Why SEC drags 260 entities, individuals to tribunal





First and foremost, the Investment and Securities Act (ISA) in Section 105, prohibits false trading and market rigging transactions in the sale of securities. Section 106 ISA 2007 prohibits price-fixing transactions. Section 110, which is the “catchall” anti-fraud provision to combat a wide variety of manipulative and deceptive activities that can occur in connection with the purchase or sale of a security, is there to tackle general fraud liability. Also, Section 111 of ISA 2007, prohibits an insider of a company from buying, selling or otherwise dealing in the securities of that company if he has information that he knows is unpublished price sensitive information in relation to those securities.


According to SEC, shortly after the Central Bank of Nigeria (CBN) intervened in banking sector last year, it set up a team of 30 people drawn from law and accounting firms and they commenced a forensic investigation in the stock market and interviewed 101 individuals; analysed over 150,000 pages of physical documents from sources including the SEC. It also interviewed banks, stock brokers, registrars, issuing houses and asset managers. In addition, SEC received electronic data spools of over 1,000 gigabytes from the intervened banks, the Central Securities Clearing System (CSCS) and the Nigerian Stock Exchange (NSE).


The investigative team developed standard protocols for basic procedures such as the collection of documents, interviewing of witnesses and gathering of electronic data. Each team, in conjunction with the data analytics group defined the technological solutions that would be used to support the investigation. The Investor learnt that the team was guided by principles of equity and fairness even as they received a myriad of petitions against many individuals and entities that adverse findings had been reached. Prior to making adverse findings against such parties, the team weighed all relevant information, including those provided by the parties or entities. A document, submitted by SEC at the Investment and Securities Tribunal, which many members of the public have started accessing, stated that, “the standard utilised for evaluating evidence that would result in an adverse finding was reasonably sufficient evidence.”


According to the document, the investigative team found the first five intervened banks – Afribank, Finbank, Intercontinental, Oceanic and Union Bank and their representatives; engage in activities that contravened the provisions of the ISA. “Specifically, these entities and individuals engaged in activities that created a false or misleading appearance of active trading in any securities. Many of the entities and individuals engaged in elaborate artifices to buy back their own shares and manipulate the market in their shares in contravention of the ISA. By so doing, they violated the general fraud provisions that prohibit the employment of a device, scheme or artifice to defraud that would operate as a fraud or deceit on any person in connection with the purchase or sale of a security,” the document at Investment and Securities Tribunal stated. The team found out that 260 entities and individuals violated various provisions of the ISA. Of these, 32 were corporations and 228 were individuals.


These individuals violated sections 105, 106, 110 and 111. Several of the individuals are liable under 305 as officers responsible for the conduct of the business of the entity. The relief sought will include – declaratory orders recognising that respondents have committed infractions of the ISA; order for an inquiry as to the losses that investors have suffered as a result of the infractions and restitution for the losses; monetary compensation to SEC for losses suffered by SEC; orders to compel the disgorgement of illegally-obtained profits and possibly damages; perpetual injunction restraining further infractions.


This revelation came few days after activities on the Nigerian Stock Exchange moved in an upward direction, but varied degrees of understanding of the action and the stock market trailed SEC’s action with respondents defending their stance. For instance, Lanre Oloyi, assistant director/ head media, Securities and Exchange Commission said: “We are taking this action not because we are not mindful of the recovery in the market, but because of our commitment in building a world class market that is based on trust.” In another development, Boniface Okezie, president, Progressive Shareholders Association of Nigeria (PSAN), expressed fears that the action by SEC would impact the already bullish market.


Simeon Obidairo, special adviser to the director general, Securities and Exchange Commission, Arunma Otteh, told BusinessDay that the Commission was committed to restore investor confidence, enhance market integrity and protect everyday investor. “We realise that the market can go up and down, but we are making sure that when investors bring in their money into the market, nobody can steal it. This exercise of investigating and prosecuting anybody that constitutes infraction in the market will boost the market and restore confidence.


It is all about securing investors. There is no sacred cow and other names will be released in due course. We are pursing cases against 260 people and it is not an easy thing. There is no sacred cow!” Obidairo said.





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