused of awarding contracts to Out Bound Investments Limited, a firm Gwarzo seated on its board as Director with 200,000 ordinary shares. SEC paid several payments amounting to millions of naira to the firm’s United Bank for Africa (UBA) account.
For instance, SEC on February 21, 2017 paid to Out Bound Investments the sum of N2, 241,360.00 for supply of diesel. It had previously on October 10, 2016 and July 27, 2016 paid the firm N1.9 million and N2.2 million respectively for supplies.
Gwarzo was placed on temporary suspension on the order of Adeosun to allow unhindered investigation in allegation of financial misconducts. Gwarzo fired back. He said he was being hounded for failing to back down on Oando share scam investigation.
An administrative panel headed by Permanent Secretary of the ministry, Dr. Mahmoud Isa Dutse, recommended outright dismissal of Gwarzo.
It also suggested that the suspended SEC DG be referred to the Independent Corrupt Practices Commission (ICPC) for further investigation of the allegation of using his position to influence the award of contracts to Outbound Investments Limited.
Back in trenches
Penultimate week, SEC and Oando came back to the trenches. It announced suspension of Tinubu and his deputy, Omamofe Boyo, from holding director positions of public companies for a minimum five-year period.
The Nigerian capital market regulator also directed other members of the board of the company to resign their positions forthwith. It also directed the convening of an extraordinary general meeting of the company on or before July 1 to appoint new directors.
SEC in a statement hinged its decision on part of recommendations in the report of the panel constituted to investigate allegations of regulatory violations against the management of Oando.
The sanctions are among some regulatory measures by SEC to remedy the infractions by the sacked management of the company.
Further to its action on Oando , SEC announced constitution of interim management team headed by Mr. Mutiu Olaniyi Adio Sunmonu to oversee the affairs of Oando, conduct EGM, appoint new directors to the board of the company and to subsequently select a monument for Oando.
Tinubu and his team are also not giving up. A Federal High Court in Lagos has granted an order restraining SEC from taking any step concerning its imposition of a fine of N91, 125,000.00 on the Tinubu, and barring him and his deputy from being directors of public companies for a period of five years.
Justice Mojisola Olatoregun granted the order following an ex-parte application accompanied with an affidavit of urgency filed before the court by Dr. Olisa Agbakoba (SAN) leading two other senior advocates, Tayo Oyetibo and Oluyede Delano.
The judge asked SEC to stay action on the matter pending the determination of the substantive suit. Oando management claimed SEC violated rules in trying to suspend top management of the firm.
SEC insisted fair hearing was duly followed, saying, “in the course of the investigations, communications e.g. letters and phone calls were exchanged and meetings held between the Commission and Oando Plc, requesting for its comments and explanations on issues relating to the investigations. The findings of the Commission were communicated to the Group Chief Executive Officer of Oando Plc by a letter dated July 10, 201”.
“The commission subsequently engaged Deloitte & Touche to conduct a Forensic Audit of the activities of Oando Plc. In the course of conducting the audit, Deloitte & Touche held regular sessions with members of the Board and senior management of Oando Plc, and afforded them the opportunity to provide explanations on issues relating to the investigation. The Commission confirms that Oando Plc was given sufficient opportunity of being heard and accorded several opportunities to rebut the issues revealed by the investigation. The responses given by Oando Plc, were however, considered unsatisfactory; prompting, the decision by the Commission to penalize the company and some of the individuals related to it for violations of securities laws.”
Scramble for SEC
Amid raging feud between regulator and an operator in the market (Oando), there is an ongoing scheming for occupation of position of director general of SEC by interested parties.
A ruling by National Industrial Court and a pronouncement by an Abuja High Court acquitting suspended Gwarzo have rekindled hope for him to warm up for a possible take over of his lost position.
Similarly, a former acting DG of SEC, Dr. Abdul Zubair, who took over in acting capacity in absence of Gwarzo, has been cleared of wrong doings by ICPC and is warming for return to SEC.
Incumbent acting DG, Ms. Mary Uduk, who succeeded Zubair, is not letting opportunity slip her. She is said to be consulting and pressing all contacts available to her.
Staff of the Commission have also joined in the fray. Last week, Association of Senior Civil Servants (SEC) chapter staged protest against ruling of National Industrial Courts’ urging reinstatement of Gwarzo.
Addressing the media, SEC chapter Chairman of the Union, Nelson Oleghe, said workers were against Gwarzo’s return to SEC, citing proven cases of corruption, maladministration that characterised his tenure.
Speaking with New Telegraph, Nelson said: “The protest is a brief one but we have achieved our aim, which is to convey our position, opposition to Gwarzo’s return to SEC.”
Given these scenarios, the regulatory capacity and effectiveness of SEC as the police of capital market is on trial. The recent court injunction procured by Oando, which directed SEC to stay action on the matter pending the determination of the substantive suit, further compounds SEC’s nightmares.
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