EXCLUSIVE: Ecobank former CEO at Loggerheads with Capital Market Regulators over Direct Cash Settlement

… N1.2 billion proceeds from shares sale at risk
…Blamed for keeping mute 3 months before contacting Nigerian Stock Exchange
…fails to report to regulators as shares were sold at discount
More than one year into the commencement of the Direct Cash Settlement (DCS) initiative in Nigerian capital market, Naija247News can exclusively report that there is a brewing legal battle involving Partnership Securities Limited (PSL) – a registered dealing member of The Nigerian Stock Exchange founded by Mr Victor Ogienwonyi, a hitherto respected capital market player and thought leader.
Mr Arnold Ekpe
Naija247News learnt that Partnership Securities Limited is involved in the case of conversion and misappropriation of N1, 237,245,000 and US$80,000.00, being part of the proceeds of sale of 96,077,872 units of Ecobank Transnational Incorporated Plc belonging to Mr Arnold Ekpe, a former CEO of Ecobank Transnational Incorporated (ETI) Plc.
Mr Victor Ogienwonyi
Arnold O. Ekpe, who served as the Group Chief Executive Officer at Ecobank Transnational Incorporated was said to have received more than 70 alerts of sale of shares, but did not received any transfer of monies to his account and he kept mute for three (3) months before contacting the Nigerian Stock Exchange (NSE), raising investigative questions about his over 20 years personal relationship with the CEO of Partnership Securities Limited.  
“Why would an investor mandate his broker to sell shares at a particular price and what he was selling was short and no complaint to both the apex and self-regulatory organization (SRO)”, an informed market source told Naija247News.
Under the leadership of the Securities and Exchange Commission (SEC), The Nigerian capital market commenced the Direct Cash Settlement (DCS) initiative, a direct payment of proceeds of sale of securities into an investor’s nominated bank account. This initiative was amongst several other efforts developed to protect investors and eliminate fraudulent activities in the Nigerian capital market.
The Direct cash settlement allows cash proceeds from trades executed by brokers on the Nigerian Stock Exchange (NSE) to settle directly into investors’ bank account. It is however worth noting that before this can happen, an investor has to give his broker the mandate to sell his or her shares and duly complete the DCS mandate form which will be submitted to the Central Securities Clearing System (CSCS), the clearing and settlement system for The Nigerian Stock Exchange.
Mounir H. Gwarzo
At the heart of the dispute is Mr Ekpe’s believe that once you mandate your stock broker to sell securities, the proceeds will automatically flow into the client’s account.
However, the DCS process is such that an investor must opt for the settlement of proceeds of sale of securities into his account by filling a direct cash settlement mandate.
This mandate will then be handed over to the stockbroker who then presents it to CSCS.
Naija247News sources who preferred to be anonymous revealed that subsequent to a notification sent to the regulators by Mr Ekpe, a preliminary investigation was conducted into the matter with NSE issuing a notice of suspension to Partnership Securities Limited on 17 October 2016 and the firm was suspended from trading on all floors of The Exchange, effective 18 October 2016. This suspension was also published in the Exchange’s online portal (BrokerTrax) in line with established tradition.
Furthermore, industry sources familiar with the matter told Naija247News that there is ongoing extensive investigation by EFCC on one hand and SEC, CBN and NSE on the other hand. The source confirmed that Mr Ekpe is collaborating with these agencies to recover his money from Mr Ogienwonyi.
Oscar Onyema
In addition, Mr Ekpe was said to have secured a Federal High Court ruling where one Honourable Justice Hassan of the Federal High Court appointed Mrs Roselyn Sonuga as provisional liquidator with a view to assisting Mr Ekpe and other affected investors recover their monies. These steps, one source argued aligns with the advice by NSE to Mr Ekpe to focus on recovering his funds from Ogienwonyi instead of instituting legal charges against the Exchange or any other market regulators.
Naija247News source also indicated that there are more grievous capital market frauds committed by companies related to Mr Ogiemwonyi. For instance, he was alleged to have set up an unauthorised securities product – Partnership Securities Deposit Account Scheme (“PSDA Scheme’), where many investors have lost money and several complaints sent to SEC. We further gathered that SEC in a bid to help partnership resolve its issues, had met and agree on a road map for restituting the investors.
Ibrahim Magu
Going by a copy of the petition of November 15, 2016 written by The Managing Partner Sofunde Osakwe Ogundipe & Belgore, representing Mr Ekpe, the law firm on behalf of the client accused The Nigerian Stock Exchange and Central Securities Clearing System Plc (CSCS) of negligence by settling the proceeds of the sale of its client’s shares into the account of Partnership Securities Limited (PSL) rather than directly into Mr Ekpe’s accounts as provided for under the Direct Cash Settlement (DCS) System. 
The law firm further claimed that NSE and its agent, CSCS should have acted much quicker with the knowledge that PSL, having conducted itself in an unprofessional manner should not have been allowed to continue as a stockbroker licensed to trade on the Exchange.
In its response dated 21 November 2016, NSE denied any wrongdoing stating that “please be informed that a review of CSCS’ records reveals that neither CSCS nor The Exchange was aware that your client had opted for the settlement of the proceeds of sales by PSL directly into your client’s bank accounts.
The records further show that the CSCS Direct Settlement Form filled by your client containing your client’s preference for direct settlement was not submitted to CSCS by PSL in direct violation of the Exchange’s rules. The Exchange can therefore not be rendered liable for these deliberate actions and fraudulent concealment by PSL”.
The Exchange also accused Mr Ekpe of negligence as “under the X-Alert platform of CSCS, your client was duly notified and received several electronic alerts on all transactions made by PSL on your client’s behalf particularly as it relates to his shares in ETI between 30th June 2016 and 6th September 2016.
Your client was therefore aware that the proceeds from the sale of his shares were not remitted directly into his account. Notwithstanding the above your client informed neither CSCS, The Exchange nor any other regulatory authority of Partnership’s deliberate infraction of capital market rules”.
NSE further noted that Mr Ekpe did not inform capital market regulators in a timely manner to assist in recovering his funds especially when contrary to its mandate to sell the shares at N16, PSL continued to sell the shares at N13.41, N2.59 below the mandated price.
In its defence, NSE claimed that “…had your client informed it that proceeds from the sale of his shares was not being remitted directly into his account, at the earliest opportunity, The Exchange would have been better placed to prevent the fraud by PSL and mitigate the losses suffered by your client as a result of PSL’s deliberate actions”.
On the continued permission of PSL to trade on its exchange, the bourse stated that it received only one complaint against PSL which was resolved in line with Securities and Exchange Commission’s Compliant Management Framework for the Nigerian Capital Market. It informed Mr Ekpe through his lawyers that “Other complaints from investors were in respect of Partnership Investment Company Plc. 
As an entity which is neither a Dealing Member of The Exchange nor a listed company, Partnership Investment Company Plc is outside the Exchange’s regulatory remit.  The Exchange did what any responsible regulator will do”
There is no doubting the fact that 2016 was a year that some stockbrokers tested the resolve of the capital market regulators judging by the number of sanctions and suspensions that occurred.
It was also a year that regulators bared their fangs based on rules governing the capital market to demonstrate their zero tolerance to infractions and market manipulations. About 100 actions occurred with BGL as most celebrated. Going by available facts to Naija247News, the case involving Partnership Securities (another brokerage firm) Limited may be another celebrated case.

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