Capital Market Scandal: Oando’s Inquiry by SEC Reveals Breach of ISA Act 2007- Investigations

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As the nation awaits the result of the Administrative Panel of Inquiry(API) set up by the Minister of Finance to look into allegations of financial impropriety levelled against the suspended Director General of the Securities and Exchange Commission(SEC), Mr Mounir Gwarzo and two others, Economic Confidential can confidently report that investigations by the capital market regulatory authority into Oando Plc reveal underhand dealings which are in breach of the Investments and Securities Act, 2007.

In a painstaking search by the economic intelligence magazine, the inquiry into Oando by SEC noted the report of the Independent Auditors of Oando Plc, Ernst & Young reveals that the company is a going concern suspected of insider dealings.

The report, which was sighted by Economic Confidential, noted that the acquisition of Oando Exploration and Production Limited(OEPL) by Oando Plc in 2013 without the prior approval by the regulatory authority is in serious breach of the Investments and Securities Act(ISA) 2007.

The report also revealed that misstatements in the 2013 and 2014 Audited Financial Statement of Oando Plc and the misleading information contained in its 2014 Rights issue circular were all in breach of the ISA Act, apart from related party transactions.

Further findings from the SEC investigative Committee also showed that there was declaration of dividends in 2013 and 2014 from unrealized profits, violation of SEC rules on remittance of dividends to the Registrars, observed discrepancies in the shareholding structure of the company and breach of SEC code of Corporate Governance amongst others.

It was based on these findings that SEC constituted a team to conduct a forensic Audit and the regulatory authority identified Akintola Williams Delloitte with other professionals to carry out the audit.

The report noted that to further ensure the interest of all stakeholders of Oando Plc is preserved the course of the exercise, SEC directed the Nigerian Stock Exchange(NSE) to place the shares of the company on technical suspension.

Economic Confidential further search revealed that Oando Plc quite dissatisfied by this decision instituted a court action and obtained an order on October 24th, 2017 praying for the halt of the of trading in its shares and forensic audit planned by SEC.

On November 23rd, 2017, the Presiding Judge at the Federal High Court in Lagos struck out the case of Oando Plc on ground that the court lacked jurisdiction over the matter and referred Oando Plc to the Investments and Securities Tribunal(IST).

However, on the November 24th, 2017, barely twenty-four hours after the above judgement by the court, the then Director General of SEC, Mounir Gwarzo was invited to the Ministry of Finance to meet with the Permanent Secretary and other top officials of the ministry, where it was agreed that SEC could go ahead with the forensic audit of Oando Plc.

In what looked like a drama, the following week, Monday, November 27th, 2017, Finance Minister invited the DG to another meeting where the DG was informed not to carry out the investigation, but rather a penalty be imposed on Oando “and be allowed to go and sin no more”.

Our investigation also showed that the following Tuesday, 28th of November 2017, in a reaction to the Minister’s verbal directive, the then SEC DG wrote a letter to the Minister highlighting all the implications of not carrying out the investigation, as this would send wrong signals to both local and foreign investors on the Nigerian capital market.

As the drama unfolds, the Finance Ministry announced to the media that the DG has been suspended on the Wednesday 29th of November 2017 and subsequently a letter signed by the Finance Minister was sent to the DG.

When contacted, a senior partner of an operator in the capital market who does not want his name in print confided in this magazine that that it was very important that SEC should be allowed to carry out its statutory responsibilities in line with section 13(k, r, aa & dd) of the ISA Act 2007 which empowers it to regulate investments and securities business apart from acting in public interest to protect investors and prevent fraudulent /unfair trade practices relating to the securities industry in the country.

He noted that the development will send wrong signals to the international investors on the strength of regulatory authorities, particularly in line with the various federal government’s reforms on transparency and ease of doing business.

However, the petition against the embattled DG in January 2017 on allegations of financial misappropriation was also sent to the Minister of Finance, EFCC, ICPC and Auditor General for the Federation whereby staff of SEC even appeared before EFCC and ICPC to provide explanation apart from the written submission to the Auditor General.

Economic Confidential also gathered that a query was sent to the DG in respect of the allegations levelled against him numbering six(6) items and reliably informed that all the items were responded to in a letter dated November 9th, 2017.

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