Appeal Court Affirms SEC Regulatory Oversight On Public Companies-

Appeal Court Affirms SEC Regulatory Oversight On Public Companies-


Post Views: 223 The Court of Appeal says the Securities & Exchange Commission (SEC) can invoke its statutory powers under the Investment & S...

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The Court of Appeal says the Securities & Exchange Commission (SEC) can invoke its statutory powers under the Investment & Securities Act 2007 intervene in any public company for the sole purpose of ensuring investor protection, while maintaining a fair, efficient and transparent capital market.
Such power to intervene, the court noted in a judgment delivered on January 31, 2019, would also serve to reduce systemic risk as stated in the preamble to the Act, which it described as “the beacon light to the powers of the Appellant under the ISA.”
The ruling was based on a 2010 suit, following the conduct of an investigation into the affairs of Big Treat Plc a public listed company (1st Respondent) and its directors, by the commission.
The probe, a statement by the SEC recalled, revealed several infractions of the ISA 2007, such as inadequate internal control systems and a breakdown of corporate governance in the company.
Based on this, and pursuant to the provisions of Section 13 (v) of the ISA 2007, the Commission in 2010 approached the Federal High Court seeking a number of reliefs against Big Treat Plc (1st Respondent), three of its directors – Pamela Wu, Harries Wu, Steve Wu – and two entities owned by them – New Frontier Engineering and Construction Company Ltd and Skyone Group of Companies Ltd with a view to preserving the assets of the 1st Respondent.
In the course of the proceedings, the Commission applied for and was granted an ex-parte order of interim injunction restraining the 2nd– 6th Respondents, their agents, servants or privies from obstructing the Commission in the exercise of its statutory oversight responsibilities to the 1st Respondent including the appointment of an interim management to take charge of the day to day administration of the 1st Respondent, so as to preserve its assets in the interest of its stakeholders pending the determination of the Motion on Notice already filed in this suit.
However, the ex-parte order was subsequently vacated on the grounds that the 1st Respondent (Big Treat Plc) “was not a capital market operator amenable to the control and management of the appellant in times of financial distress”.
The Commission appealed against the decision, urging judges of the Appeal Court to determine “whether the lower court was right when it held that the 1st Respondent (Big Treat PLC) is not a capital market operator because it does not play any specific role in the capital market and as such, not registerable or subject to the control of the Appellant (the Commission)”.
In its ruling, the Appeal Court held: “that the 1st Respondent, an issuer of securities, having been duly registered with the Appellants and was at all material times performing the specific function of issuing securities in the capital market was subject to the intervention of the statutory powers of the Appellant…”
The Court of Appeal further held that the lower court “should not have vacated the interim preservative order made by it to protect the imminent collapse of the 1st Respondent but the Appellant who at all material times was exercising statutory powers under the ISA to stem the tide of decay in the internal management of the 1st Respondent…”