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The Director-General of the Securities and Exchange Commission, Ms. Arunma Oteh, on Monday, said that people should be brought to book for their actions but could not explain why the commission accepted donations from capital market players for its 50th anniversary tagged, ‘Project 50.’
At the resumed hearing on the Near-Collapse of the Nigerian Capital Market by the House of Representatives Ad Hoc Committee led by Ibrahim El-Sud, a member of the panel, Mr. Yakubu Dogara, sought to know why most of the donors were stakeholders in the capital market.
The current committee was reconstituted last month after the previous one headed by Herman Hembe was sacked over allegations of alleged improper conduct and bribery.
“Most of the donors to the project were players in the capital market. For SEC to receive donations from key players, it could affect your role as a regulator,” Dogara noted.
Oteh parried the question when she was asked to name the donors. She defined ‘Project 50’ as a series of events put together to mark 50 years of capital market operations in Nigeria and merely explained that the project was a “partnership with several bodies for market development purposes.”
She also refused to answer a question on whether SEC gave approval for the ‘nationalisation’ of Afribank, Union Bank and Spring Bank.
Dogara, who put the question to Oteh, asked, “Can we safely conclude that there was no approval by SEC for the nationalised banks?”
But the DG did not answer the question.
Asked to speak on the prospects of the capital market, Oteh replied that the market had “very high potential for investors.”
However, she advised investors to be knowledgeable about the market before putting their money there.
She added that SEC had a list of reputable market experts, who could guide investors in decision-making.
“It is good to invest in your child’s education and invest in other things, but on the whole you must be properly guided,” she said.
However, Oteh was emphatic that the commission sacked the former DG of the Nigerian Stock Exchange, Prof. Ndi Okereke-Onyiuke, and the entire management in 2010 because of fraudulent practices and weak corporate governance.
Oteh said the former NSE management’s purchase of a yacht for N37m was a clear example of “misappropriating, false accounting.”
She told the committee that the yacht was indicated in NSE books a year later as, “a gift presented during its 2008 Long Service Award; yet there are no records of the beneficiary.”
She stated that the exchange spent a separate sum of N186m on the purchase of 165 Rolex wristwatches, supposedly as “gifts for awardees.”
Oteh said that only 73 were “actually presented to the awardees. The outstanding 92 Rolex watches valued at N99.5m remain unaccounted for.”
The DG noted, “These were the kinds of financial imprudence that were perpetrated at the NSE.
“These transactions were routed through companies owned by some senior officers of the Exchange.
“In 2009, N1.7bn of the 2008 operational surplus was distributed to Council members and employees, in violation of CAMA and SEC rules, which preclude the NSE from such; given that the NSE is a company limited by guarantee.
“This happened in previous years. “Other notable fraudulent transactions include the reclassification of the sum of N1.3bn originally expended on business travels. Of this sum, N953m was reclassified under ‘Software Upgrade’ and subsequently expended, as against being capitalised.
“There were other cases of such unethical accounting practices.
“Given the foregoing, it was important to me that we engage the NSE to address these weaknesses.”
Oteh stressed that as the regulator of the Nigerian Capital Market, SEC wielded the big stick as part of efforts to refocus it and restore investors’ confidence.
She informed the panel that before she assumed duty in January 2010, her predecessors had done an inspection report on the state of affairs at the NSE.
According to her, the report indicated that the NSE was in a mess, due to alleged financial recklessness and disregard for operational rules, encouraged by the former management of the exchange.
She added, “The findings of that inspection were shocking and included weak corporate governance, risk management and internal controls, insufficient oversight of brokerage firms and listed companies, and inability to enforce its rules.
“The inspection team also found that more than 2,700 investors’ complaints lodged with the NSE had not been treated.
“These complaints ranged from unauthorised sale of shares to withholding of proceeds of sale of shares.
“The team also found that the NSE investor protection fund was not being properly administered.
“The report also highlighted a number of financial mismanagement issues including huge amounts spent on a construction project that was yet to be completed many years after inception.”
The SEC boss claimed that the commission’s intervention in 2010 by raising a new management team was to rescue the NSE from bankruptcy. According to her, SEC had to send some members of the new council, whom she described as “highly-skilled professionals,” to the exchange to bring it back to life.
Oteh claimed that the alleged abuse of procedures in the NSE affected market operations, resulting in the crisis that almost crashed the market.
“As the regulator, we found out that the market abuses of the past affected the confidence in the market.
“I do believe that people should be brought to book for their actions,” she added.
Oteh told the panel that in pursuance of this objective, SEC instituted suits against 260 organisations and individuals, who made “illegal profits” from insider abuses in the market.
But, the panel berated SEC for failing to protect investors in the heat of the market crash.
Dogara observed, “In all of this that you are saying, our concern is what SEC did or did not do to assist investors who lost all their life savings.”
Another member, Mr. Ini Udoka, raised the issue of the interest of depositors in some banks that were acquired by others.
He stated that most of the depositors believed that they were unfairly treated “because there was no protection for their investments.”
One of the panel’s members, Mr. Bimbo Daramola, noted that Oteh placed more emphasis on happenings in the NSE, but was silent on institutional weaknesses in SEC itself.
The DG claimed that SEC had been working since 2010 to rebuild the market and restore investor confidence, “which is so far our major and most important concern.”
She explained that SEC hoped to raise the market capitalisation of the Nigerian Capital Market to N153tn.
The panel queried the fact that eight out of the 19 council members of the NSE were appointees of SEC.
Although Oteh explained that this was done in the overriding public interest, the panel insisted that it was abnormal and had no legal backing since the exchange was a private organisation.
Commenting on the matter, El-Sudi noted, “No matter how honest or well-intentioned for public interest, it raises a lot of suspicions.”
The panel also raised an issue concerning Access Bank, which allegedly diverted the proceeds of its 2007public offer to the acquisition of Intercontinental Bank.
Udoka observed that Access Bank breached the rules by its action and should have been sanctioned by SEC.
Responding, Oteh stated that SEC approved the transaction because it was “normal.”
A petitioner had written the panel alleging that though SEC had experienced employees, Oteh preferred to use “a few inexperienced hands she brought with her.”
The petitioner also described Oteh as an ‘arrogant’ manager, who chose to work alone while ignoring the board of SEC in taking decisions.
But Oteh claimed that the allegations were “frivolous” when the panel sought for her reaction.
On a question regarding her qualification and experience in capital market operations, Oteh replied that she was a first class graduate and had 19 years post-graduation experience in the market.
She said her experience included a stint as the Group Treasurer of the African Development Bank, where she also worked as a ratings officer for the continent.
The panel also expressed concern over the “lack of cohesion in SEC,” as exemplified in the leakage of very sensitive documents from the organisation.
The chairman said some SEC employees gave testimonies to the panel privately, where they accused Oteh of being ‘high-handed’.
She was also accused of favouring those she personally recruited by sending them to choice institutions for training.
But Oteh insisted that the allegations were frivolous.
However, the panel handed over the petitions to her and directed her to respond to them in writing.
Culled from The Punch.
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Simply Cheska...
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