By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-To ensure market confidence and promote investors apathy, the Nigeria’s apex capital market regulator, the Securities and Exchange Commission (SEC) has ordered Wema Bank Plc to pay over N70 million for negligence.
The order was made by the SEC, after an all parties meeting pursuant to a petition written by BROADSTREET PARTNERSHIP, a Lagos based Commercial Law firm and Business Advisory Consultants on behalf of WEHSAC FARMS LTD, against WEMA BANK PLC for negligence and default of contract relating to the inability of Wema Asset Management Ltd, then a wholly owned subsidiary of Wema Bank; but now fully integrated into the Bank for non purchase of 7.0 million units of Daar Communication Plc shares during the company’s 2008 public offer.
SEC ordered Wema Bank to refund the sum of N35 Million with interest calculated at the current Monetary Policy Rate (MPR) plus five (5) percent from the date of allotment in 2008 till the date the compliant was lodged in the Commission on October 14, 2014 amounting to over N70 Million.
The petition
The petition to SEC was written on October 14, 2014 after series of letters to Wema Bank by the petitioner and their counsel failed to get the bank to act diligently.
The Bank and the petitioner were duly represented by lawyers at the all parties meeting that held in the Commission’s office on March 17th 2015.
It was further established by SEC that the respondent acted nonchalant in their handling of the transaction the subject matter of the petition and thereafter.
A letter obtained by InvestAdvocate addressed to the managing director (MD) Wema Bank with reference number SEC/LZO/L&I/INVG/1754 signed by Omotayo Adeleke on behalf of the director general (DG) and dated May 21, 2015 shows that the Commission established that the complainant WEHSAC Farms Ltd subscribed to 7.0 million units of Daar Communication shares in the 2008 public offer which the company never got.
Findings
Other facts established by SEC shows that the subscription was done through Wema Asset Management and the sum of N35 million deposited with a completed application form submitted accordingly.
Also, it was established that as a result of error, the complainant never received its share certificate or any notice of allotment of shares of Daar Communication.
SEC disclosed that after several unfruitful visits to Wema Asset Management’s office, the complainant wrote a letter of enquiry to First Registrars Ltd, Registrar to Daar Communication in year 2011, requesting to know if any allotment of shares was made to the WEHSAC Farms in the said offer.
The complainant was informed by First Registrar that their names were not in the register of members allotted shares in Daar Communication as regards the 2008 offer.
The Nigeria’s apex capital market regulator revealed that Wema Asset Management Ltd by a letter dated August 19, 2011 three (3) years after the offer informed WEHSAC Farms that the said shares were allotted in a wrong name following their error in the list of subscribers forwarded to the Registrar and advised the complainant to apply to the Registrar for change of name.
According to SEC, the complainant declined the advice having filed the correct company’s name in the application form submitted; as it considered this the duty of Wema Asset Management who forwarded the wrong names to the Registrar to take necessary steps to rectify the error.
The Commission disclosed that thereafter no further action was taken by Wema Asset Management to rectify this mistake until 2014 six (6) years after the offer and when Wema Asset Management became integrated with Wema Bank Plc as a result of which the matter was taken over by the Bank.
Following the integration of Wema Asset Management with Wema Bank, the lender wrote to First Registrar on June 26, 2015 admitting the mistake made by Wema Asset Management which it acquired and requested for the confirmation of holdings and change of name.
A visit to First Registrar by InvestAdvocate, a copy of the Bank’s letter to the Registrar dated June 26, 2014 admitting error on the part of Wema Asset Management was made available to InvestAdvocate for sighting.
Officers’ in-charge of the support services division of First Registrar confirmed to InvestAdvocate there was a name change from WEH Farms Ltd to Wehsac Farms Ltd with account number 181891. They also confirmed that the share certificate was still with them at the registrar.
SEC says despite the fact that Wema Bank had executed an indemnity form on behalf of the complainant, and a new certificate issued in the correct name, the complainant has refused to collect the new certificate due to the fact that the value of the shares has declined.
“It is pertinent to state that the counsel that represented the Bank at the All Parties Meeting scheduled for the resolution of this matter refused to avail the Commission with copies of all the documents requested which was in his possession,” SEC disclosed.
According to the apex capital market regulator, having established the facts, it is noteworthy that the purpose of investment is for yielding future benefit. “The complainant in this case was denied access to the instrument with which appropriate time bound investment decision could have been made through the negligence of Wema Asset Management Ltd in delaying its prompt rectification,” SEC added.
The Commission noted that the Rules for Code of Conduct for Capital Market Operators as embedded in schedule IX of SEC Rules and Regulation provides that operators as professionals should not engage in any act that would adversely affect and erode investor’s confidence.
SEC directed the lender to comply with its decision as regards the matter and revert to it latest June 5, 2015.
In his reaction to the SEC, decision, BROADSTREET PARTNERSHIP, managing consultant. Iyaniwura. Adebisi, a financial and commercial lawyer, said the decision was proper both under the market best practice standard and under the common law duty of care that financial institutions owe their clients particularly bearing in mind that most Nigerian financial institutions think they are mostly doing their clients favours.
InvestAdvocate contacted Onome Odili, head, brand management & marketing communications of Wema Bank to seek clarification from the side of the Bank as regards the matter.
She requested for the SEC letter to made available to her in order to follow up the matter with those in-charge, in a telephone chat with InvestAdvocate, this was availed to her.
On reverting to InvestAdvocate, she tried to find out if the former fully understood what was in the letter purportedly written by Wema Bank to First Registrar on June 26, 2014 admitting mistake by Wema Asset Management, requesting for confirmation of holdings and change of name.
Odili disclosed that Wema Bank has since responded to the Commission’s letter dated May 21, 2015 establishing its findings.
“Did you read the letter and what did the Wema Bank letter say,” she queried.
According to Odili, the bank is not seeing the matter as negligence, “we are not seeing it as negligence,” she said.
She promised doing an official letter to respond to our enquiries, “I will send you an email,” she added following questions by InvestAdvocate on the timeline for the official response.
As at the time of filing in this report, InvestAdvocate is yet to receive the official response via email from the Wema Bank’s head, brand management & marketing communications as promised by her.
If occurences such as this are not properly handled to protect investors, how will they make headway in the nation’s capital market? Financial markets contribute to economic growth through the activities of investors.
Share price of the lender at the close of Wednesday’s session on the Nigerian Stock Exchange (NSE) declined 3.03 percent to 0.96 kobo from 0.99 kobo recorded the previous session; losing 0.03 kobo per share.
