The Securities & Exchange Commission (SEC), on Thursday reacted to media reports of unauthorized share sale against Partnership Securities Limited (PSL), a dealing member firm already suspended by the Nigerian Stock Exchange (NSE), saying it has held an all-parties meeting.
In a statement, the commission said while further investigations are ongoing on the illegal sale of shares belonging to Mr. Arnold Ekpe, former chief executive of United Bank for Africa and Ecobank Transnational Incorporated, the matter is now before the Economic and Financial Crimes Commission (EFCC).
The SEC assured “all investors and stakeholders of its commitment to ensuring the continued development and stability of the capital market, while no stone is being left unturned to recover for investors monies illegally converted by market operators.”
The matter became public knowledge recently, following the Nigerian Stock Exchange’s (NSE) reaction to media enquiry on the complaint dated 16 October 2016 from Mr. Ekpe, who alleged that Partnership Securities Limited misappropriated the sum of N1.237 billion, part of the proceeds of the sale of his 96,077,872 units of ETI and dividends of US$80,000 (about N36 million).
Specifically, he alleged that although he completed a form indicating that the proceeds of the share sales should settle into his bank account under the Direct Cash Settlement system, Partnership Securities Limited elected to settle the proceeds into its own account and misappropriated the funds.
Upon receipt of the complaint, The Exchange took a number of actions, including the following: On 17 October 2016, The Exchange suspended Partnership Securities Limited from trading on all floors of The Exchange, effective 18 October 2016. “Partnership Securities Limited remains under suspension from trading on the floor of the Exchange”, the NSE said.
On 17 October 2016, The Exchange requested the Central Securities Clearing System Plc (CSCS) to request the settlement bank to place N42.4million (N42,499,761.20), being the proceeds from the sale of ETI shares for Mr. Ekpe made by Partnership Securities Limited on 14 October but due to settle on 18 October 2016 into a special CSCS bank account in order to prevent the proceeds from settling into the account of Partnership Securities Limited.
“Subsequently, the sum of N43,301,792.70 being the proceeds of sale less statutory charges was paid to Mr. Ekpe’s Union Bank Plc account on 3 November 2016 as a direct result of the steps undertaken by The Exchange immediately upon its receipt of Mr. Ekpe’s complaint.”
The Exchange said on 19 October 2016, it formally informed the Securities and Exchange Commission (SEC) of the complaint and requested for a joint examination of Partnership Securities Limited and its associated companies. This formal notification was a follow up on an earlier oral notification to relevant personnel of the Commission shortly after receipt of the complaint on 17 October 2016.
The Exchange noted further that thereafter it held a meeting with Mr. Ekpe, his solicitors McPherson Barristers & Solicitors (McPherson) and Partnership Securities Limited on Monday 24 October 2016 to address the issue and take necessary steps towards recovery of the sums misappropriated and sanctioning of Partnership Securities Limited upon conclusion of the matter.
Pursuant to the Memorandum of Understanding (MoU) between The Exchange and the Economic and Financial Crimes Commission (EFCC), on 31 October 2016, The Exchange said it filed a petition before the EFCC in respect of the complaint on the fraudulent misappropriation of the sum of N 1,237,245,000 and US$80,000.00 belonging to Mr. Ekpe. “The matter is presently the subject of a criminal investigation by the EFCC.”
The Exchange said it also sought the assistance and collaboration of the Central Bank of Nigeria (CBN) through the ‘Other Financial Institutions Supervision Department’ (OFISD) to conduct an examination of SBDC Microfinance Bank (SBDC), an associate company of Partnership Securities Limited for the purpose of tracing and recovering the funds. “This assistance is currently ongoing”.
The Exchange and SEC conducted a joint examination on Partnership Securities Limited (7 – 11 November 2016) to determine the extent of the financial exposure, protect clients’ assets, and settle investor’s complaints, adding that “The Exchange has been cooperating with SEC and other relevant regulators and agencies on the matter. The Exchange attended an all parties meeting convened by the SEC on 20 December 2016 between Mr Ekpe, his solicitors, and The Exchange and CSCS.”
The Exchange has done a lot of work on the matter and continues to do so. However, it faces certain constraints, including the following: Unavailability of a key figure to provide relevant evidence.
The SEC in its statement, titled: “Response to Publications in the National Dailies Alleging that Investors in the Nigerian Capital Market,” further assured that it “would do everything within the confines of the Investments and Securities Act (ISA) 2007 and the Rules and Regulations made pursuant to the Act, to ensure the protection of investors and their investments in the market.
“The Commission has established a robust framework for investigating complaints received from investors. The Commission also has an excellent enforcement mechanism and continues to maintain zero tolerance to any form of infraction in the market. Furthermore, the Commission adopts a risk-based monitoring and supervision of operators and institutions in the market to forestall potential systemic collapses.”
It stressed that stiff sanctions are imposed on erring operators “as a deterrent within the limits permitted by law, while infractions with elements of criminality are referred to the Law enforcement agencies for prosecution as provided under Section 304 of the ISA 2007.”
The commission further expressed confidence in the viable Rules/risk management strategies and corporate governance standards adopted by Self-regulatory Organizations in the Nigerian capital market like the NSE, that conform to global best practice.
“The Commission continues to collaborate with these platforms to ensure the eradication of all forms of market manipulations.”