OPINION: SEC, Oando And The Overall Interest Of Nigeria’s Capital Market

BY Kayode Kolade

Unarguably, the decision, penultimate week to sanction the management of Oando Plc and the ensuing removal of its key directors by the Securities and Exchange Commission (SEC), continues to generate a lot of commentaries and analyses on the issue now before a court of competent jurisdiction. Away from philistinian sentimentalism and prejudice to the ruling of the court,and being the regulatory body saddled with the arduous task of protecting the investors’ interest as well as ensuring that market operators/players ply their trade in consonance with the best global practices, and ensuring the nation’s market reliability, it is important to position the argument within the context of justice, equity, fairness and in particular, the protection of the public and shareholders interest.
Without a doubt, Oando plc is a publicly quoted company, oiled by shareholders’ monies and held in utmost trust for the investing public, which translates to it not being a one-man or worse still a family company. Thus, for that reason, each pronouncement and action or inaction of Oando plc and that of the regulator, SEC ought to, and must be seen to serve the overall interest of the investing public and its shareholders, and not that of an advantaged few.
It is therefore against this backdrop that this seeming embarrassing situation between the regulator, SEC, and Oando be viewed as it threw up such questions as: Did SEC act within or outside the powers conferred on it by the Investment and Securities Act (ISA)? , Did SEC act in the overall public and shareholders’ interest? And above all, could SEC’s actions be principally to protect both investors’ interest and that of the market operators as well as ensuring market integrity?
These are the cogent issues that ought to be x-rayed by all and sundry before arriving at some conclusions. But sadly, many commentators and other armchair analysts are quick to vilify SEC for undertaking to do the needful not minding whose ox is gored.
It will be recalled that when the SEC noticed some gross financial anomalies in the books of Oando Plc, it notified the company and subsequently set up a forensic audit of Oando, and the follow-up report of the forensic audit performed by the firm of Deloitte and Touche revealed serious infractions. These include: “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”.
The Commission, therefore, ordered the resignation of some board members, while barring Tinubu and Boyo, from being directors of public companies for a period of five years, based on the allegation which the company’s management described as “unsubstantiated, ultra vires, invalid and calculated to prejudice the business of the company.”
Oando plc in a statement to the Nigerian Stock Exchange (NSE), further accused the commission of not giving it fair hearing as in previous cases where it similarly intervened in the management of public companies, contrary to the SEC’s claim. Despite the alleged lack of fair hearing, Oando said its management “simply co-operated with the process and responded to questions posed by the auditors in the course of their fieldwork for findings in a report that the company has still not seen.”
Oando, in addition, argued that before the forensic audit “its management was not afforded 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.”
But throughout the 18-month long forensic audit exercise, the company insisted that it was never given an opportunity to present its case based on the concerns or findings of the Forensic auditor to the SEC. They claimed that in the kick-off meeting with Deloitte and Touche, they assured the Company that they would be allowed to read their report on the forensic audit and give further clarification or comments on matters raised in their report.
However, the commission has since argued to the contrary, affirming that Oando Plc was given sufficient opportunity of being heard before they were penalised. In a statement, the SEC said that, there were various opportunities to defend themselves (Oando plc) during the investigation by SEC and during the forensic Audit and various reports questioning the regulatory authority of the SEC, and insinuating lack of due process in the investigations of Oando Plc are harshly unfounded and baseless, and said interalia “To put the records straight, the SEC hereby states that fair hearing is a paramount and fundamental principle, which the Commission as a law-abiding agency adheres to in all its investigative processes.
“In the course of the investigations, communications e.g. 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 were communicated to the Group Chief Executive Officer of Oando Plc by a letter dated July 10, 2017.
SEC said in the course of conducting the forensic audit, Deloitte & Touche held regular sessions with members of the Board and senior management of Oando Plc and afforded them the opportunity to provide explanations on issues relating to the audit.
“The Commission confirms that Oando Plc was given sufficient opportunity of being heard and accorded several opportunities to rebut the issues revealed by the investigation. The responses given by Oando Plc were however considered unsatisfactory; prompting, the decision by the Commission to penalize the company and some of the individuals related to it for violations of securities laws.
“The actions of the Commission were properly effected pursuant to the provisions of the Investments & Securities Act (ISA) 2007 and the SEC Rules and Regulations made pursuant to the ISA 2007,” the SEC said.
“As the Apex Regulator of the Nigerian capital market, the Commission has a mandate to protect investors.The Commission’s recent action on Oando Plc aligns with the above cardinal mandate, as the directive for the removal of persons from the board of Oando Plc and the appointment of an interim management team to temporarily steer the affairs of the company is to protect investors and preserve stakeholder value.
“Failure or refusal of the Commission to act in the face of the serious issues thrown up by the investigations or to reverse its directives, would undermine the federal government’s agenda to build strong institutions and promote the transparency and integrity of the Nigerian capital market, especially given that, these are preconditions for attracting foreign investors to the Nigerian capital market,” the apex capital market regulator added.
Since SEC is following its mandate, which is to intervene in the management and control of public companies, under its power of investor protection, while maintaining a free, fair, efficient and transparent capital market, it must strive to draw the courts attention to the provisions of Section 13 which empowers its management to perform all that it has done in the Oando Plc matter. They must also convince the court of its powers under Section 13 (bb) of the Investment and Securities Act (ISA 2007) that Tinubu and Boyo are persons unfit to be employed in any arm of the securities industry, as affirmed by a most recent decision of the Court of Appeal in SEC v. Big Treat & 5
Ors Suit No – CA/L/88/2011.
Consequent upon Section 13 of the ISA 2007, the commission as the apex regulatory organisation for the Nigerian capital market is empowered to undertake the functions prescribed in this Act, including regulating investments and securities business in the country as defined in the Act, and the action so far taken with regards to the case of Oando Plc is in the public interest, especially as it concerns investor protection; and in further bid to prevent “fraudulent and unfair trade practices relating to the securities industry;” among others.
Aside this, SEC’s implementation of Section 13 of the ISA 2007 is the responsibility of its management, just as the power to sanction erring individuals under Section 13 (u) and to levy fees, penalties and administrative costs of proceedings or other charges on any person in relation to investments and securities business in Nigeria, in accordance with the provisions of the Act. The injunction, therefore, restraining SEC from implementing the recommendations in the forensic audit report could lead to protracted legal battles that could impact the company’s share prices on the Nigerian Stock Exchange (NSE). Let whoever is affected by the recommendations in the report obey the directives from SEC for the sake of our investments in the capital market.
However, SEC must, therefore, be firm and holistic in handling all conflicts within the ambit of its regulatory powers towards protecting investors’ interest in the Nigerian capital market and should not allow its authority to be undermined if the outcome of the forensic audit was true.
The Oando saga is a big issue in the Nigerian capital market that needs a firm and holistic approach to restore confidence in the capital market and adhere to the truth of corporate governance. If the unfolding events between Oando and SEC are allowed to fester longer than necessary, it could dampen investors’ confidence and tamper with Nigeria’s integrity. As the international investment community/foreign investors are watching to see the manner the Oando issue would be handled, as well as local shareholders and most especially retail investors, and the way it is handled will go a long way to determine the success of the nation’s drive for financial inclusion and attraction of new retail and foreign investors returning to the market, as well as safeguard investors’ confidence.
The Acting DG of SEC, Ms Mary Uduk ought to be applauded for the courage in releasing the outcome of the forensic audit.

Kolade, a Public Affairs Analyst Lives in Abuja.