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For The Sake Of Shareholders



As Securities and Exchange Commission (SEC) seeks a broader investors’ confidence for a stable capital market in Nigeria, some believe the Commission should apply the rules with human face. MARK ITSIBOR writes

On resumption of office as acting director-general of Securities and Exchange Commission (SEC), Ms. Mary Uduk, promised to build a stable capital market and help to entrench strong institutions, while enjoining boards of public companies to properly perform their fiduciary duties as required under extant securities laws.

Up till now, the DG has not minced words as she kept saying that the Commission – under her watch, as the apex regulator of the Nigerian capital market would maintain zero tolerance to market infractions, with a commitment to ensuring the fairness, integrity, efficiency and transparency of the securities market, thereby strengthening investor protection. If you ask industry watchers and capital market operators if there are indications to achieving that set goal, not a few would vote in affirmation.

But one thing that is certain is the fact that capital markets all over the world thrive on investor confidence which is largely built on availability of timely and reliable information. Financial reporting helps to reduce information asymmetry between company insiders and external investors. For this reason, regulators and participants alike have various roles to play in facilitating a well-functioning capital market that narrows the information gap in order to ensure that investors are empowered to make sound investment decisions.

So, that could better explain the foundation upon which SEC pillars its sanction against management of Oando Plc., a Nigerian based oil firm (listed on the Nigerian and Johannesburg Stock Exchanges).

After prolonged war and bickering and horse trading over alleged corporate governance abuse by management of Oando Plc., SEC recently announced its conclusion of investigation into two petitions, including the one from Ansbury in September 2017, calling for inquiry into the running of the oil company. Ansbury has 56 per cent equity stake in Oando Plc., according to reports. Many people were beaten to surprise by the outcome of the investigation that led to the proscription of the principal officers’ of the oil firm from holding executive offices for a 5-year period. SEC said the forensic audit into the allegations was fairly conducted.

“Certain infractions of securities and other relevant laws were observed,” the capital market watchdog said in a statement. It further engaged Deloitte & Touche to conduct a Forensic Audit of the activities 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 said in a statement by its head of media, Efe Ebelo.

That is not even all – 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.

According to the report of investigation, SEC said 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), what that means is that, Oando may just be fighting in many fronts.

The Commission announced the constitution of an interim management team headed by Mr. Mutiu Olaniyi Adio Sunmonu. His mandate is to oversee the affairs of Oando Plc; conduct an extraordinary general meeting on or before July 1, 2019; and to appoint new directors to the board of the company, who would subsequently select a management team for Oando Plc.

But that is not even as strong as the proscription of the top management staff of the company. The watchdog among others,  barred the group chief executive officer (GCEO), Wale Tinubu and the deputy group chief executive officer (DGCEO) of Oando Plc from directing public companies for five years over the alleged financial infractions – though Wale has dismissed the charges as unsubstantiated and headed to court to seek redress.

In a statement, Oando said it was taking all legal steps to protect its business and assets, while remaining committed to act in the interest of its shareholders.

The company’s major complain is that it was not given the opportunity to see, review and respond to the forensic audit report and so is unable to ascertain what findings (if any) were made in relation to the alleged infractions, and defend itself accordingly before the SEC, a claim SEC has faulted, stating that “Oando Plc was given sufficient opportunity of being heard and accorded several opportunities to rebut the issues revealed by the investigation.”

In a statement on Sunday, SEC insisted that in the course of the investigations, communications, including 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 was communicated to the group chief executive officer of Oando Plc by a letter dated July 10, 2017,” the Commission said, adding that it subsequently engaged Deloitte & Touche to conduct a Forensic Audit of the activities of Oando Plc.

Obviously, the outcome of the findings of the inquiry strongly fits to be called a straw capable of breaking the camel’s back. Already, the oil giant is already suffering share price drop. The share price of Oando Plc had drop by 9.52 per cent by Monday last week, according to reports. No matter how panging that may seem, SEC believes that shareholders’ confidence and market discipline cannot be sacrificed on the altar of what is seen as “administrative recklessness.”   The interesting thing is that, that action by SEC, which it said was part of “remedial measures” to significantly reduce unwholesome practices by public companies, has sharply divided market operators, including shareholders of Oando Plc along individual and group sentiments.

While a school of thought believes that SEC took a courageous step and wielded the big stick against a perceived erring management, others feel the action did not have human face.

For instance, national chairman, New Dimension Shareholder Association (NDSA), Mr. Patrick Ajudua, said shareholders of the company were more interested in the protection of minority shareholders, the development and protection of the capital market.

Ajudua, who is also a shareholder of the troubled company said the consequences of the far reaching directives from the watchdog would have an adverse effect on the share price of the company both locally and internationally, market integrity, rule of law and expected returns on investment.

“I believe that the SEC as presently constituted have no power to issue such far reaching directives without the consent of a board. Disappointedly, the regulator has been operating without a board for more than 4 years and as such is like a car without a pilot, a human being with a body but no head,” he said, adding that even the USA SEC have not operated without a board since 1939. “Therefore it is my submission without prejudice to the rights of directors of Oando to seek judicial intervention that the SEC as a body have gone beyond the remit of their powers. I strongly support the steps taken by Oando in seeking legal redress and justice,” he said.

Those who share such view said the actions of SEC would cause a loss of confidence in the capital market and endanger FDI into the country. A Sokoto State-based shareholder, Kabiru Tambari, expressed displeasure over the prolonged dispute between SEC and management of Oando Plc believes the company should be allowed to grow without disputes.

While the brouhaha continues, it however remains to be seen whose favour the pendulum would swing.



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