Sec Functions
-
Upload
folatunde2001 -
Category
Documents
-
view
94 -
download
0
Transcript of Sec Functions
1
SECURITIES AND EXCHANGE COMMISSION (SEC) AND ITS FUNCTIONS
The Securities and Exchange Commission (SEC) is the apex regulatory institution of
the Nigerian capital market. It is a statutory body supervised by the Federal Ministry
of Finance.
The Commission has evolved over time. In 1979, the Securities and Exchange
Commission Act was enacted to provide a statutory backing for the establishment of
the Securities and Exchange Commission (SEC).SEC commenced operations in 1980
The SEC Act has been reviewed several times. The current Act is known as the
Investment and Securities Act No. 29 of 2007. The ISA 2007 provides guidelines for
the operation and regulation of the Nigerian Capital Market.
Section 13 of the ISA empowers the Commission to:
a) Regulate investment and securities business in Nigeria as defined in this Act. b) Register and regulate Securities Exchanges, Capital Trade Points, Futures,
Options and Derivatives Exchanges, Commodity Exchanges and other recognized Investment Exchanges;
c) Regulate all offer of Securities by public Companies and entities d) Register Securities of public Companies and entities e) Render assistance as may be deemed necessary to promoters and Investors
wishing to establish Securities Exchanges and Capital trade points. f) Prepare adequate guidelines and organized training programmes and
disseminate information necessary for the establishment of Securities Exchanges and Capital trade points;
g) Register and regulate cooperate and individual Capital Market operators as defined in this Act.
h) Register and regulate the workings of venture capital funds and collective Investment Scheme in what ever form
i) Facilitate the establishment of a nation-wide system for securities trading in the Nigerian capital market in order to protect investors and maintain a fair and orderly market;
2
j) Facilitate the linking of all markets in securities with information and communication technology facilities.
k) Act in public interest having regard to protection of investors and maintenance of fair and orderly markets and to this end establish a nation-wide trust scheme to compensate investors whose losses are not covered under the Investors’ Protection Fund administrated by Securities Exchanges and Capital Trade Points;
l) Keep and maintain a register of foreign portfolio investment. m) Register and regulate securities depository companies, clearing and
settlement companies, custodians of assets and securities, credit rating agencies and such other agencies and intermediaries;
n) Protect the integrity of the securities market against all forms of including insider dealing;
o) Promote and register self regulatory organizations including Securities exchanges, capital trade points and capital market trade associations to which it may delegate its powers;
p) Review, approve and regulate mergers, acquisitions, takeovers and all forms of business combinations and affected transactions of all companies as defined in this Act;
q) Authorize and regulate cross- border securities transactions; r) Call for information from and inspect, conduct inquiries and audits of the
Securities Exchanges, Capital market operators, Collective Investment schemes and all other regulated entities;
s) Promote investors’ education and the training of all categories of intermediaries in the securities industry;
t) Call for , or furnish to any person, such information as may be considered necessary by it for the efficient discharge of its function;
u) 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 this Act;
v) Intervene in the management and control of capital market operators which it considers has failed, is failing or in crisis including entering into the premises and doing whatsoever the Commission deems necessary for the protection of investors;
w) Enter and seal up the premises of persons illegally carrying on capital market operations;
x) In furtherance of its roles of protecting the integrity of the securities market, seek judicial order to freeze the assets (including bank accounts) of any
3
person whose assets were derived from the violation of this Act, of any securities law or regulation in Nigeria or other jurisdictions;
y) Relate effectively with domestic and foreign regulators and supervisors of other financial institutions including entering into cooperative agreement on matters of common interest;
z) Conduct research into all or any aspect of the securities industry; aa) Prevent fraudulent and unfair trade practices relating to the securities
industry; bb) Disqualify persons considered unfit from being employed in any arm of
the securities industry cc) Advise the Minister in all matters relating to the securities industry; and
dd) Perform such other functions and exercise such other powers not inconsistent with this Act as are necessary or expedient for giving full effect to the provision of this Act;
In brief
SEC protects investors thereby
enhancing their confidence in the
capital market.
4
FEATURE ARTICLE
THE NEED FOR RISK BASED SUPERVISION (RBS) IN THE NIGERIAN CAPITAL
MARKET
INTRODUCTION
The financial system plays an important role in the growth and development of national economies by promoting savings mobilization and ensuring efficient allocation of resources for productive investment. However, financial markets are prone to risks and uncertainties which sometime constrain the markets’ ability to impact the economy positively.
Sound regulation of financial market enhances its stability. This is, therefore, necessary to minimize the risks and uncertainties associated with the markets and provide the benefits especially in the area capital formation needed for economic growth. A sound regime of market regulation should not only be able to identify actual and potential sources of uncertainties in the system, but should also be able to nip it in the bud.
A regulatory framework which identifies gaps in risk management policies and practices of the different entities in the market which affect earnings and investments is Risk Based Supervision (RBS).
According to Odusola (2008), RBS allows supervisory authorities to take a
more proactive action as opposed to a reactive compliance/ rules based risk management approach.
The impact of the recent global financial crisis triggered by sub-prime mortgage lending in the US in 2007, coupled with the need for better allocation of limited resources, prompted regulators to seek improved methods of identifying and managing risks posed by new breed of market participants, new financial products
5
and globalisation. Thus globally, financial regulators and supervisors have either migrated to RBS or mapped out strategies for migration to RBS.
CONCEPT OF RISK BASED SUPERVISION
Risk is a measure of the probability that something adverse will occur in the future. Using The Oxford Dictionary as a guide, risk can be defined as “a chance or probability of danger, loss or injury.” Risk Based Supervision (RBS) is a system which evolved during the 1990s following series of financial crisis that occurred in the 1980s. Prior to the financial crisis of the 1980s, regulators focused on Compliance (Rule) Based Supervision (CBS) which relied on review of historical performance and operations of the supervised entities regardless of any apparent or probable weakness. In the CBS framework, results were evaluated with little emphasis on systemic controls or risk management. It was the obvious inadequacies of the CBS in preventing financial crisis that led to the adoption of RBS. According to International Organizations of Securities Commission (IOSCO), RBS places emphasis on the process rather than on individual transactions. Market intermediary’s treatment is based on its risk profile and ability to manage risk. RBS is therefore proactive and a clear departure from the CBS which is mainly reactionary in approach.
The aim of RBS is to promote transparency, provide early warning signals and encourage the regulated entities to self evaluate their positions at regular intervals.
A Risk Based Supervision process provides flexible and responsive oversight to foster consistency, co-ordination and communication among supervisors. This relies on the risk assessments as well as on the development of a supervisory plan and procedure tailored to risk profile of individual institution.
The primary aim of the RBS is to focus supervision of entities that pose the greatest risk to the financial system and the economy in general. In other words supervisory attention would be focused on financial institutions whose failure could precipitate systemic crisis.
6
TYPES OF FINANCIAL RISKS
Financial risks are risks associated with any form of financing, and they are usually categorised into Systemic, Market, Liquidity, Operational, Legal, Environmental, Reputational, Regulatory and Compliance etc.
Systemic risk is the risk of collapse of an entire financial system or entire market,
as opposed to risk associated with any one individual entity, group or component of
a system. Systemic risk is also known as "un-diversifiable risk" or "market risk. This
risk is outside the control of the investor and it is inherent in any investment.
Credit or default risk is the risk of loss due to debtor's default in payment of loan or other lines of credit (either the principal or interest (coupon) or both). Risk can arise here in case of delay in repayments, restructuring of repayments, or bankruptcy of the borrower.
Liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit) Liquidity Risk is the risk that a party to a securities instrument may not be able to sell or transfer that instrument quickly at a reasonable price, and as a result, incur a loss. Liquidity risk includes the risk that a firm will not be able to unwind or hedge a position.
Operational risk is the risk arising from execution of a company's business functions. It is a very broad concept which focuses on the risks arising from the people, systems and processes through which a company carries out its business. It covers risk of loss due to the breakdown in internal controls, unauthorized trading and fraud in trading or in back office functions, inexperienced personnel, and unstable and easily accessed computer systems etc.
Reputational risk is the risk arising from negative public opinion regarding an institution’s products or activities.
Legal risk is the risk of potential loss due to uncertainty of legal proceedings, such as bankruptcy, and potential legal proceedings.
Environmental risk These are losses that can arise due to natural occurrences in the environment where a company is located. Such events include earthquakes, tsunamis, volcanic eruptions, floods and other natural hazards.
7
Political/Country risk relates to the level of political stability in the country. Frequent changes in government policy usually affect businesses due to restrictions /or new requirements.
Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes.
Market RISK: Four major sources of market risk are stock prices, interest rates, foreign exchange rates, and commodity prices.
Equity risk is the probability that stock prices and/or the implied volatility will change.
Interest rate risk is the chance that interest rates and/or the implied volatility will change.
Exchange rate risk is the probability that foreign exchange rates and/or the implied volatility will change.
Commodity price risk is the risk that commodity prices (e.g. corn, copper, crude oil) and/or the implied volatility will change.
LEVEL OF IMPLEMENTATION OF RISK-BASED SUPERVISION
Financial Regulators and Supervisors have partly been blamed for the global financial crisis as a result of their inability to regulate and manage risks associated with derivative instruments, new market participants, and margin loans as in the Nigerian context. Consequent upon the experiences of the crisis, different financial supervisory and regulatory bodies worldwide have recommended the adoption of Basel II Accord Principle on Risk Management.
8
BASEL II ACCORD PRINCIPLES ON RISK MANAGEMENT
The Basel Committee (Basel I of 1988 and Basel II of 1999-2004) recognized the need for effective risk management and control for the purposes of financial sector stability. Accordingly, Basel I made recommendations on prudential regulation while Basel II accord, initiated in 1999 but published in 2004, defines rules and procedures covering different types of risks due to business activities in its Three (3) Pillars which are highlighted below.
- Pillar 1: Capital structure/adequacy placed emphasis on minimum capital requirement to mitigate credit, market and operational risks faced by financial sector intermediaries.
- Pillar 11: Risked Based Supervision (RBS) (Supervisory Review Process). This focuses on standardised/basic indicator approach for each category of financial market intermediary operating in the capital or money market. It uses internal rating based on model and advance measurement approach. RBS advocates the development of internal processes based on evolving best practices to enable supervisors conduct regular review and ensure adequate capital. Where review fails, supervisors are to increase capital adequacy. In addition, financial supervisors are expected to demand for early remedial action to ensure adequate capital, and therefore principle based.
- Pillar 111: This deals with the enhancement of market discipline through imposition of discipline such as capital structure and level of risk of financial institutions.
In line with the Basel II Principles, Malaysia adopted the UK model of Risk-Based Capital Adequacy Requirements (CAR) in December 1999 with the following objectives:
To assist stock broking company (SBC) in managing its risk appetite. To ensure that the level of risk assured by a SBC matches with its level of
capital. To make regulatory capital requirements more sensitive to differences in risk
profile among SBCs. To minimize disincentive to holding liquidity low rise assets. To achieve greater flexibility in evaluation of capital adequacy among SBCs.
9
Hasnah Omar of the Malaysian Securities Commission in a paper observed that before the introduction of CAR, the SBCs in Malaysia were required to maintain a prescribed level of liquid funds regardless of the risk profile of their portfolio as it is currently practised in Nigeria. It is obvious that the shortcomings of the compliance framework led to the introduction of the CAR in Malaysia.
FINANCIAL ACTION TASK FORCE (FATF) RISK CONTROL REQUIREMENTS
Financial Action Task Force (FATF) against Money Laundering and Counter Financing of Terrorism Recommendation No. 6 on Risk Assessment and Control in the Financial System provides that: “Financial institutions should be required, in addition to performing the Customer Due Diligence (CDD) measures, to put in place appropriate risk management systems that can determine whether a potential customer, a customer or the beneficial owner is a Politically Exposed Person (PEPS)”. Examples of measures that could form part of such risk management system include seeking relevant information from the customer, referring to publicly available information or having access to commercial electronic databases of PEPS.
SEC’s CODE OF CORPORATE GOVERNANCE
In Nigeria, the SEC’s Code of Corporate Governance Part E, Section 29 (1) on Risk Management and Audit was introduced to ensure good corporate governance and risk management within regulated entities. The Code 29 (1) provides that, the Board is responsible for the process of risk management as well as having its own opinion on the effectiveness of the process. It noted that Management is accountable to the Board for implementing and monitoring the process of risk management and integrating it into the day-to-day activities of the company.
Furthermore, Section 29 (2) of the Code provides that the Board through the Risk Management Committee should:
(a) Oversee the establishment of a management framework that defines the Company’s risk policy, risk appetite and risk limits. The framework should be formally approved by the board. The company’s risk Management policies should be communicated in simple and clear language to all employees to ensure the integration of risk awareness at all levels of the company.
(b) Ensure that the risk management framework is integrated into the day-to-day operations of the business. In addition, provide guidelines and standards for
10
administering the acceptance and on-going management of key risks, such as operational, reputational, financial, market and compliance risks.
(c) Undertake at least annually, a thorough risk assessment covering all aspects of the company’s business. The results of the risk assessment should be used to update the risk management framework of the company.
(d) Obtain and review periodically relevant reports to ensure the ongoing effectiveness of the company’s risk management framework.
(e) Ensure that the company’s risk management policies and practices are disclosed in the annual report (and other relevant returns).
IMPLEMENTING RBS IN THE NIGERIAN CAPITAL MARKET Roles of Stakeholders and the Challenges In line with international best practice, the SEC is currently taking necessary steps to adopt RBS. Consequently, players in the Nigerian capital market (regulators, operators, listed entities and investors) have a significant role to play to ensure smooth migration from Compliance Based Supervision (CBS) to RBS. It is also important to note that the adoption of RBS in Nigeria would not bring about total abandonment of the rule/compliance based approach. The latter will compliment RBS where the need arises. REGULATORS
The Commission is responsible for regulating the activities of Securities Market with the primary objective of investors’ protection and capital formation needed for economic growth and development. To achieve the stated objectives, Investors’ confidence, trust in the Securities Markets, and integrity of the market must be high. To this end, SEC had undertaken a number of proactive measures, including self assessment to reposition itself and match towards quick recovery from the Global Financial Crisis, and attend to the objectives of the Federal Government vision 20-2020 and the Financial System Strategy (FSS)2020.
Furthermore, the SEC has the responsibility of scrutinizing potential market operators before they can function as market operators so as to maintain market integrity and sanctity. To this end, the SEC is putting necessary measures in place for risk identification, assessment for effective monitoring and control. The
11
objective is to ensure that operators have sufficient capital to cover the risk they undertake in their business activities. To implement the above, the SEC is currently putting up Rules and Guidelines for market players to enable regulators and regulated entities put in place adequate framework for identifying potential capital market risks early enough to avoid associated multiplier effects. In pursuit of its developmental role and support of relevant agencies, SEC will promote capacity building among regulators, market intermediaries and staff of listed entities, on Risk management and control in the Nigeria capital market. The Nigerian Stock Exchange The NSE is expected to ensure that their members adhere to SEC rules, its own rules as well as other measures put in place for effectives risk management and control in the capital market.
MARKET OPERATORS AND PUBLIC COMPANIES
These Shareholders are expected to ensure that:
Establishment of best practices on risk management policies and procedures.
Establishment of risk management office with proper manning levels.
Establishment of business continuity plan (in the areas of disaster recovery to minimize the impact of unexpected adverse effect of business operations and customer services).
Constitution of top management committee to consider all business strategies on risk management of the company.
Conduct independent evaluations to ensure compliance and continued suitability of established policies.
Intermediaries are to ensure observance of high level of KYC/Customer Due Diligence and suitability principle for all customers. These principles are mostly adhered to through Risk Based Supervision approach, which operates with policies guidelines and procedures for identifying higher risk customers.
Above all, they should ensure that their minimum capital base is adequate to cover their risks exposures.
12
INVESTORS Investors are expected to engage the services of registered/licensed market intermediaries in order to be guided in line with suitability principles when making investment decisions. Furthermore, investors need to be conversant with market rules, regulations as well as developments in the market, for self protection while playing in the market. Furthermore, Unit trust fund investors should note that mutual trust investment is subject to the volatility of the capital market, which includes stock market and other securities market. The capital market is influenced by certain factors, such as economic growth, movement in interest rates, overseas capital market performance and fiscal policies of the respective countries. Therefore, these factors affect the performance of a unit trust fund which is heavily invested in fixed income securities and equities. CHALLENGES OF IMPLEMENTING RISK BASED SUPERVISION (RBS) Experiences from pioneering countries show that it is difficult to migrate to RBS without proper understanding of the concept and the expected challenges. This is because the implementation of such an exercise requires, in some cases, reorganisation of regulatory framework (new laws, regulations, policies to accommodate such regulatory approach), adoption of appropriate mathematical models, engagement of the right skills, capacity building, buying in the support of market stake holders to support the process. There must also be appropriate developed and effectively deployed information technology (hard ware and soft ware) that is geared towards risk monitoring as well as adequate control system along with adherence to fit and proper test. The above situation notwithstanding, it is gratifying to note that the SEC Nigeria is in the process of finalising rules and guidelines on Risk Based Supervision which would be a composite code of the IOSCO guidelines, FATF recommendations, Basel II Accord and SEC’s Code of Corporate Governance on risk management and audit. CONCLUSION There is no doubt that the recent global financial crisis and its adverse effect on the global economy shook the foundation and stability of the financial markets around the globe. Its impact made governments across the globe to evolve measures to forestall further negative effects of the crisis. However, within the quarter under review, the Nigerian market showed signs of recovery as evidenced by major economic and capital market indicators in particular.
13
Generally, there is a global consensus among financial Regulators/Supervisors and International financial bodies (World Bank, IMF, IOSCO) to move from Rule Based Supervision to Risk Based Supervision as a more efficient way of mitigating such crises in the future. It is believed that RBS is capable of improving Regulators’ efficiency and effectiveness of regulatory process by optimum utilisation of supervisory measures, and pro-active compliance culture among market Intermediaries. Finally, the ability of the Financial Regulators to proactively monitor and supervise actions of market intermediaries by ensuring strict adherence to principles of “naming and shaming” will not only strengthen the global and Nigerian financial system but will bring about sanity and fully restore Investors’ confidence.
14
ACTIVITIES OF PRIMARY AND SECONDARY MARKETS
PRIMARY MARKET
NEW ISSUES
A total of seventeen (17) new equity and debt securities were floated in the market
in the quarter because, the sustained recovery of the market has encouraged some
new issuance activities which practically dried up in 2009. The summary of
activities in the primary market during the quarter is shown on Table 1 below:
Table 1: Summary of New Issues (January – March, 2010)
Mode of Offer No. of Issues
Value of Shares
(N’ m)
Rights 4 22,158.87
Private Placement 3 50,164.66
Total Equities 7 72,323.53
Corporate Bond 1 2,240.00
FGN Bonds 9 220,000.00
Total Debt 10 222,240.00
Overall 17 294,563.53
Source: SEC, DMO
Equities
In the Primary equity market, seven (7) new issues valued at N72.32 billion were
floated in the first quarter of 2010. All the issues were rights and private
placements. Given the state of the market, issuers were obviously staking their hope
on their shareholders and selected group of investors.
The issues were floated by;
15
Oando Plc
The company issued 301.69 million ordinary shares of 50 kobo at N70.00 each
valued at N21.12 billion to refinance the acquisition of upstream assets, fund
upstream business development, and provide working capital for the company etc.
Hallmark Paper Products Plc
Right issues of 100 million ordinary shares of 50 kobo at N2.50 each valued at 250
million were floated by the company. The proceeds from the right issue was to
finance paper trading, working capital, factory extension, procurement of new
machineries and equipment, office expansion, upgrade /overhauling of existing
plant and machineries and to bridge loan repayment.
Nexans Kabelmetal Nigeria Plc
The Commission approved a right issue of 49.78 million ordinary shares of N2.00 at
N2.50 each valued at N129.42 million for this company. Proceeds from this offer
would be utilized on machinery and equipment and working capital.
Interlinked Technology Plc
The company floated 188.80 million ordinary shares of 50 kobo at N3.50 per share
valued at N666.80 million. The issue was floated to provide additional working
capital for the company and to finance the expansion of its operational facilities.
Nigeria Wire and Cable Plc
Private Placement of 1.180 billion ordinary shares of 50 kobo at N1.05 kobo each
valued at N1.239 billion was floated by Nig. Wire and Cable Plc, to provide working
capital for the company, payment of liabilities to banks and other creditors,
construction of new office building and to finance its operational facilities.
African Alliance Insurance Plc
African Alliance Insurance Plc privately placed to CONAG Limited its 4,585.00
million ordinary shares of 50k each at N0.50 per share for a value of N2,292. 50
million.
16
Ecobank Nigeria Plc
The bank made a private placement of about 6.662 billion ordinary shares of 50k
each at N7.00 per share valued at N46.63 billion. This was to enable the bank inject
additional capital in order to sustain its current level of operations and also
maintained effective adequacy ratio.
Breakdown of equities issued in the quarter is as contained on Table 2 below.
Table 2: FLOATED NEW ISSUES IN THE FIRST QUARTER OF 2010
COMPANY
TYPE OF
ISSUE
NOMINAL
VALUE
(N)
OFFER
PRICE
(N)
VOLUME
(MILLION)
VALUE
N'M
DATE
OPENED
Nexans
Kabelmetal
Nig. Plc Rights 2.00 2.60 49.78 129.43 11/01/10
Interlinked
Technology
Plc Rights 0.50 3.50 188.80 660.80 11/01/10
Hallmark
Paper
Production
Plc Rights 0.50 2.50 100.00 250.00 18/01/10
Oando Plc Rights 0.50 70.00 301.69 21,118.30 25/01/10
Nig. Wire
and Cables
Plc
Private
Placement 0.50 1.05 1,180.00 1,239.00 07/01/10
African
Alliance
Insurance
Private
Placement 0.50 0.50 4,585.00 2,292.50 27/01/10
17
Plc
Ecobank
Nigeria Plc
Private
Placement 0.50 7.00 6,661.88 46,633.16 06/01/10
Total 13,067.15 72,323.19
Debt Securities
Corporate Bond: A N2.24 billion five (5)-year bond was issued during the quarter
by C&I Leasing Plc through a private placement. The unsecured variable coupon
redeemable convertible loan stock will be maturing in 2014. Proceeds from the
issue will be utilized to finance the following;
Acquisition of car spare parts, distribution and maintenance capacity 22.9% Repayment of borrowings 13.8% Increase in working capital 24.7% Additional investment in subsidiary
i. Leasafric Ghana 10% ii. C & I Motor Limited Nigeria 22.9%
iii. Citrans Global Services 5.71%
TABLE 3: CORPORATE BOND IN THE FIRST QUARTER 2010
Issuer Type Of Issue
Offer
Price
(N)
Volume
(Million)
Value
N'm Issuing House
Date
Opened
C & I Leasing
Plc
Unsecured
Variable
Coupon
Redeemable
Convertible
stock 1,000.00 2,240.00 2,240.00 Afri Invest W. A. Plc 04/01/10
Total 2,240.00 2,240.00
18
Sub-national Bond: No sub-national bond was issued to the public during the
quarter. However the Commission received a number of applications from some
State Governments which are seeking to raise bonds for various infrastructural
projects.
The Commission during the quarter approved the Book building of the 2nd Lagos
State Government bond worth N50.0 billion.
FGN Bonds: During the quarter, FGN bonds worth N220.0 billion were offered in
nine (9) issues of 3, 10 and 20-year tenors. These issues, as shown on Table 4 below,
were significantly oversubscribed to the tune of N569.51 billion. However, the Debt
Management Office (DMO) allotted N238.50 billion in all.
Table 4: AUCTION SUMMARY OF FGN BOND FOR THE FIRST QUARTER OF 2010
Date Auctioned/Maturity Tenor (Yrs)
Amount Auctioned (N’Billion)
Level of Subs (% )
Amount Subscribed (N’Billion)
Amount Allotted (N’Billion)
*Marginal Rate (% )
January 20/May 22, 2012** 3 20.00 202.15 40.43 38.50 6.83 January 20/October 23, 2019** 10 25.00 168.40 42.10 25.00 8.14 January 20/November 20, 2029** 20 30.00 218.33 65.50 30.00 8.50 February 17, 2010/February 20, 2013 3 20.00 390.15 78.03 20.00 5.50 February 17, 2010/October 23, 2019** 10 25.00 212.80 53.20 25.00 7.00 February 17, 2010/November 20, 2029** 20 30.00 220.17 66.05 30.00 8.50 March 17, 2010/February 30, 2013** 3 20.00 410.70 82.14 20.00 5.50 March 17, 2010/October 23, 2019** 10 20.00 311.00 62.20 20.00 7.00 March 17, 2010/November 20, 2029** 20 30.00 266.20 79.86 30.00 8.50
Total 220.00 569.51 238.50 Source: Compiled from DMO Reports
** Re-opened
19
REGISTERED BONUS ISSUES
As shown on Table 5 below, the Commission registered in the quarter eight (8)
bonus issues amounting to over 2.81 billion ordinary shares with a nominal value of
N1.58 billion.
Table 5: REGISTERED BONUS ISSUES IN THE FIRST QUARTER OF 2010
Company Volume (Unit) Nominal Value (Naira)
Date Registered
Bonus Ratio
Regency Alliance Insurance Plc 606,250,000 303,125,000 15/01/10 1 for 10 Niger Delta Exploration Products Plc 18,454,120 184,541,200 13/01/10 1 for 5 Nigerian Aviation Handling Co. Plc 246,093,750 123,046,875 04/01/10 1 for 5 University Press Plc 59,917,986 29,958,993 08/01/10 1 for 5 STACO Insurance Plc 482,947,796 241,473,898 04/02/10 1 for 10 Royal Exchange Plc 369,588,872 184,794,436 18/02/10 1 for 10 International Energy Insurance Plc 917,203,921 458,601,960 19/02/10 1 for 6 R. T. Briscoe Nigeria Plc 113,460,290 56,730,145 25/03/10 1 for 5 Total 2,813,916,735 1,582,272,507
Source: SEC
CONVERSION (DEBT TO EQUITY)
One (1) debt-to-equity conversion of 1,181,055,863 ordinary shares of 50k each was
approved in the quarter. The conversion arises from a loan of US$100 million that
International Finance Corporation granted to ETI Plc. The conversion as indicated
on Table 6 was based on US$0.08467 per unit.
Table 6: CONVERSION
Issuer Issue type Issued shares
Price
US$
Value
US$
Date
Registered
EcoBank
Transnational
Incorporated Plc
Debt-
Equity
Conversion 1,181,055,863 0.08467 USS100,000,000 11/2/2010
20
ALLOTMENT CLEARANCE
Seven (7) allotment proposals, involving five (5) equities and two (2) corporate
bonds were cleared during the quarter. A look at the allotment summary on Table 7
below showed that the issues were all 100% subscribed. Hence, the total of about
N63.70 billion was capitalized by the companies involved.
Table 7: ALLOTMENT CLEARANCE IN THE FIRST QUARTER OF 2010
Issuer
Offer Price N
Volume of Shares
Value (N)
Level of Subscription (%)
Amount capitalized Approval
Date Private Placement:
Interlinked Technologies Plc 2.50
140,900,000 352,250,000 100% 352,250,000 10/02/10
African Paints (Nig) Plc 0.50
130,000,000 65,000,000 100% 65,000,000 02/02/10
Nigeria Wire and Cable Plc 1.05
1,180,000,000
1,239,000,000 100%
1,239,000,000 02/02/10
Ecobank Nigeria Plc 7.00 6,661,876,000
46,633,132,000 100%
46,633,132,000 02/02/10
African Alliance Insurance Plc 0.50 4,585,000 2,292,500 100% 2,292,500 01/03/10
Bond:
C&I Leasing Plc 4.75 471,580,000
2,240,005,000 100%
2,240,005,000 03/02/10
GT Bank Plc 1,000 13,165,000 13,165,000,000 100%
13,165,000,000 01/03/10
Total 8,602,106,000
63,696,679,500
63,696,679,500
Source: Securities & Exchange Commission
21
SECONDARY MARKET
The market showed signs of recovery throughout the first Quarter of 2010 as a
number of key market indicators were on the upswing. The improvement was
driven by the gradual restoration of investors confidence in the market, positive
reception of the Asset Management Company proposed by the CBN, lower interest
rate obtainable in the money market, perceived under-valuation of prices of some
stocks in the market, better financial result posted by companies, the various
financial sector reforms which are improving transparency and financial disclosure
etc resulting in firmer equity prices.
Trading Activities on the Nigerian Stock Exchange
Trading statistics on Table 8 below show that about 26.96 billion securities valued
at N191.84 billion were traded on the floor of the Exchange during the quarter
compared to 19.03 billion securities of N106.91 billion which exchanged hands on
the floor of the Exchange during same period of 2009. The volume and value of
transactions grew by 41.67% and 79.44% respectively when compared with the
position in the first quarter of 2009.
In the reviewed quarter, the Exchange recorded no transactions in FGN bonds as
they were basically OTC trades. However, transaction worth N3.25 million on Lagos
State fixed rate redeemable bond were executed on the Exchange in 2 deals. There
were no transactions in the industrial loan/Preference shares segment during the
quarter.
Table 8: COMPARATIVE SUMMARY OF TRADING STATISTICS
SECURITIES
FIRST QUARTER 2009 FIRST QUARTER 2010
Deals
Volume
(M) Value (N’M) Deals
Volume
(M) Value (N’M)
Government
Stock - - - 2 0.003 3.25
Industrial
Loans/Pref.
Shares 1 0.005 5.0 - - -
22
Equities 420,807 19,033.12 106,907.80 614,971 26,961.18 191,838.84
TOTAL 420,808 19,033.13 106,912.80 614,973 26,961.18 191,842.09
Source: Compiled from reports supplied by The NSE
Figure 1
Sectoral Trading Analysis
The Banking sector remained the most active of all the thirty-five (35) sectoral
classification on the Exchange. During the quarter, investors traded over 14.17
billion units of bank shares for N123.35 billion 227,490 deals. With these figures,
the sector accounted for 52.59%, 64.30%, and 36.99% of the quarter’s total volume,
value and deals respectively as shown on Table 9 below.
In volume terms, Insurance, Food, Beverages & Tobacco and Information,
Communication & Telecommunication were behind the Banking sector with
over 4.36 billion shares, 1.09 billion shares and 1.03 billion shares traded in 33,272
deals, 43,656 deals and 3,857 deals respectively. Whereas in value terms, Food,
Beverages & Tobacco, Building Material and Petroleum (Marketing) sectors
trialed behind the Banking sector with the trading value of about N16.34 billion,
N8.78 billion and N8.61 billion respectively.
23
TABLE 9: SECTORAL TRADING STATISTICS FOR THE FIRST QUARTER OF 2010
Sector Deal
Volume
(unit of shares) Value (Naira)
2nd-Tier Securities 504 678,092,420 348,846,369.18
Agriculture 3,402 217,500,330 278,535,510.76
Air Services 8,041 89,523,419 681,647,625.40
Automobile & Tyre 2,301 180,863,808 242,768,182.58
Aviation 0 0 0.00
Banking 227,490 14,178,665,368 123,345,195,545.74
Breweries 12,651 142,385,930 7,801,114,789.33
Building Materials 13,617 344,422,497 8,780,369,459.30
Chemical & Paints 1,048 130,510,165 637,722,764.89
Commercial/Services 1,151 329,585,099 950,166,473.62
Computer & Office Equipment 1,069 81,590,636 55,299,718.38
Conglomerates 15,976 838,791,099 7,926,686,328.33
Construction 5,202 271,007,923 1,374,868,440.19
Engineering Technology 492 15,166,953 23,592,357.09
Food/Beverages & Tobacco 43,656 1,095,121,807 16,344,830,740.10
Footwear 9 4,146,628 16,377,282.94
Healthcare 7,035 309,308,067 911,658,195.89
Hotel & Tourism 821 82,203,554 153,845,616.19
Industrial/Domestic Products 2,333 70,783,427 338,337,326.41
Information, Communication &
Telecommunication 3,857 1,039,702,814 2,863,323,575.87
24
Insurance 33,272 4,363,276,809 4,829,774,687.34
Leasing 1,556 90,769,869 267,915,998.92
Machinery (Marketing) 0 0 0.00
Maritime 7,516 302,035,561 388,315,937.37
Media 1,996 66,695,718 47,259,713.59
Mortgage Companies 4,393 885,653,064 572,386,631.96
Other Financial Institutions 1,519 358,950,521 305,621,087.98
Packaging 195,612 398,163,914 906,852,966.23
Petroleum(Marketing) 13,578 191,750,456 8,609,528,323.92
Printing & Publishing 1,379 25,374,086 153,600,973.37
Real Estate 1,054 36,235,068 754,174,762.52
Real Estate Investment Trust 18 48,260 4,826,000.00
Road Transportation 615 20,745,045 19,688,266.07
Textiles 65 1,757,956 2,661,709.97
The Foreign Listings 1,743 120,347,723 1,901,043,542.03
Total (Equities) 614,971 26,961,175,994 191,838,836,903.46
Debt Securities 2 3,000 3,250,000.00
Overall Total 614,973 26,961,178,994 191,842,086,903.46
Source: Compiled from reports supplied by The NSE
Top Twenty (20) transactions by Volume in the First Quarter of 2010
The twenty (20) most traded equities by volume accounted for about 15.59 billion
(58.0%) of the total volume of shares traded in the quarter As shown on Table 10,
the top five (5), all bank equities, were Zenith Bank Plc, Fin Bank Plc, First Bank of
Nig. Plc, Access Bank Plc and GT Bank Plc.
25
TABLE 10: TOP 20 TRANSACTIONS BY VOLUME IN THE FIRST QUARTER OF
2010
S/N Equity Deals Volume (units)
1 Zenith Bank Plc 18,542 1,839,482,230
2 Fin Bank Plc 6,970 1,597,652,206
3 First Bank of Nig. Plc 53,433 1,368,273,503
4 Access Bank Plc 12,842 1,084,668,622
5 GT Bank Plc 27,277 1,003,851,355
6 UBA Plc 15,900 999,595,901
7 Fidelity Bank Plc 11,145 939,106,494
8 Diamond Bank Plc 6,896 921,255,748
9 Capital Oil Plc 457 663,240,549
10 Skye Bank Plc 11,540 653,637,135
11 Transnational Corporation Plc 3,141 587,536,217
12 Sterling Bank Plc 4,185 499,291,161
13 Guaranty Trust Assurance Plc 2,185 493,356,570
14 IHS Plc 67 488,802,725
15 FCMB Plc 4,891 468,791,851
16 Oceanic Bank Int’l Plc 8,802 453,309,591
17 Resortsal 412 403,249,778
18 Nigerian Bag Manufacturing Co. Plc 195,251 389,564,503
19 Aiico Insurance Plc 10,888 369,960,187
20 African Alliance Insurance Plc 136 363,340,685
Total 394,960 15,587,967,011
26
Market Capitalization
Equity market capitalization which opened the year at about N4.99 trillion rose to
N5.44trillion at the end of January 2010, and further to N5.54trillion in February. By
the end of the first quarter, equity market capitalization had gained about N1.29 trillion
or 26.0% to close the quarter at about N6.28 trillion.
Sectoral Market Capitalization
A Sectoral analysis of market capitalization on Table 11 showed that the Banking
sector led the pack with market capitalization of about N2.90 trillion i.e. 46.18% of the
total equities market capitalization. The Food/ beverages & Tobacco sector came
second with the value of about N825.0 billion. This was equal to 13.14% of the
aggregate equities market capitalization. The Breweries sector occupied the third
position with a market capitalization of N682.79 billion to account for 10.86% of total
equities values. This was followed by the Building Material and Conglomerates
sectors with market capitalization of about N414.28 billion and N319.59 billion
respectively.
TABLE 11: SECTORAL MARKET CAPITALIZATION AS AT MARCH 31, 2010
Sector Market Capitalization (Naira)
% of
Total
Banking 2,902,574,269,445.04 46.18
Foods Beverages And Tobacco 825,864,417,672.30 13.14
Breweries 682,791,464,502.95 10.86
Building Materials 414,277,138,074.50 6.59
Conglomerates 319,589,769,333.63 5.08
Petroleum(Marketing) 273,597,581,415.47 4.35
The Foreign Listings 220,149,606,493.56 3.50
Insurance 186,289,534,175.02 2.96
Construction 74,152,967,424.30 1.18
27
Information, Communication &
Telecommunications 68,802,593,355.56
1.09
Health Care 47,957,911,647.66 0.76
Packaging 38,663,558,555.52 0.62
Mortgage Companies 26,248,271,354.64 0.42
Real Estate 26,180,000,000.00 0.42
Commercial/Services 23,433,392,871.55 0.37
Agriculture/Agro-Allied 20,700,162,909.92 0.33
Airline Services 15,994,580,000.00 0.25
Hotel & Tourism 15,988,399,375.32 0.25
Chemical And Paints 15,314,321,158.43 0.24
Industrial/ Domestic Products 14,895,535,986.33 0.24
Media 11,258,103,626.57 0.18
Printing And Publishing 10,802,315,463.48 0.17
Maritime 10,646,592,917.20 0.17
Other Financial Institutions 9,275,083,629.19 0.15
Automobile And Tyre 7,811,534,207.50 0.12
Computer/ Office Equipments 5,491,027,871.04 0.09
2nd Tier Securities 4,405,690,474.20 0.07
Engineering Technology 3,047,801,051.48 0.05
Leasing 2,100,000,000.00 0.03
Real Estate Investment Trust 2,000,000,000.00 0.03
Aviation 1,740,000,000.00 0.03
Road Transportation 1,491,930,000.00 0.02
28
Textile 1,197,463,318.34 0.02
Footwear 270,131,638.70 0.00430
Machinery (Marketing) 1,290,520.00 0.00002
Total Equities Market Capitalization 6,285,004,440,469.40 100.00
Twenty (20) Most Capitalized Equities
At the end of the first quarter 2010, total market value of the twenty (20) most
capitalized equities, as shown on Table 12 below, closed at about N4.452 trillion,
representing 70.85% of equities market capitalization. The remaining one hundred and
ninety four (194) companies had market capitalization of N1.832 trillion i.e. 29.15% of
equities market capitalization.
Table 12: POSITIONS OF TWENTY (20) MOST CAPITALIZED EQUITIES AS AT
MARCH 31, 2010
S/N Equity
Closing
price on
31/03/10
Issued shares
(units)
Market Capitalization
(Naira)
1 Zenith Bank Plc 18.97 25,117,195,029 476,473,189,700.13
2 First Bank Of Nig Plc 16.39 29,006,297,206 475,413,211,206.34
3 Nigerian Breweries Plc 61.50 7,562,562,340 465,097,583,910.00
4 GT Bank Plc 20.90 18,653,748,613 389,863,346,011.70
5 United Bank for Africa Plc 15.20 21,556,462,462 327,658,229,422.40
6 Benue Cement Company Plc 61.00 3,915,527,343 238,847,167,923.00
7 Dangote Sugar Refinery Plc 18.63 12,000,000,000 223,560,000,000.00
8 Guinness Nigeria Plc 140.12 1,474,925,519 206,666,563,722.28
9 Stanbic IBTC Bank Plc 10.96 18,750,000,000 205,500,000,000.00
29
10 E TI Plc 18.92 9,873,614,567 186,808,787,607.64
11 Access Bank Plc 11.21 16,437,259,273 184,261,676,450.33
12 Nestle Nigeria Plc 270.00 660,546,875 178,347,656,250.00
13
First City Monument Bank
Plc 9.00 16,380,311,234 147,422,801,106.00
14 Diamond Bank Plc 9.50 14,475,243,105 137,514,809,497.50
15 Unilever Nigeria Plc 29.80 3,783,296,248 112,742,228,190.40
16 Flour Mills Nig. Plc 61.06 1,708,373,333 104,313,275,712.98
17 Lafarge WAPCO Plc 34.50 3,001,600,004 103,555,200,138.00
18 PZ Cussons Nig. Plc 31.35 3,176,381,636 99,579,564,288.60
19 Fidelity Bank Plc 3.33 28,963,174,117 96,447,369,809.61
20 Dangote Flour Mills Plc 18.53 5,000,000,000 92,650,000,000.00
Top 20 Market
Capitalization
4,452,722,660,946.90
Source: Compiled from reports supplied by The NSE
The All-Share Index
The All-share index gained 25% year to date as it closed the quarter at 25,966.25
points from 20,838.90 points at the beginning of the year. In the comparable period
of 2009, the index declined by about 37.0%.
The indicator, which closed December 2009 at 20,838.90 points, appreciated to
22,060.36 points with a gain of 5.92% by the middle of January 2010 and further
added a gain of 2.42% to end the month at 22,594.90 points, as shown on Table 13.
The upward trend continued in February as the indicator opened and closed the
month at 22,865.16 points and 22,985.0 points respectively. Between end of
February and March, the index appreciates by about 13.0% to end the quarter at
25,966.25 points. A graphical representation of the index is shown on Figure 2
below.
30
Table 13: NSE ALL-SHARE INDEX MOVEMENT (January – March, 2010)
DATE INDEX % Change
31/12/09 20,827.17 -
04/01/10 20,838.90 0.06
15/01/10 22,060.36 5.86
29/01/10 22,594.90 2.42
01/02/10 22,865.16 1.20
12/02/10 22,967.26 0.45
25/02/10 22,985.00 0.08
01/03/10 22,995.75 0.05
15/03/10 24,380.09 6.02
31/03/10 25,966.25 6.51
Source: Daily Official List of The NSE
Note: The Index were for the beginning, middle and end of the months under
consideration
Figure 2
31
PRICE PERCENTAGE GAINERS AND LOSERS
During the quarter, investors appear to be taking advantage of the perceived under-
valuation of some stocks in the market to enhance their holdings while better
financial result by companies particularly non banks have encouraged the upward
movement in prices of equities. A look at the price levels of the two hundred and
fourteen (214) listed equities in the quarter showed that the bulls dominated
market activities as the number of companies which made gains out numbered the
losers. In all, there were ninety one (91) price gainers and fifty five (55) losers while
the prices of the remaining sixty eight (68) equities remained unchanged.
Gainers
The top ten (10) gainers as shown on Table 14 recorded appreciation ranging from
80.78% to 155.80% while the remaining eighty one (81) gainers for the quarter
recorded appreciation ranging from 0.42% to 80.78%.
TABLE 14: TOP TEN (10) PERCENTAGE PRICE GAINERS IN FIRST QUARTER OF
2010
S/N Equity
Price on
31/12/09
(Naira)
Price on
31/03/10
(Naira)
Absolute
Gain
(Naira)
Gain
(%)
1 Capital Hotel Plc 1.38 3.53 2.15 155.80
2
Nigerian Bags Manufacturing
Company Plc 1.45 3.70 2.25 155.17
3 Ikeja Hotel Plc 0.87 2.17 1.30 149.43
4 Sterling Bank Plc 1.23 2.76 1.53 124.39
5 FTN Cocoa Processing Plc 0.52 1.11 0.59 113.46
6 Fidson Healthcare Plc 1.78 3.70 1.92 107.87
7 Daar Communication Plc 0.56 1.15 0.59 105.36
8 National Salt Plc 4.35 8.88 4.53 104.14
32
9 Dangote Flour Mills Plc 9.93 18.53 8.60 86.61
10 Eterna Oil & Gas Plc 4.98 9.01 4.03 80.92
Source: Compiled from the NSE Reports
Losers
The top ten (10) losers, as shown in Table 15, recorded depreciations ranging from
34.24% to 76.47% while the remaining losers recorded declines of between 0.24%
and 31.54%.
TABLE 15: TOP TEN (10) PERCENTAGE PRICE LOSERS IN FIRST QUARTER OF
2010
S/N Equity
Price on
31/12/09
(Naira)
Price on
31/03/10
(Naira)
Absolute
Loss
(Naira)
Loss
(%)
1 Unity Capital Assurance Plc 2.38 0.56 0.54 76.47
2 Alumaco Plc 27.71 10.5 0.35 62.11
3 Staco Insurance Plc 1.25 0.50 0.29 60.00
4 Incar Nigeria Plc 4.33 1.97 5.30 54.50
5 Nig. Wire & Cable Plc 0.97 0.55 0.21 43.30
6 African Alliance Insurance Plc 0.87 0.50 1.54 42.53
7 Crusader Nigeria Plc 1.57 0.91 0.32 42.04
8 DN Meyer Plc 5.39 3.40 0.80 36.92
9 Afromedia Plc 0.80 0.51 0.42 36.25
10 Ecobank Nigeria Plc 10.63 6.99 6.48 34.24
Source: Compiled from The NSE Reports
33
COLLECTIVE INVESTMENT SCHEMES
UNIT TRUST SCHEMES
Applications Received
During the period under review, a total of five (5) unit trust applications were
received and were being processed .These are:
Skye Islamic Fund: This was a proposed Offer of 200,000,000 Units of
N100 each at par- A reminder letter to earlier deficiency was sent.
Skye Guaranteed Income Fund: This was a proposed IPO of 200,000,000
Units at N10.00 each at par- additional deficiency letter was
communicated to the Issuing House.
Stanbic IBTC Bond Fund: This was an IPO of 10,000,000 Units of N1.00
each at N100 per unit- The Issuing house had forwarded a summary
report on completion of the offer which was being reviewed by the
commission.
Stanbic IBTC Money Market Fund: This was an IPO of 10,000,000 Units
of N1.00 each at N100 per unit- the allotment had been approved.
SIM Capital Alliance Fund: This was an IPO of 50,000,000 Units at
N103.50 each at par-additional deficiency letter had been
communicated to them.
Applications Approved
The commission approved five (5) applications during the review period,
these are:
34
Diamond Balanced Fund: This was an IPO of 50,000,000 Units of
N100.00 each at per unit- approval was given to hold completion board
meeting.
Access Fixed Income Fund: This was an IPO of 10,000,000 Units of at
N100 each at per-additional deficiency letter was communicated to the
Issuing houses, awaiting their response.
Access Balanced Fund: this was an IPO of 10,000,000 units at N100
each at par- additional deficiency letter was communicated to the
Issuing houses, awaiting their response.
The Lead Fund: This was an IPO of 1000,000 units of N1000 each at par-
additional deficiency letter was communicated to the fund manager.
Continental Capital Alliance Limited applied for registration as
community savings/esusu scheme operator, the application was
reviewed and forwarded for further action.
DRAFT AUDITED ANNUAL ACCOUNT RECEIVED IN THE QUARTER
The Audited Annual Accounts of the following companies were received
and analysed.
Nigerian Energy Sector Fund audited account for the year ended
31st March 2009.
DVCF Oil&Gas Fund audited account for the year ended 30th
September 2009.
Oceanic Vintage Fund audited account for the year ended 31st
March 2009.
Coral Growth, Coral Income and Coral Ethical audited account for
the year ended 31st December 2009.
Observed deficiencies were communicated to concerned fund managers.
VENTURE CAPITAL
The following companies submitted their quarterly return for the quarter
ended March 2010:
First funds limited
35
SME managers
IBTCventures limited
DVCF oil and gas
Diamond capital limited.
Below are the analysis.
ANALYSIS OF EQUITY INVESTMENT OF VENTURE FUNDS AS AT MARCH 2010
S/N NAME OF
COMPANY
AMOUNT UNDER
MANAGEMENT
AMOUNT DISBURSED
IN PREVIOUS
QUARTER
AMOUNT
DISBURSED IN
PRESENT
QUARTER
VARIENCE %
1. FIRST FUNDS
LIMITED
4,008,620,312.93 3,371,405,152.97 3,333,778,430.00 (37,626,722.97) 1.11
2. SME MANAGERS
LIMITED
3,942,640,909.00 420,000,000.00 300,000,000.00 (120,000,000.00) 28.57
3. IBTC VENTURES
LIMITED
1,485,902,000.00 2,778,415,000.00 2,102,231,000.00 (676,184,000.00) 24.33
4. DVCF OIL AND
GAS
942,494,902.00 505,425,565.00
5. DIAMOND
CAPITAL
5,000,000,000.00 542,588,393.00 29,850,000.00 512,738,393.00 94.49
TOTAL 15,379,658,123.90 7,112,408,545.97 6,271,284,995.00 841,123,509.97 11.82
36
2. UNIT TRUST SCHEMES
Inspection of Registered Collective Investment Scheme
The Commission inspected 26 unit trust schemes. They are as follows:
1. Zenith Ethical Fund, 2. Zenith Income Fund 3. Zenith Equity Fund 4. Indo Nigeria Unit Trust Fund 5. The Legacy Fund 6. ARM Aggressive Fund 7. ARM Discovery Fund 8. Coral Ethical Fund 9. Coral Growth Fund 10. Coral Income Fund 11. MBA Mutual Unit Trust Fund 12. Continental Unit Trust Fund 13. Stanbic IBTC Ethical Fund 14. Stanbic IBTC Equity Fund 15. Stanbic IBTC Guaranteed Income Fund 16. Kakawa Guaranteed Income Fund 17. Lighthouse Jubilee Fund 18. Nigerian International growth fund 19. FBN Capital Heritage Fund 20. DVCF Oil and Gas Fund 21. Afrinvest Equity Fund 22. Nigerian International Debt Fund 23. Nigerian Energy Sector Fund 24. Sky Shelter Fund 25. UBA Money Market Fund 26. UBA Bond Fund
Observed breaches have been communicated to concerned fund managers for
compliance. SEC would effect necessary sanctions where it establishes non
compliance.
37
The investment table on unit trust schemes (October - December 2009)
S/N
NAME OF FUND
CAPITAL MARKET INVESTMENT N
MONEY MARKET INVESTMENT N
OTHER INVESTMENT N
TOTAL OF INVESTMENT N
TOTAL EXPENSES N
NET ASSET VALUE N
NO. OF UNIT HOLD-ERS
1. DVCF Oil & Gas
101,016,205.04
25,513,280.70
390,814,320.99
520,575,533.89
6,809,019.91
538,174,102.69 27,180
2. NIDF - 1,857,950,492.46
270,180,000.00
2,307,149,033.14
20,792,349.55
2,191,081,244.65 39
3. Nigeria Global Inv. Fund
21,731,147.37
76,680,345.93
26,848,082.19
126,883,474.10
371,640,39
124,013,361.41 34
4. Coral Income Fund
- 457,044,728.99
- 457,044,728.99
1,776,354,57
455,044,728.99 -
5. Stanbic IBTC Guaranteed Income Fund
20,990,773.65
1,051,212,739.73
- 1,284,341,908.02
6,882,501.76
1,273,585,432.33 2,467
6. ARM Aggressive Growth Fund
1,745,540,776.58
398,689,687.68
9,798,853.27 2,221,773,326.33
19,603,683.17
2,175,741,391.26 8,637
7. Frontier Fund
141,704,334.53
60,316,097.66
- 202,744,992.23
3,253,910.32
196,074,485.63 814
8. Continental Unit Trust
6,912,688.21 - - 6,912,688.21 604,663.38
6,403,090.13 2,405
9. Afrinvest 139,963,090.57
241,266,069.20
- 38,122,915,977.00
2,867,987.37
441,111,863.19 2,023
10. Intercontinental Integrity Mutual Fund
164,812,223.05
153,515,977.56
- 321,803,918.82
603,809.11
8,683,853.48 2,420
11. Zenith Equity Fund
368,423,159.69
4,958,581,679.39
3,321,610.54 84,049,630,840.00
25,794,445.16
4,958,581,679.39 12,998
38
12. Lighthouse
3,121,760.00 - - 3,121,760.00 68,682.00 4,354,158.00 3,737
13. Coral Growth Fund
2,084,995,589.40
2,084,995,589.04
- 3,412,261,929.53
18,726,365.89
3,506,990,180.64 1,078
14. Stanbic IBTC Equity Fund
10,751,664,507.45
1,302,560,137.00
- 13,265,663,364.67
276,482,387.69
13,112,168,785.63 19,276
15. Indo Nigeria Unit Trust Scheme
21,005,446.32
- 653,539.07 21,658,985.39
79,422.69 21,584,849.93 1,692
16. Union Trustees Mixed Fund
20,489,578.65
- 1,884,140,805.85
1,904,630,384.45
13,966,236.03
1,862,523,876.37 2,808
17. UBA Money Market Fund
- 265,000,000.00
- 265,000,000.00
2,374,651.00
241,049,887.00 975
18. IMB Energy Master Fund
111,345,194.85
59,633,992.97
- 173,082,314.99
- 29,734,960.35 698
19. Women Investment Fund
57,191,634.08
- 135,187,103.67
192,378,737.75
3,340,158.36
184,170,809.82 955
20. Nigeria Energy Sector Fund
97,295,460.65
1,014,005,342.85
9,127,918.74 1,120,428,722.24
7,579,100.95
1,100,562,492.84 823
21. Abacus Unit Trust
104,948,637.57
- 11,531,940.95
116,480,578.52
5,000.00 115,422,828.52 -
22. Paramount Equity Fund
- - - - - - -
23. Nigeria International Growth Fund
1,425,797,101.10
- 667,130,750.00
2,849,451,855.55
7,730,637.63
2,703,919,061.97 2,157
24. Legacy - - - - - - -
39
Fund
25. UBA Equity Fund
1,149,457,061.02
880,000,000.00
- 2,056,339,593.93
11,029,284.46
1,964,643,962.58 3,191
26. Union Homes REITS Fund
- - - - - - -
27. Skye Shelter Fund
- 413,895,365.00
2,122,000,000.00
2,535,895,365.00
22,200,743.00
2,395,259,065.00 2,674
28. Zenith Income Fund
- - - - - - -
29. UBA Balanced Fund
441,778,306.19
1,187,006,000.00
258,020,000.00
1,886,798,306.19
10,071,286.74
1,862,075,325.54 1,480
30. Kakawa Guaranteed Income Fund
23,793,285.22
1,370,304,228.73
- 1,406,747,999.18
52,632,981.69
1,285,649,561.74 1,701
31. Denham Mgt. Millennium Fund
9,977,316.30 2,712,000.78 17,872,588.13
30,561,905.21
169,513.41
29,284,071.80 5,592
32. Zenith Ethical Fund
44,700,000.00
- 943,278,793.70
987,978,793.70
4,997,360.51
972,952,666.86 3,098
33. Coral Ethical Fund
4,517,451.45 - - 4,517,451.45 996,418.20
33,301,575.73 209
34. Oceanic Vintage Fund
558,488,289.75
137,022,191.78
170,501,680.00
866,012,161.53
5,481,574.21
1,862,075,325.54 5,268
35. FBN Heritage Fund
906,541,500.26
2,736,245,410.99
708,305,479.45
4,351,092,390.70
4,420,209,820.95
17,281,244.28 6,770
36. Stanbic IBTC Ethical Fund
3,116,242,552.92
522,874,082.19
- 3,914,171,104.35
62,291,026.73
3,873,450,646.37 12,276
37. UBA Bond - 219,000,000. 255,080,000. 474,080,000. 4,245,938. 427,298,013.28 919
40
Fund 00 00 00 50
38. ARM Discovery Fund
2,055,830,605.95
849,669,372,17
323,484,531.77
3,330,789,619.14
26,625,231.72
3,340,990,266.79 20,894
39. Lotus Halal Fund
572,858,336.73
- - 572,853,336.73
38,160,832.41
2,558,709,421.70 19,470
40. Anchor Fund
27,139,960.18
83,158,135.79
1,000,000.00 111,298,095.97
296,734.80
119,996,878.30 1,106
41. Bedrock Fund
63,418,956.05
44,491,792.67
1,000,000.00 104,062,272.90
293,304.17
104,062,272.90 1,530
42. MBA Mutual Fund
64,535,076.76
- - 70,345,526.02
- 68,927,016.02
11,824
TOTAL 26,428,228,007.50
22,453,344,740.06
8,207,277,998.03
175,649,478,975.82
5,079,415,058.04
56,166,934,438.65 191,218
MONITORING AND INVESTIGATION
1.0 MONITORING
Within the period under review, data obtained from statutory returns
filed by 219 registered Capital Market Operators (Broker Dealers,
Issuing Houses, Portfolio Managers, and Investment Advisers)
revealed the following:
o Aggregate Net Worth (Shareholders Fund) of 219 firms -N2,403,042,045
41
o Aggregate value of investment in shares of quoted Companies -N184,752,671291
o Aggregate value/volume of loans to clients of Brokerage firms / market Operators - N53,880,179,602
o Aggregate indebtedness to Banks/Fund providers -N218,655,695,578
o Overall debt to Equity ratio - N91.72:1
This implied a ratio of 91 portion of debt financing (from margin
facilities) to 1 portion of equity financing reflecting the high debt over
hang on stock broking firms (in percentage terms, a ratio of 9,100%).
Of the 219 firms reviewed, 29 firms (i.e 13%) with threshold of
indebtedness from N1b to N82b accounts for an aggregate
indebtedness of N198,937,415,067, which approximately is 91% of
the aggregate industry indebtedness of N218,655,695,578.
Accordingly, 9% of the total firms accounts for the balance of bank
indebtedness of N20,218,280,511.
Unclaimed Dividend: Aggregate figure of unclaimed dividend as at
December 31, 2009 = N41,258, 771,475,.98
Fig 1. Pie Chart Analysis of S/B Firms Indebtedness
42
*S/B – means stock brokers
3.0 MONEY LAUNDERING ACTIVITIES
Ninety – Two (92) operators were penalised for violating AML/CFT
requirements and they were required to rectify observed deficiencies.
Meanwhile, Nigeria was among other African Countries referred to the face-
to-face plenary meeting (key review group) of the Financial Action Task Force
(FATF). SEC was among the Nigerian delegation that represented Nigeria at
the meeting held in the first quarter of 2010.
4.0 INVESTIGATION
In the first quarter, the Commission received a total of 1188 correspondences
from various Capital Market Operators and Investors; The breakdown of the
1188 correspondences received were as follows:-
Activities Stockbrokers January – March 2010
Registrars January – March 2010
Total
New complaints 202 142 344 Correspondences on existing complaints
529 315 844
Total Correspondences Received 731 457 1,188
5.0 Breakdown of Total Complaints as at March 31, 2010
Remaining 190 firms (91%)
N198,437,415,067.00
29 Most indebted Firms (9%)
N20,218,280,511.00
43
S/N NATURE OF COMPLAINTS NUMBER OF COMPLAINTS
Outstanding as at Dec. 31, 2009 B/F
January 2010
February 2010
March 2010
TOTAL
1. Unauthorized/ fraudulent sale and purchase of shares
229 7 4 8 248
2. Non remittance of share sale proceeds 120 6 47 51 224 3. Refusal/
Illegal transfer of shares
110 8 6 - 124
4. Falsification of clients’ accounts 60 4 8 6 78 5. Non purchase of shares/ undue delay
in the purchase of stocks 208 4 8 2 222
6. Miscellaneous (complaints against Capital Market Operators other than Stockbrokers and Registrars)
136 15 5 13 169
7. Non-receipt of dividends warrants/ bonuses
230 16 14 7 267
8. Returned monies for un-allotted shares
350 12 8 15 385
9. Non verification of share certificates
213 8 5 6 232
10. Non issuance of share certificates 150 11 12 28 201 11. Total 1,806 91 117 136 2,150
6.0 Breakdown of total complaints Resolved and Outstanding as at March
31, 2010
S/N Nature of Complaint Total complaint
Complaints transferred for enforcement action
Resolved and confirmed by the complainants
Resolved but unconfirmed by the complainants
Outstanding complaints as at 31st March 2010
1. Unauthorized/ fraudulent sale and purchase of shares
248 12 4 26 206
2. Non remittance of share sale proceeds
224 120 4 46 54
3. Refusal/ 124 - - 21 103
44
Illegal transfer of shares
4. Falsification of clients’ accounts
78 2 - 6 70
5. Non purchase of shares/ undue delay in the purchase of stocks
222 2 3 171 46
6. Miscellaneous (complaints against Capital Market Operators other than Stockbrokers and Registrars)
169 7 1 - 161
7. Non-receipt of dividends warrants/ bonuses
267 34 48 126 59
8. Returned monies for un-allotted shares
385 101 280 4
9. Non verification of share certificates
232 26 90 116
10. Non issuance of share certificates
201 39 87 75
Total 2,150 177 226 853 894
Fig 2. Pie Chart showing various stages of
complaints
SECURITIES AND INVESTMENTS SERVICES
45
MERGERS AND ACQUISITIONS During the quarter under review, the Commission received two (2) new applications each for mergers and acquisition. New applications for Mergers
1. Proposed Merger between Obajana Cement Plc and Benue Cement Company Plc
2. Proposed Merger between Africa Oilfield Services Limited and Orwell
International Oil and Gas Limited New applications for Acquisitions
o Restructuring involving Obajana Cement Plc, Dangote Bail Limited and DCW Limited
o Restructuring involving Wema Asset Management Limited,
Independent Securities Limited and Wema Capital Limited However, three (3) transactions involving two mergers and an acquisition were approved. Approved Merger Transactions
O Merger between First Alliance Pension & Benefits Ltd and ARM Pension Managers (PFA)
o Merger of Rubber Estates Nig. Ltd, Araromi Rubber Estates Ltd,
Osse River Rubber Estates Ltd, Utagbo-Uno Rubber Estates Ltd and Water side Rubber Estates Ltd.
Approved Acquisition Transactions
46
Ratification of the Acquisition of 100% equity holdings of Lombard Insurance Company Ltd by NEM Insurance Plc.
Applications under processed for Mergers and Acquisitions The following ten (10) applications are under processing.
1. Proposed Merger involving Intercontinental Capital Markets Ltd, Intercontinental Finance and Investment Ltd and Intercontinental Securities Ltd
2. Merger between Technology Support Centre Ltd and Brian Integrated Systems Ltd
3. Merger between Stokvis Nig Plc and Naturelle Extracts Ltd
4. Merger between A & G Insurance Ltd and A & G Life Plc (formerly
BAICO)
5. Acquisition of 51% Equity Holdings of Nigeria Eagle Flour Mills Limited by Flour Mills of Nigeria Plc
6. Ratification of the Acquisition of 100% equity holdings of Gold Standard Insurers Ltd and First Chartered Insurance Company Ltd by Investment And Allied Assurance Company Plc
7. Ratification of the Acquisition of 100% equity holdings of Piccadilly Insurance Company Ltd by Zenith General Insurance Company Ltd
8. Ratification of the Acquisition of 100% equity holdings of Corporate Ideals Insurers Ltd by Oceanic Bank International Plc
9. Transfer of Diamond Bank Plc’s Shareholding in Diamond Securities Limited to Diamond Capital And Financial Markets Limited
10. Restructuring involving ADIC Insurance Ltd and ADIC Life Assurance Ltd
ACQUISITIONS
47
NEW APPLICATIONS Eight (8) new applications were processed during the period under review
1. Restructuring involving Obajana Cement Plc,
Dangote Bail Limited and DCW Limited
2. Restructuring involving Wema Asset Management
Limited, Independent Securities Limited and Wema Capital Limited
3. Acquisition of 51% Equity Holdings of Nigeria
Eagle Flour Mills Limited by Flour Mills of Nigeria Plc
4. Ratification of the Acquisition of 100% equity holdings of Gold Standard
Insurers Ltd and First Chartered Insurance Company Ltd by Investment
And Allied Assurance Company Plc
5. Ratification of the Acquisition of 100% equity holdings of Piccadilly
Insurance Company Ltd by Zenith General Insurance Company Ltd
6. Ratification of the Acquisition of 100% equity holdings of Corporate
Ideals Insurers Ltd by Oceanic Bank International Plc
7. Transfer of Diamond Bank Plc’s Shareholding in Diamond Securities
Limited to Diamond Capital And Financial Markets Limited
8. Restructuring involving ADIC Insurance Ltd and ADIC Life Assurance
Ltd
TAKEOVER
There were no takeover transactions in the period under review
APPROVED TRANSACTIONS
There were four (4) approved transactions during the review period, they
were:
1. Merger between First Alliance Pension & Benefits Ltd and ARM Pension
Managers (PFA)
2. Merger of Rubber Estates Nig. Ltd, Araromi Rubber Estates Ltd, Osse
River Rubber Estates Ltd, Utagbo-Uno Rubber Estates Ltd and Water
side Rubber Estates Ltd.
3. Ratification of the Acquisition of 100% equity holdings of Lombard
Insurance Company Ltd by NEM Insurance Plc.
48
4. Restructuring involving CFAO Nigeria Plc and CFAO Motors Limited
FINANCIAL STANDARD AND CORPORATE GOVERNANCE
49
FINANCIAL ANALYSIS
The Commission continued with the analysis of Annual and Quarterly
Financial Reports (including Earning Forecasts) of public companies to assess
their financial health, ensure compliance with regulatory requirements and
adherence with the provisions of Nigerian Accounting Standard Board
(NASB).It also examined companies’ observance of the provisions of the
Investments and Securities Act ISA) 2007,Companies And Allied Matters Act
(CAMA) 1984 and the Rules of the Commission with respect to administration
of Public companies. The Commission also rendered other technical
accounting services.
COMPANIES REVEIWED
During the quarter, the Commission received the Annual Accounts of thirty-one (31) public listed companies. These are:
1. Capital Hotels plc
2. ABC Transport
3. Fidelity Bank
4. Capital Oil Plc
5. Chevron Nigeria Plc
6. May & Baker Plc
7. Niger Delta Exploration Plc
8. BCC Plc
9. UTC Nigeria Plc
10. CAP Plc
11. Vita Foam Plc
12. Deap Capital Management Trust Plc
13. Neimeth Pharmaceuticals Plc
14. Mobil Oil Plc
15. Cutix Nig Plc
16. United Nigeria Textiles Plc
17. National Salt Company Of Nigeria
18. Cappa D. Alberto
50
19. Oasis Insurance Plc
20. May & Baker Nigeria Plc
21. Ekocorp Plc
22. Nestle Nigeria Plc
23. Sovereign Trust Insur. Plc
24. Costain WA Plc
25. Nampak Nigeria Plc
26. UBA Plc
27. Sterling Bank
28. IHS Nigeria Plc
29. PZ Cussons Plc
30. Stanbic IBTC Bank
31. Fidelity Bank Plc
Observed lapses were communicated to concerned companies.
REVIEW OF FINANCIAL REPORTS
The Commission reviewed the following audited accounts for second opinion
as requested:
Bedrock Funds
Anchor Funds
Light House Jubilee Funds
FILING OF QUARTERLY RETURN BY PUBLIC COMPANIES AS A FORM OF
MARKET INFORMATION
In compliance with statement of accounting standards (SAS) 30 on interim
financial reporting, the commission had sensitized public companies on the
need to file quarterly financial statements. This market information was
necessary for the commission and the investing public to assess the current
performance of quoted companies in the capital market .This had drawn an
encouraging response from the affected companies in the past 12 months.
51
ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
(IFRS) IN NIGERIA.
The Commission participated in the National Accounting Standards Board
(NASB) road map Committee for the adoption of IFRS in Nigeria. The final
report stipulating the timelines was being awaited from the NASB.
The commission also partnered with the World Bank on capacity building of
supervisors, analysts and inspectors who would analyze accounts of public
companies using IFRS with effect from January 2012.
ATTESTATION BY EXTERNAL AUDITORS ON AUDITED ACCOUNTS OF
PUBLIC COMPANIES
To ensure effective internal governance of public companies with emphasis on
the commissions internal controls, the Commission requested external
auditors of public companies to comply with section 63 of the ISA 2007.This
section requires external auditors to certify the existence and adequacy of
internal control system of public companies.
INVESTIGATIONS
The Commission carried out an investigation into the activities and the books
of Big Treat Plc during the quarter. In addition the Commission met with:
1. DAAR Communications Plc – On the company’s failure to file statutory
returns.
2. IHS Nigeria Plc - On the complaint filed by J. K. Randle Professional
Services.
DISCLOSURE AND COMPLIANCE
HALF YEARLY RETURNS
During the period under review, the Commission reviewed the half yearly
returns of 73 (Seventy Three) quoted companies. The review was to
determine Companies compliance with the following:
52
- Code of Corporate Governance
- Provisions of CAMA
- Provisions of the Investment and Securities Act 2007.
The observed lapses were communicated to the companies, out of which fifty
six (56) Companies were invited for a meeting with the Commission on how to
resolve the issues.
The Commission also organized an interactive meeting with the Director-
General and leaders of Shareholders Associations in Nigeria at the
Commission’s Zonal office in Lagos on 23rd March 2010. The decision taken is
being considered by SEC management.
UNCLAIMED DIVIDEND
The Commission through the Lagos Zonal office undertook the inspection of
Companies that had submitted their half yearly returns on Unclaimed
Dividend. The report was forwarded to the Commission’s head office and is
being reviewed.
TRAINING ON INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRS).
The Commission held a meeting with officials of the World Bank on training
its staff on the implementation of IFRS in Nigeria.
The Commission also organized an interactive meeting with leaders of
Shareholders Associations in Nigeria at the Commission’s Zonal office in Lagos
on 23rd March 2010. The decision taken is being considered by the
commission.
53
ENFORCEMENT AND COMPLIANCE
ENFORCEMENT 1. Illegal Capital Market Operators in Onitsha, Asaba, and Nnewi The Commission conducted surveillance on nine (9) illegal capital market operators carrying out capital market activities without SEC’s registration in Asaba, Nnewi, and Onitsha. It was observed that the two illegal operators at Nnewi had closed and relocated to an unknown location. 2. Fraudulent sale of 692,505 units of Unilever shares belonging to
Erasmus Obiechina Mbakwe
The Commission on the receipt of the above complaint investigated the
matter and found Sikon Securities Ltd., Gorsord Securities Ltd., Union
Registrars, and CSCS Ltd. liable for roles played by the operators.
The Commission therefore suspended Sikon Securities Limited and
Gorsord Securities Limited from all capital market activities and directed
them to repurchase complainant’s shares along with the accrued bonus
while Union Registrars and the CSCS Limited were directed by the
Commission to pay the dividend accrued on the above stated shares. The
CSCS Limited and Union Registrars Limited had paid and the complainant
had acknowledged receipt.
The Commission received letters from Gorsord Securities Limited and
Sikon Securities Limited proposing the buy-back of the complainant’s
shares in instalments within a period of six months and appealed for the
lifting of their suspension by the Commission.
The commission reviewed the proposal by Sikon Securities and Gorsord
Securities Ltd and resolved not to lift the suspension on the two companies
until the complainant is fully resituated.
54
3. Complaint on non receipt of share certificate for Transcorp Plc IPO ifo
Mr Nwoye Okafor Christopher
The matter was forwarded for enforcement action for non receipt of
Transcorp Plc shares which the complainant claims deprivation to transact
on the shares.
The Enforcement Division of the Commission on receipt of the complaint
wrote to Afribank Registrars Limited requesting it to forward evidence of
dispatch of the complainant’s share certificate within the time frame
stipulated by the SEC Rules and Regulations as the complainant is
contesting non receipt of his share certificate. A meeting was held with
the parties which necessitated that Afribank Registrars should mitigate
the complainant’s loss.
4. Complaint against Capital Oil Plc by Valueline Securities &
Investments Limited
This was a case of alleged filling of false information to the Commission on
the special placement of Capital Oil Plc.
An all-parties meeting was held between the complainant (Valueline
Securities & Investment Ltd.), Capital Oil Plc, and the two core investors of
the special placement.
The parties urged the Commission to give them time to resolve all the
issues raised.
5. Re: African Petroleum Plc 2008 public offer of 199,070 ordinary
shares of 50 kobo each at N250.00 per share:
Underwriting commitment by Greenwich Trust Limited
The Commission accepted the request of Greenwich Trust Limited to pay the
underwriting commitment over time as agreed with the Issuer.
6. Dangote Flour Mills Share Certificate ifo Enugwu – Adazi Community Bank – case against Oceanic Registrars An all parties meeting was held on February 18, 2010 with Oceanic Registrars Limited to discuss the penalty imposed on them by the Commission via Onitsha Zonal Office of the Commission.
55
7. Mainland Trust Limited- N1,000,000.00 (one million naira) deposited for purchase of shares The Commission was planning to take an enforcement action against the operator for failing to comply with the SEC directive and reply to the various letters requesting for the resolution of the above matter. 8. Interagency Committee on Illegal Fund Managers/”Wonder Banks” At the meeting of the above stated Committee held on February 10, 2010, at the CBN Head office, Abuja, the following issues were deliberated on;
The status of cases filed by some of the illegal fund managers/wonder
Banks (Nospetco Oil & Gas Limited and Wealth Creation Limited); The need to liquidate the illegal fund managers/”wonder banks”; The suggestion by the CBN for adoption of an approach in restitution of
investors/depositors different from the order of the IST which directed SEC and CBN to restitute the investors /depositors;
The status of prosecution of illegal fund managers/wonder banks by the EFCC;
Media campaign strategies to counter the activities of wonder banks; The threat posed by the phenomenon of on-line forex trading; and Constitution of a standing committee on monitoring of illegal fund
managers.
The Commission in March 3,2010, participated at the meeting of the Inter
Agency Committee with the Inspector General of Police, Monitoring team
and some depositors of Wealth Solutions Ltd., an illegal fund manager.
The depositors alleged that they had obtained a judgment of N518 million
against Wealth Solution Ltd. and that the CBN and the Commission had
about N600 million belonging to the company.
9. Suspension of Finbank Plc and its subsidiaries from capital market activities The Commission received a letter from Fin Capital Limited stating that all the outstanding cases against the Companies had been resolved and appealed for the lifting of their suspension. Meanwhile, the company was to pay penalty for
56
not complying with the directive within the deadline given by the Commission.
10. Criminal Diversion of Fund belonging to Mr. Chima Osuji by Shalom
Investment & Securities Ltd.
The Commission wrote to Shalom Investment & Securities Ltd. requesting for
evidence of resolution of the complaint, failing which enforcement action
would be taken against the company. On receipt of the company’s response,
an all parties meeting was scheduled for April 22, 2010.
11. Fraudulent Disposal of shares belonging to Adesoye Holdings Ltd. by
First Alstate Securities Limited
This was a complaint of fraudulent/unauthorized disposal of 21, 666, 667
units of IPWA Plc shares by the Operator. The Operator was written to
confirm the resolution of the matter and no reasonable response was
obtained, to this, the Commission suspended the Operator from
participating in all capital market activities. The CSCS was written to place
caution on the account of the company and its Managing Director, Mr.
Tajudeen Folaji. The matter was also referred to the EFCC for further
investigation and prosecution.
12. Ademu Daniel vs. Maclaize Trust Limited This was a complaint on non purchase of 760,000 units of Standard
Alliance Insurance Plc shares paid for by Dr. Daniel Ademu against
Maclaize Trust and Securities Company Ltd. A letter communicating
penalty of N201,000 for unethical conduct was being finalized.
13. Morphac Pharmacy Ltd. vs Mutual Alliance Investment & Securities Limited This was a case of unauthorized sale of 83,688 units of Bank PHB Plc’s
shares belonging to Morphac Ltd. by Mutual Alliance Investment &
Securities Ltd. A letter communicating penalty of N97,000 to the operator
was being finalized.
57
14. Complaint by Transglobe Investment & Finance Company Limited against NSE for not allowing it to trade in respect of complaint from SPDC COOP WEST
The Commission received a letter from Transglobe Ltd. stating that the NSE
refused it to resume trading on the floors of the Exchange despite the
Commission’s letter lifting its suspension to the NSE.
In view of the above, the Commission directed the NSE to permit the
Operator to resume trading in the absence of any adverse issue pending
against the company.
15. Arrest of Illegal Fund Managers - Mercor Investment Limited The Commission sought the assistance of the Nigeria Police, Kaduna
Command to effect an arrest of some illegal capital market operators in
Kaduna.
Meanwhile, a formal letter was written to Kaduna State Police Command
informing it of the alarming increase in the activities of illegal fund
managers in the state and requested the assistance of the police.
16. Re: Complaint against Supra Commercial Trust Limited Complaints against Supra Commercial Trust Ltd. on non purchase of shares
paid for review of the files, a letter was written to the Operator to respond
on the complaints.
17. Meeting with Davandy Securities & Finance Limited to reconcile records on Complaints received by the Commission The Division held meeting with the representative of the operator as
directed by the Executive Commissioner (L&E), where reconciliation of the
outstanding indebtedness of the 61 complaints received by Commission
were addressed. The Operator appealed for its suspension to be lifted to
enable it commence business and repay the complainants as agreed with
them.
A recommendation was made to Management on the Operator’s appeal.
58
ADMINISTRATIVE PROCEEDINGS
18. APC/3-4/2009: In The Matter Of Alleged Securities Market
Manipulations And Other Violations Of The Isa 2007, Sec Rules And
Regulations 2000 As Amended, Code Of Conduct For Capital Market
Operators And Their Employees And Code Of Corporate Governance,
Made Pursuant Thereto, Against Union Bank Plc & 26 Ors And Oceanic
Bank International Plc & 37 Ors
The Administrative Proceedings Committee (APC) sat on January 25 and
26, 2010 to hear the matters between the Commission and Union Bank Plc
& 26 Ors and Oceanic Bank International Plc & 37 Ors.
19. Confirmation Of Adverse Report/Status On Operators
The Commission responded to a request for confirmation of adverse
reports of sixty nine (69) operators/consultants during the period under
review. This is with a view to rid the market of persons with fraudulent
distortion.
20. APC/2-150/2008: SEC V Alliance Capital Management Company Ltd &
ors
During and after the hearing of the matter between SEC and Alliance
Capital Management Co. Ltd (ACML) on November 3rd – 6th 2009, the
Commission received share certificates and copies of CSCS statements from
the 1st Respondent in respect of some of the complainants. However, some
of the CSCS statements after analysis did not reflect settlement of some of
these complainants claims.
In compliance with the Committee’s directive at the hearing, the Managing
Director of ACML forwarded a report on the status of complaints against
the company in January 15, 2010. The analysis of the report revealed that
the 1st Respondent contrary to its admission at the hearing, claimed that 42
complainants were indebted to ACML to the tune of N13,659,745.63.
Consequently, the complainants were written to confirm whether or not
they were indebted to ACML and to confirm if their CSCS statements
59
reflected a settlement of their claims. ACML was also written requesting
that they forward evidence of the said complainants’ indebtedness to
company.
21. APC/150-228/2008: Complaints against Alliance Capital
Management Company Ltd. & ors
Further more, 78 additional complaints against Alliance Capital
Management Company Ltd were recovered. Hearing Notices were sent to
the Respondents and complainants. The APC sat on March 2, 2010 to hear
these additional complaints (APC/150-228/2008: Complaints against
Alliance Capital Management Company Ltd. & ors).
22. SEC vs Finbank Plc and SEC vs Intercontinental Bank Plc
The Commission received additional submissions by Respondents in
respect of the matter between SEC and Finbank Plc and Intercontinental
Bank Plc, which were being analyzed to enable the division incorporate
same in the draft summary of evidence and Findings.
23. APC/01/2009: SEC V Finbank Plc & 44 ors
The APC sat on March 3, 2010 to review the minutes, submissions, and
findings in respect of this matter (APC/01/2009: SEC V Finbank Plc & 44
ors).
24. APC/2-227/2008: SEC V Alliance Capital Mgt Plc & 15 ors
The additional 72 complaints were presented at the APC Hearing. The
operator was asked to come up with a definite settlement plan.
25. APC/05/2009: SEC V Afribank Plc & 32 ors
The APC sat on 4th March, 2010 to hear the matter. The matter was
adjourned indefinitely.
COMPLIANCE
26. National Sports Lottery The above company came to the market in May 2008 to raise 800,000,000 ordinary shares of 50k each at N15.50k per share through an IPO. Strand
60
Capital Partners Ltd, one of the six underwriters, undertook in the prospectus on a firm basis to underwrite N5, 313,333,335 representing almost 45% of the total expected issue proceeds, which amounted to N12, 400,000,000.
The 5 other underwriters paid a total of N6.1 billion out of which N152,864,385.80 was deducted as underwriting commissions. The allotment was subsequently cleared since the subscription level was above 50% of the total anticipated.
Strand Capital Partners remained the only party that failed to honour its underwriting commitment despite several letters from the Commission to do so. Consequently the company would be penalized if it fails to comply with the underwriting commitment. The Enforcement and Compliance (E&C) department recently invited the company’s MD and other Directors to the Commission for a meeting on March 9, 2010 in order to extract a payment commitment.
27. NON-RENDITION OF HALF-YEARLY RETURNS
The Commission received a list of 59 (Fifty nine) companies who failed
to render their half-yearly returns for the period ended December 31, 2008.
Meanwhile letters of penalties to the companies were sought out of which only 6 (six) responses were received, giving various reasons for the non-rendition.
However, some of the companies had pleaded with the Commission to review their cases and reduce or waive the penalties imposed.
28. RE: NON-RENDITION OF QUARTERLY RETURNS BY CAPITAL MARKET
OPERATORS The Monitoring and Investigation (M&I) Department forwarded a list of twenty five (25) operators that had failed to render their quarterly
61
returns. Appropriate penalty would be mated out to concerned companies in line with SEC zero tolerance positions on market infrastructure.
29. RE: AFROIL PLC
Unity Registrars Ltd, the Registrars to Afroil Plc forwarded to the
Commission a court order (Form 48) directing them to transfer 15,960,000 units of Afroil Plc shares held in the name of Farm Estate Ltd to K. S. Funds Ltd. The form 48 was issued following an application by Mr. I. O. Sanni the former MD of Afroil Plc. following a decision of the Federal High Court Lagos in Suit No.FHC/L/LS/279/99. Management had directed that the matter be sent to the Legal Department to take steps in order to vacate the judgment.
The newly appointed Directors of Afroil Plc in March 2010, however, requested the Commission to file on its behalf the Form Co7 at the Corporate Affairs Commission.
The Commission is making arrangement from form CO7 at CAC which is the only way to finally authenticate the appointment of the new Directors at the Company’s Registry (CAC).
Meanwhile, the new board of Directors also forwarded a letter
requesting for the Commission to come to their aid by approving a “Take off Grant” in the sum of N26,879,735 (Twenty six million, eight hundred and seventy nine thousand, seven hundred and thirty five Naira only) as well as lifting suspension from trading on Afroil shares. The request is being adhered by SEC.
30. RE: VICTOR INYANG Vs. FUTUREVIEW FINANCIAL SERVICES LTD The Commission was in receipt of the complain from Victor Inyang, a former staff of Futureview Financial services company who resigned his appointment on September 15, 2008 and requested the termination of his investment of N15, 000,000.00. The company refused and went ahead to suspend him for three months (without pay) alleging that he committed fraud on some of the Accounts he was managing.
62
The complainant engaged the services of Messrs Taiwo Kopolati & Co. and proceeded to report the matter to the Commission. The amount outstanding and due to the complainant was currently over N19 million representing his investment and terminal benefits.
The Commission after review of the matter decided that the company Futureview Financial Services Ltd should pay the complainant his return on investment which amounts to N14,726,791.60 and his terminal benefits of N4,209,919 failing which the company should be suspended from all capital market activities.
31. RE: ASSET PLUS SECURITIES LTD
The Commission received a letter from the stockbrokers (Union Capital Markets Ltd) appointed to distribute the recovered stocks where in they forwarded the transfers that had been completed and also requested for the payment of their transfer fees of N4,464,040.41 (Four million four hundred and sixty four thousand, forty naira, forty one kobo only).
The Commission directed that the fees be paid to the stockbrokers as it was not feasible to request regulatory bodies to waive their statutory fees.
The Commission carried out a thorough review of the distribution process and requested for payment of brokerage commission presented by Union Capital Market Ltd. The stockbrokers were invited for a meeting to enable them make a presentation and reconcile the details of the distribution accordingly. Union Capital markets Ltd had been advised to stick to the distribution schedule.
32. RE: LAFARGE CEMENT WAPCO NIG. LTD
The company failed to render its 1st half account year ended June 30, 2009, which is breach of Section 60 (1) of the ISA. The company was therefore directed to pay the sum of N1,425,000 (One million four hundred and twenty five thousand naira only) failing which the penalty will continue to run for everyday of default till they comply.
63
REGISTRATION AND RECOGNISED INVESTMENT EXCHANGES
A. Fresh Applications
1. A total of forty-four (44) new applications were received from Potential
Capital Market Operators to register for the following functions during
the review period as follows:
S/N APPLIED FUNCTION NO OF
APPLICANTS
% OF TOTAL
1 Reporting Accountants 3 6.8
2 Broker Dealers 8 18.2
3 Fund/Portfolio Managers 7 15.9
4 Corporate Investment
Adviser
5 11.3
5 Receiving Banker 1 2.3
6 Registerar 1 2.3
7 Solicitors 7 15.9
8 Custodian 1 2.3
9 Individual Investment
Adviser
3 6.8
10 Issuing Houses 4 9.1
11 Auditor 1 2.3
12 Over the Counter Market 1 2.3
13 Capital Market
Consultants
2 4.5
Total 44 100
64
2. Broker/Dealers constituted the majority with eight (8) applications,
representing (18.2%) of the application, followed by Fund/Portfolio
Managers and solicitors with seven (7) applications each (15.9%).
3. Registered Operators
There were no Fresh Registrations for new Capital Market Operators
between January and March 2010.
B. Commodity Exchange Division
1. Price information on Major Commodities
Below is the market price list of major commodities.
PRICE LIST AS AT MARCH 2010
Market Commodity Type Price\Ton Date
Kumo Millet Gero N46,900.00 29032010
Kumo Soyabeans Variety White N54,200.00 29032010
Kumo Sorghum Red N39,400.00 29032010
Kumo Sorghum White N39,400.00 29032010
Kumo Maize Yellow N43,600.00 29032010
Kumo Maize White N44,700.00 29032010
Kumo Cowpea Brown (Big
Seed) N83,000.00 29032010
Kumo Cowpea White (Big
Seed) N88,500.00 29032010
Buruku Soyabeans White Variety N45,000.00 29032010
Mangu Groundnut Shelled (Mai
Bargo) N155,000.00 29032010
Mangu Millet Maiwa N85,000.00 29032010
65
Mangu Millet Gero N80,000.00 29032010
Mangu Sesame seed Cleaned N140,000.00 29032010
Mangu Soyabeans Variety White N60,000.00 29032010
Mangu Sorghum Red N75,000.00 29032010
Mangu Sorghum White N67,690.00 29032010
Mangu Maize Yellow N47,000.00 29032010
Mangu Maize White N41,000.00 29032010
Mangu Cowpea Brown (Big
Seed) N110,000.00 29032010
Mangu Cowpea White (Big
Seed) N110,000.00 29032010
Source: ASCE
2. Trading activities at Abuja Securities and Commodity Exchange
(ASCE):
The ASCE recorded no trading activities during the review period.
DEVELOPMENT IN THE INTERNATIONAL COMMODITIES MARKET
Ethiopia Commodity Exchange Knowledge Forum
A Knowledge Forum titled “The Making of a Market: Global Learning from Commodity Exchange Experiences”, jointly organized by the Ethiopian Commodity Exchange (ECX) and the United Nations Development Programme (UNDP)opened on (24th February 2010) in Addis Ababa, this gathered nearly 400 participants drawn from the international diplomatic and donor community, federal and regional government officials, private traders, and various exchanges from around the African continent and India.
Others are chief executives from India’s National Commodity and Derivatives Exchange (NCDEX) and the Agricultural Markets (SAFEX) under the Johannesburg Stock Exchange, other represented exchanges include Uganda Commodity Exchange, Zambia Agricultural Commodity Exchange, Khartoum
66
Stock Exchange, Kenya Agricultural Commodity Exchange, Malawi Agricultural Commodity Exchange, and the Abuja Commodities and Securities Exchange. Alongside these, projects to establish exchanges are also representatives from Tanzania, Ghana, and Zimbabwe. A total of 12 African countries were represented at the event.
The ECX-UNDP Knowledge Forum was organized in response to the numerous expressions of interest in the recent Ethiopian experience. The central themes raised in the Forum were: how can markets be appropriately developed to transform the agricultural sector? What are the prospects for commodity exchanges in Africa? How can commodity exchanges be regionalized or contribute to regional trade? The objectives of the Knowledge Forum were to highlight lessons from comparative global experiences in establishing commodity exchanges and to engage in learning on the actual process of implementation and the challenges faced.
One of the envisaged outcomes of the Knowledge Forum was a Consultative
Meeting among the gathered exchanges to be held on February 25, with the
aim of establishing the African Commodity Exchanges Association, expected to
be hosted by ECX in Addis Ababa.
United Nations Development Programme (UNDP) Ethiopia Support to
the Ethiopia Commodity Exchange (ECX)
The major objectives of Ethiopian Commodity Exchange (ECX) is to implement national agricultural marketing information system that connects all regions and provide relevant and timely market information to various market actors. It also attempts to establish and strengthen vertical and horizontal linkages among producers, cooperatives, wholesalers, processors and exporters through organized trading platform.
In view of strengthening this innovative undertaking, UNDP had been supporting ECX since 2006 in the following areas.
A tripartite Memorandum of Understanding (MOU) signed between Ethiopian Ministry of Agriculture and Rural Development (MOARD), International Food Policy Research Institute (IFPRI) and UNDP for the implementation of UNDP support to ECX for two phases mainly for professional training, sensitization
67
workshop, market information and office set up and equipment and Experience sharing visits to help set up ECX. This was followed by:
Assignment of 6 International senior advisors for a period of 3 years. This is an ongoing support.
Organization of the Knowledge Forum in collaboration with ECX is also part of the UNDP support.
In general, UNDP support in this innovative intervention of ECX operations along with other donors contributed to improving service delivery for the broad base clients in:
Providing warehouse operations facilities Quality assurance by establishing a system of industry-accepted product
grades and standards Rapid and reliable dissemination of market information to all actors Clearing all payments from buyers to sellers Information technology development and support and Risk Management
DEVELOPMENT IN THE LOCAL COMMODITIES MARKET
Implementation of 2009/2010 Guaranteed Minimum Price (GMP)
The National Food Reserve Agency (NFRA) under the supervision of the
Federal Ministry of Agriculture and Water Resources had notified the general
public on the implementation of Guaranteed Minimum Price (GMP) scheme
for 2009/2010 farming season to improve farmer’s income and boost
agricultural production, thereby ensuring food security. In addition, a
mechanism had been put in place to ensure farmers obtain fair prices for their
produce. It was a predetermined price the farmer will get for a given unit
measured of his produce. An effective GMP therefore would keep the farmer
in business.
For 2009/2010 agricultural season, contracts were awarded to 23 licensed
buying agents to procure produce from farmers.
The approved GMP for the various food commodities were as follows:
68
Maize - =N=45,000/mt Sorghum - =N=41,000/mt Millet - =N=41,000/mt Soya beans - =N=56,000/mt Paddy rice - =N=60,000/mt Garri - =N=75,000/mt While the approved silo locations of deliveries are: Minna, Ilorin, Akure,
Makurdi, Irua and Ogoja.
C. Renewal of Registration
S/N COMPANY/FIRM FUNCTION DATE
REGULARISED
1 First Securities Discount
House
Corporate Inv. Adv.
Fund/Portfolio Mgr. and
Issuing House
25/1/2010
2 Rainbow Securities Broker Dealer 8/2/2010
3 CSCS Clearing settlement and
Depositary Agency
17//2010
4 Cashville Investment and
Securities Ltd
Broker Dealer 19/12/2010
5 Ajumogobia and Okeke Solicitor 4/3/2010
6 Adeniji Kazeem & Co Solicitor 18/3/2010
2. Fidelity Bond
A total number of fifty-eight (58) companies/firms filed their Fidelity Bond
3. Change of Name/Address
A total number of eight (8) companies/firms changed their addresses while
three (3) companies/firms changed their names.
69
LEGAL DEPARTMENT
Legal Opinions
The following legal opinions were given during the period under review.
1. Resuscitation of Consortium Resource Investment Notefund The Collective Investment Schemes (CIS) had by a memo dated
January 5, 2010 sought legal advice on the proposal by ARM
Investment Managers Ltd for the resuscitation of the Consortium
Resource Investment Note (CRIN) fund which they intend to
convert to an Islamic fund.
The Legal Department reviewed the proposal and was of the
opinion that it was reasonable and should be approved.
2. Stanbic IBTC Money Market Fund – IPO of N10,000,000 units of N100 Each at Par and Supplementary Offer of 2,211,800 Units of N100 Each Issued at Par The Collective Investment Schemes Department requested for
legal opinion on the regulation for the management of the
arrangement referred to by Stanbic IBTC as “Fund of Funds”.
The Stanbic IBTC Asset Management Ltd (SIAML) floated the
above titled fund and it was observed that 5 other funds managed
by SIAML and which were not registered with the Commission,
were major subscribers to the fund.
The Legal Department was of the opinion that the structure of the
IBTC Money Market Fund, being a fund of funds, was not contrary
to the provisions of the ISA. A collective investment scheme by
whatever name called and regardless of the structure was
required to be regulated, provided it was a collective investment
fund as defined by the ISA.
70
The Legal Department therefore advised that since the fund was a
fund of funds for all purposes, same regulations that applied to
other Unit Trust Schemes should also apply.
3. Proposed Dissolution of FSDH Coral Ethical Fund
A memo was received from the Collective Investment Schemes
(CIS) Department seeking for legal opinion on the above subject
matter.
The Legal Department reviewed the request and opined that in
the light of the fact that FSDH Asset Management Ltd had
complied with the Commission’s directives on the dissolution of
the fund, the process should be finalized.
5. Absenteeism of Chairman of Conoil Plc from Annual General
Meetings
The Department received a memo from FS&CG Dept. requesting to
know what sanctions could be imposed on the Chairman and
some Executive Directors of Conoil Plc who had consistently been
absent from the AGMs of the company.
The Legal Department was of the opinion that the provisions of
CAMA did not prescribe sanctions against a Chairman or
Managing Director who absents himself from AGM. The Code of
Corporate Governance also had no sanctions for its violators.
The Department therefore advised that FS&CG Dept. should
closely monitor the activities of the company and draw the
attention of its Board to any lapses observed and where there
were clear violations of securities law, the company should be
sanctioned accordingly.
6. Request for Market Data on Registered Mutual Funds Collective Investment Scheme (CIS) Department sought for legal
opinion regarding a letter from BGL Plc requesting for the most
71
updated information regarding all funds registered by the
Commission.
Rules 308 & 309 of the Commission’s Rules and Regulations
provided that all documents filed with the Commission shall be
open to inspection on the payment of a prescribed fee.
BGL Plc did not request for inspection but wanted some
information on the funds.
Rule 309(b) (ii) stated that a letter requesting for inspection
should state the purpose for inspection.
The Legal advise was that BGL Plc be asked to state or disclose
the purpose for requesting such information, and the provisions
of Rule 308 & 309 brought to their attention.
7. Oando Plc – Proposed Dual International Offering of Global Depository Receipts and Convertible Instruments Vetiva Capital Management Ltd, the financial advisers to Oando
Plc sought clarification on Rule 226 of the Commission’s Rules &
Regulations as regards a dual international offering of GDRs and
Convertible instruments solely to international investors.
They requested to know if they were to comply with the full
disclosure requirements of the Commission.
The Legal opinion was that though the offer was targeted solely at
foreign investors and the primary filing would be at the UK, the
Issuer in accordance with Rule 226(2) must comply with the
disclosure requirements of the Commission.
8. Whether a Quoted Company Can Buy Back its Own Shares Directly During an Initial Public Offer/Offer for Subscription/Rights Issue De-canon Investment Ltd, a registered capital market operator
requested to know if a quoted company could buy back its own
72
shares directly during an initial public offer, offer for subscription
or rights issue.
The Legal opinion was that a public company was not authorised
to buy back its own shares in the primary market and the
Commission had never authorised any public company to do so.
The Legal Department however advised that Rule 109B of the
Commission’s Rules and Regulations contemplated such share
buy back but only through the secondary market.
9. Afroil Nig. Plc – Notice of Consequence of Disobedience to order of Court Unity Registrars Ltd, registrars to Afroil Plc, in its letter dated
February 5, 2010, requested for urgent advice with regards to
Notice of Consequences of disobedience to Court order sent to it
by the Federal High Court, Lagos.
The Commission was also affected by the order of Court because
Order No. 4 stated that all statutory regulatory authorities should
give effect to the orders.
The Department noted that neither Unity Registrars nor the
Commission were parties to the suit where these orders were
made, and therefore advised that the Commission should
immediately apply to be joined in the matter as an interested
party.
Initial Public Offering of 50,000,000 units of N103.50 in the SIM Capital Alliance Value Fund (The Offer) The Collective Investment Scheme Department sought for the
Legal Department’s opinion on whether a close-ended fund which
tends to be listed and traded on the floor of the Exchange, could
be allowed to absorb the over subscribed portion of its offer.
The Legal Department opined that a closed or open-ended fund
was set up for investment purposes and for the benefit of the unit
73
holders and the over subscribed portion, if absorbed would also
be invested for benefits of unit holders.
The Legal opinion was that the company could be allowed to
absorb the excess if the request was disclosed in their Prospectus.
10. IBTC Ethical Fund – Request for Interpretation of the Trustees Investments Act and 3RD Supplemental Trust Deed The Legal Department reviewed the Trust Deed of IBTC Ethical
Fund and observed that the provisions of the Supplemental Trust
Deed stated that the manager shall not make any investment that
would result in more than 10% being invested in the “securities”
of a single company or one group of companies.
Shares and debentures were regarded as securities and this fell
within Section 3(b) of Trustee Investment Act (TIA).
The Legal opinion was that the clause was not in violation of the
TIA but that the Commission should monitor the fund to ensure
that not more than 5% was invested in a particular company.
11. Suspension of Platinum Capital Ltd from carrying out Capital Market Activities The Commission received a letter dated February 10, 2010 from
Bank PHB Plc which requested that the Commission should
exercise restraint and wait for the outcome of the matter in court
before it took a decision on the complaint against Platinum Capital
Ltd which was pending with the Commission.
The Legal Department advised that the Commission should not
take any step that might affect the status of the parties,
particularly suspension of Platinum Capital Ltd from the capital
market, pending the determination of the matter in court or any
out of court settlement.
12. Invitation to Attend a Public Hearing on a Bill for an Act to Amend the Economic and Financial Crimes Commission (Establishment) Act 2004
74
The Legal Department reviewed the EFCC Amendment Bill and
forwarded its comments and observations as follows:
(a) The discipline or field of experience of the Chairman was not stated under the new Section 2(1) (a)(iii).
(b) It was observed that the Director-General of SEC was removed as a member of the Commission. The Legal Department opined that as the apex capital market regulator which is an important part of the Nigerian financial system, SEC should be a member of the Commission.
(c) The Bill sought to amend Section 40 of the Act by making it unlawful for any court in Nigeria to make orders of injunction to restrain or interfere with the performance of duties by the EFCC.
The Legal Department therefore opined that excluding the
rights of persons to apply for injunction or stay of
proceedings was undemocratic and a violation of the
fundamental human rights of citizens and further advised
that these provisions be expunged or further amended.
The observations were transmitted to National Assembly .
13. Appeal No. IST/LA/APP/01/08 – Akintola Williams Deloitte (AWD) Vs SEC Akintola Williams Deloitte (AWD) was one of the respondents
who appeared before the Administrative Proceedings Committee
(APC) in connection with overstatement in the financial statement
of Cadbury Nig. Plc between 2003 and 2006.
AWD appealed against the decision of the APC at the Investments
and Securities Tribunal. The IST nullified the APC decision and
75
ordered a retrial and a refund of the N20 million penalty paid to
AWD.
AWD appealed against the order of retrial while the Commission
cross-appealed on the entire decision of the Tribunal.
AWD, by letters dated August 15, 2008 and July 28, 2009 as well
as at a meeting held on August 31, 2009 with the Commission,
requested that the appeal and cross appeal be dropped and that
the matter be amicably settled out of court in the best interest of
the Nigerian capital market.
The Legal Department noted that from the minutes of the meeting
held between SEC and AWD, it appeared that Management of the
Commission was willing to accept the request of AWD but subject
to the approval of the rules on consent process by the
Commission’s Board as well as the Minister and that it did not
categorically state that it would withdraw its cross-appeal in the
matter.
14. Amendment of the Investments and Securities Act 2007 The Investments and Securities Act (Amendment) Bill was
received and reviewed by the Legal Department forwarded its
observations in the following areas:
(i) Amendment of Section 20 – Application of the funds of the
Commission.
(ii) Further clarification be sought on Section 26(4).
(iii) New Section 26(6) – The Legal Department advised that this section be amended to enable the Commission withdraw from the funds in succeeding year if the appropriation bill was not yet passed.
(iv) Section 23 of the Principal Act - The Department opined that the Commission should be allowed to utilize proceeds of
76
penalties charged and fees paid to it after necessary approvals.
It was also the view of the Legal Department that the
Commission should dialogue with the National Assembly on
the need for the Commission to retain its funds and to
continue with its present arrangement whereby the budget
is only laid before the National Assembly without going
through the appropriation process.
15. Review of Proposed Bill to Amend the Land Use Act The Legal Department reviewed the proposed amendment to the
Land Use Act 1978 and recommended as follows:
(a) that the requirement of Governor’s consent to assign
interest in properties be removed from the Act;
(b) that the Act be removed from the Constitution in order to
facilitate amendment whenever the need arose.
16. Registration of Venture Capital Fund/Venture Capital Company The Law firm of Aluko & Oyebode vide a letter dated March 16,
2010 sought for clarification on the following issues:
1. Whether venture capital fund/company must be a shareholder in companies to which it intends to grant loan.
2. Whether its client, as a registered venture capital fund/company might grant loans to eligible companies without taking up equity in such companies.
The Legal Department advised that Rule 282 of the Commission’s
Rules provided that the partnership agreement between a venture
capital and the company it is investing in might grant it limited
partnership.
77
Therefore the terms of the agreement would determine whether
the venture capital fund/company must be a shareholder or take
up equities in the company it intends to grant loan.
17. Failure/Rejection by Company Registrars of Bank Confirmation Issued by Primary Mortgage Institutions (PMIs) in Respect of Shares/Stocks The Institute of Capital market Registrars vide a letter dated
March 9, 2010, addressed the issue of members of the Capital
Market Registrars of Nigeria’s refusal to accept bank letters of
confirmation issued by Primary Mortgage Institutions (PMI) in
respect of shares.
The letter made reference to an earlier letter dated February 16,
2010 from the Central bank of Nigeria (CBN) which confirmed
that PMIs were bonafide financial institutions duly licensed by the
CBN to take deposits which were insured by NDIC.
The Legal Department advised that members of the Institute
should be directed to accept bankers’ confirmation issued by PMIs
being bonafide institutions licensed by CBN.
The Department also advised that the Commission in conjunction
with CBN should issue a directive that banks should accept
payment of dividend warrants into savings account.
18. Request for Information – Opening of Liaison Office by Security Companies Registration & Recognised Investment Exchanges (RRIE)
Department sought for legal opinion on whether Dependable
Securities Ltd, a company registered as a broker dealer with the
Commission, may be granted permission to open a liaison office to
enable them relate with and serve their clients more effectively.
The memo also stated that the Commission had no policy on the
issue.
78
The Legal Department opined that the company might be allowed
to open a liaison office as long as it was duly registered with the
Commission.
However, the office should be managed by a senior officer who is
registered by the Commission as a sponsored officer
Suit No. IST/LA/11/08 – Brentonwoods Ltd Vs Genesis
Securities & Investments Ltd & 2 Ors
The Commission was the 2nd Respondent in this case.
The Law firm of Falana & Falana forwarded a copy of the IST
judgment in the above case and called the Commission’s attention
to the portion of the judgment which compelled the Commission
to comply with the Tribunal’s order by ensuring that the 1st and
3rd Respondents i.e. Genesis Securities & Invest. Ltd and the
Nigerian Stock Exchange respectively, paid the Applicant the sum
of N22,469,189.20 which was the judgment debt.
The Legal Department advised that the Commission had a duty to
ensure compliance with the law by carrying out the Tribunal’s
order to ensure that the 1st Respondent paid the judgment debt to
the Applicant.
LITIGATIONS
1. Suit No. FHC/CA/CS/112/09 – Pastor Monday Akpan & Anor Vs Securities & Exchange Commission – Review of Court Process Commandclem Nig. Ltd filed a Motion on Notice dated December
23, 2009. In the Motion, the Company sought for an order of the
Court restraining the Commission from issuing any threat, arrest,
impounding or sealing the business premises of the applicant.
The Commission was served with a pre-action notice on
November 23, 2009 and the motion was slated for hearing on
79
January 19, 2010. The Dept. advised that one of the Commission’s
External Solicitors resident in Calabar should defend the matter.
2. Suit No. IST/EN/OA/02/10 – Engr. Mbakwe Christopher Nwachukwu Vs SEC & 2 Ors Engr. Nwachukwu filed a suit at the IST Enugu, claiming from the
Commission, Nova Finance and Mr. Oparawaukwe, the sum of N35
million as special and general damages for the misconduct of the
Respondents.
The claim against the Commission was that the Commission
refused to take any action with regard to the compensation
claimed by the Applicant against the 2nd and 3rd Respondents.
This was after the Commission had settled the dispute between
the Applicant and the 2nd and 3rd Respondents, and the Applicant
was fully restored.
The Legal Department opined that the Commission should defend
the matter and one of the Commission’s External Solicitors has
been appointed to represent the Commission in the suit.
3. Status of Judgment Taken in Sec Vs Allgreen Invest. Ltd & 36 Ors – Suit No. IST/OA/17/07 The Investments and Securities Tribunal (IST) delivered judgment
in this matter on July 3, 2008 and directed the Commission to
work together with the Central Bank of Nigeria (CBN) to ascertain
the funds left in the account of illegal fund managers and pay back
the affected investors.
The Enforcement & Compliance (E &C) Department informed the
Legal Department that an Inter-agency Committee on Illegal Fund
Managers/Wonder Bank headed by CBN was in the process of
implementing the judgment.
The Legal Department reviewed the update and opined that the
instruction given by CBN to unfreeze the accounts of the wonder
banks undermined the directive of the Tribunal.
80
4. Appeal No. CA/L/13/2010 – Suit No. FHC/L/CS/789/09 – Alh. Aliko Dangote Vs African Petroleum Plc & 27 Ors – Review of Court Processes The Commission received a Motion on Notice and a Record of
Appeal filed at the Court of Appeal, Lagos by Alh. Aliko Dangote.
The Appellant prayed the Court for an order to stay proceedings
in the matter at the Federal High Court or alternatively grant an
interlocutory injunction restraining the Plaintiffs from further
prosecution of the suit.
The Legal Department advised that the Commission should not
participate in the appeal since the decision of the Court of Appeal
would not adversely affect the position of the Commission in the
matter.
5. Suit No. FHC/L/CS/667/08 – Chief Raymond Ihyembe Vs SEC & Anor The Plaintiff, Chief Ihyembe, was challenging the powers of the
Commission to disqualify him from holding directorship position
in any public company for a period of one year.
The Legal Department advised that the case should be defended.
One of the Commission’s Solicitors was briefed to defend the
Commission in the matter.
6. SUIT NO. FHC/MKD/CS/16/10 – Chief John Akperaeshi Vs Benue State Government & 8 Others The Commission was the 8th Defendant in this case. The Plaintiff
in this case claimed as follows:
1. A declaration that the transfer of the 443,104,491 units of
the rights owed by the 1st and 4th Defendant to the 5th
Defendant was null and void.
2. An order rescinding same, the said illegal transfer of the
said units and reversing same to the status quo ante bellum.
81
3. An order of perpetual injunction restraining all the defendants the Court may find culpable in the transaction.
4. Such other orders as the Court may deem fit to make in the circumstance.
The Legal Department was of the view that although no specific
claim was made against the Commission, the Plaintiffs showed
serious lack of understanding of operations in the market as well
as the functions of the Commission.
The Department therefore advised that one of the Commission’s
external Solicitors be instructed to defend the Commission in
Court to protect the interest of the Commission considering the
ignorance of the Plaintiff and his Solicitor in capital market
operations.
NEW RULES / AMENDMENTS TO SEC RULES / REGULATION
During the period under review, Legal Department circulated the
following New Rules/amendments to the Rules and Regulations which
came into effect on March 24, 2010:
1. Approval of Appointment of Directors of Market Operators (New Rule 15A)
2. Rules on Bonus issue (New Rule 40D) 3. Validity period of accounts (New Rule 40B)(i)(iv)(h) 4. Rule 40(3) - Reduction in documentation filed with SEC by
operators. 5. Conditions for approval of IPO and listing by introduction(New
Rule 50) 6. Filing of Registration Statement (Rule 50(1) & (2) 7. Declaration by the issuer on full disclosure (New Rule 50 (3) 8. Condition for approval of subsequent Public Offer (New Rule
50A) 9. Incorporating forecast and oversubscription in the Offer
documents (New Rule 56(XV) 10. All Parties Meeting (New Rule 59B) 11. Pre-Offer waiting period (Fixed price Offers)(New Rule 59C)
82
12. Extension of Offer Period (New Rule 60(d) 13. Opening of Interest yielding accounts for offer proceeds
(Rule 64(1)). 14. Absorption of over-subscription (Rule 64(4)(a)(iii) 15. Interest on Return Monies (new Rule 64(7) 16. Basis of allotment ( Rule 69(2) 17. Subscription level for Issue not underwritten (Rule 70(6)(ii) 18. Listing of securities after allotment clearance (New Rule
71(ii) 19. Cost of issue (Rule 73) 20. Amount to be underwritten (Rule 75) 21. Underwriting of Rights issues (New Rule 75A) 22. Underwriting capacity/commitment (Rule 76) 23. Conditions for Approval of Offer(Private Placement)(Rule
90) 24. Advertisement of Private Placement (New Rule 90(2) 25. Know your Customer (Rule 100) 26. Issue and handling of certificates (Rule 200) 27. Depository receipts of Nigerian entities (New Rule 226(3)) 28. Harmonization of Rule 109B(vi) with Section 161(a) of
CAMA 1990 29. Issuance of Corporate bonds (New Rule 307A) 30. Reduction of SEC fees for the registration of bond Issuance 31. Rule on Money Market fund (Rule 249A) 32. Amendments to Schedule 1, Part C, Item 5,6& 7(Empowers
SEC to charge 0.25% of gross income of CIS schemes) 33. Regulations of Mergers, Takeovers and Acquisitions (Rule
227) 34. Clearance of scheme Documents(New Rule 232(c) 35. Power to order the Break up of Company(New Rule 234(C) 36. Method of Calculations of Annual Turnover or Assets to be
applied in relation to Merger thresholds (New schedule X) 37. Rules on Procedure of APC of SEC (Schedule VII) 38. Vending agreement (Amendment to Rule 78B) 39. Regulations of Public Companies (Part B4) 40. Guidelines for the monitoring of unclaimed dividends by
public companies
83
The Rules were subsequently forwarded to all Capital Market
Trade Associations, CMC Sub-Committees, Operational
departments of the Commission, Information & Technology
Department for uploading in the Commission’s website, Media
Division for publication in National daily newspapers, Executive
Management of the Commission, Transformation Committee and
other relevant stakeholders for their information and compliance.
84
ACTIVITIES OF ZONAL OFFICES
IBADAN ZONAL OFFICE
The following complaints were received during the period under review
Complaints by Investors and actions taken:
Eight (8) new complaints were received from Investors.
The zone was able to resolve/settle nine (9) cases between the
Investors and Operators while investigation was on going in respect of
14 files.
One (1) case file was sent to the Head Office for enforcement action.
Two (2) All party meetings were held. They were:
i. Mrs. Racheal Ajayi (W.A. Aladedutire & Co) VS First Alstate Sec.
Ltd
ii. Mr. Popoola Emmanuel Ayodele (M.O. Oladeji & Co) VS First
Alstate Sec. Ltd
Inspection was conducted on HEBN Publishers Plc, in respect of
registration of existing Securities.
TRADING ACTIVITIES
The Zone had commenced monitoring/surveillance activities on the floor of
Nigerian Stock Exchange, Ibadan.
MARKET DEVELOPMENT ACTIVITIES
The Zone held a meeting with shareholders association to intimate them on
the need to help mobilize their members towards 2010 public enlightenment
programme.
85
KADUNA ZONAL OFFICE
OPERATIONAL ACTIVITES
The Zone received a total of forty five (45) complaints during the period under
review. Thirty five (35) were Registrars related while ten (10) were
stockbroker related complaints.
The Zone also resolved thirty two (32) cases out of which twenty nine (29)
were Registrar related while three (3) were Stockbroker related.
The total number of complaints received by the Zonal Office amounted to 391
out of which 155 had been completely resolved while others were in various
stages of being resolved. 53 of these complaints were referred to the Head
Office for enforcement action.
APPLICATION FOR REGISTRATIONS
There were no applications for Fresh Registration during the reviewed period.
INSPECTIONS
The Zone in conjunction with some staff from Enforcement and Compliance
Department of the Head Office, conducted some target inspections on the
activities of some Forex Trading Companies residing within Kaduna
metropolis. An official letter was written to the Kaduna State Commissioner of
Police to make available a standby committee that would quickly go into
action to arrest illegal operators when confirmed. The Commissioner had
obliged.
MARKET DEVELOPMENT ACTIVITIES
COURTESY CALLS/STUDENTS VISITS
The Zone paid a “Thank You Visit” to the Management of Kaduna State Media
Corporation (KSMC) on 10th February, 2010. The visit was to express
gratitude to the KSMC for hosting the SEC, Kaduna Zonal Office on a Capital
Market enlightenment programme free of charge, for one year four months at
its Television station.
86
The Zone also hosted a delegation of Evangelical Churches of West Africa,
Kaduna Central District Church Council on a Courtesy Visit on 16th February,
2010. The purpose of the visit was to acquaint themselves with the activities
of SEC.
The Zone also hosted a delegation of Federal Character Commission, Kaduna
Zonal Office. The purpose of the visit was to be enlightened on the activities of
the Commission.
Students of Higher Institutions continued to access the Zonal Library during
the period for research purposes.
KANO ZONAL OFFICE
During the period under review, the Kano Zonal Office conducted the
following:
OPERATIONAL ACTIVITIES
The zone received complains on:
A. REGISTRARS RELATED CASES: S/N NATURE OF COMPLAINT NO. OF CASES
1 Non-receipt of share certificate 105
2 Non-receipt of dividend 26
3 Non-receipt of Bonus 13
4 Non-receipt of return money 10
5 Revalidation of dividend warrant 8
TOTAL 162
B. STOCKBROKERS RELATED CASES:
87
C. RESOLVED CASES: S/N NATURE OF COMPLAINT NO. OF CASES
1 Non-receipt of share certificate 36
2 Non-receipt of dividend 8
3 Non-receipt of Bonus 4
4 Non-receipt of return money 11
5 Unauthorized sale of shares 1
6 Non execution of Investors
mandate
2
7 No verification of share certificate 4
8 Revalidation of dividend warrant 3
9 Wrong crediting of CSCS Account 3
TOTAL 72
MARKET DEVELOMENT ACTIVITIES
Excursion by Students/Trading Associations
a. On the 25th Feb, 2010 a total of seventy eight (78) students from Economics Department of Isa Kaita College of Education Dutsinma, Katsina State came for excursion.
S/N NATURE OF COMPLAINT NO. OF CASES
1 Unauthorized sale of shares 5
2 Non execution of Investors mandate 14
3 No verification of share certificate 9
TOTAL 28
88
b. On the 11th March, 2010 Twenty Three (23) Members of the capital Market Club (Government Secondary School Rano Chapter) paid a courtesy call.
Enlightenment Programmes
a. Enlightenment workshop programme for Principals, Management Staff and the Board of Senior Secondary School Management Board (SSMB) was held on 8th Feb, 2010 at Rumfa College Hall.
b. Enlightenment workshop programme for the Officers and Men of
the Nigerian Custom Service Training School was held on 16th Feb, 2010 at Custom Trainning School Kano.
c. Enlightenment workshop programme for the Officers and Men of
the Nigerian Immigration Service Training School was held on 09th Feb, 2010 at Immigration Trainning School Kano.
Establishment of Capital Market Club
a. Thirty four (34) Capital Market Clubs were lunched in Thirty four (34) secondary schools in Kano State on 1st March, 2010 at Rumfa College
b. Preparation for the launching of thirty one (31) Capital Market Clubs in Sokoto State is in progress.
LAGOS ZONAL OFFICE
The Lagos Zonal Office during the period under review conducted the
following:
OPERATIONAL ACTIVITIES
Annual General Meetings A total of twelve (12) Annual General Meetings were attended as follows:
89
Lucky Fibres Plc - 29/01/2010 Wema Bank Plc - 05/02/2010 Ihs Nigeria Plc - 05/02/2010 Fidson Nigeria Plc - 11/02/2010 Costain (West Africa) Plc - 23/02/2010 UACN Property Plc - 23/02/2010 Nampak Nigeria Plc - 24/02/2010 Intercontinental Integrity Fund - 26/02/2010 Afromedia Plc - 03/03/2010 DVCF Oil & Gas Plc - 03/03/2010 Vitafoam Plc - 04/03/2010 Lagos State Debt Issuance Programme - 16/03/2010
Extra-Ordinary General Meeting
Two (2) Extra-Ordinary General Meetings were attended during the
period under review.
C & I Leasing Plc - 15/02/2010
Tantalizers Plc - 24/03/2010
Completion Board Meeting
One (1) Completion Board Meeting was attended for the period
Oando Plc - 08/01/2010
Pre-Registration Inspection Five (5) pre-registration inspections were conducted: CBO Capital Partners - 24/02/2010 Doyin Rhodes-Vivour & Co. - 02/03/2010 Treasure Capital Trust Ltd - 02/03/2010 Abox-Ossa Professional Chartered Accountant -
02/03/2010 Venerate Capital Ltd - 11/03/2010
90
Target inspection in respect of unclaimed dividend were carried out on
the following companies:
Standard Alliance Insurance Plc
Intercontinental Energy Insurance Plc
Bank PHB Plc
Fidelity Bank Plc
GT Bank Plc
Nigerian Bag Manufacturing Bag Company
Prestige Assurance Plc
Oasis Insurance Plc
Continental Reinsurance Plc
NCR (Nigeria) Plc
Fresh Registration and Renewals
A total of 20 fresh registrations were carried out for the period. A total of 13 Additional Sponsored Individuals were registered. A total of 3 Renewal was carried out A total of Sixty-one (61) Police Clearance forms for market operators
were administered.
NSE Exchange Observations There were no newly listed companies on the NSE during the review
period.
DELISTING Afprint Nigeria Plc was delisted from Daily Official List of the
Exchange on 8th March, 2010.
Technical Suspension Placed The NSE announced the full suspension of Investments and Allied
Assurance Plc. This was as a result of a letter from the Commission indicating that the company’s activities were being investigated.
91
Afprint Nigeria Plc was placed on full suspension on 12th January, 2010 in preparation for delisting following the request from the board of directors.
Technical Suspension Lifted The technical suspension placed on Oando Plc was lifted, following
the expiration of the two-weeks period after the closure of the offer.
The technical suspension on Mutual Benefits Assurance Plc was lifted following the placing of shares.
LEGAL AND ENFORCEMENT
Complaint Received: a total of Seventy-five (75) complaints were received.
Treated Files:
a) Three hundred and four thousand (304) files were treated out of which eight-six (86) were successfully resolved.
b) Five (5) files were sent for enforcement action, but
feedback is yet to be received.
c) Forty-four (44) meetings were held.
Review of one of the core matters resolved: 1. Name of File: Dayo Akinyemi & Co (On behalf of Miss Bimbola Coker) Vs. Lead Securities & Investment Limited
Subject Matter: Alleged fraudulent/unprofessional conduct by
Lead Securities and Investment Limited. Action Taken: An all parties meeting was convened, and it was
revealed that all the allegations made against the operator by the complainant were baseless
92
and unfounded, as monies which the complainant claimed was not remitted to her was actually signed for and received by her - hence the file was closed.
2. Name of File: Dr. Julie Ajieh Vs. Kakawa Discount House
Limited Subject Matter: Alleged breach of margin facility agreement. Action Taken: At the meeting held in the Commission, it was
established that the Nigerian Stockbrokers had failed/refused to dispose of the stocks placed as collateral for the facility promptly, which culminated in the inability of the complainant to liquidate the loan and increase in the interest on same. However, investigation was still on-going.
MAIDUGURI ZONAL OFFICE
OPERATIONAL ACTIVITIES
The Maiduguri zonal office received seventeen (17) complaints in addition to
the twenty two complaints (22) under investigation during the period under
review. The complaints were for non receipt of share certificates and returned
money in respect of shares purchased during various public offers. Complaints
on stolen/interception of share certificates were also received during the
period under consideration.
MARKET DEVELOPMENT ACTIVITIES
The Zone hosted students from Federal Government College Billiri Capital
Market Club on January 19th, 2010.
The Zone also implemented Investor’s Education enlightenment programme
for Youth Corps members at the Orientation Camps within the North East
Zone in the following States:
93
Borno State on March 17, 2010
Yobe State on March 23, 2010
Gombe State on March 25, 2010
Bauchi State on March 26, 2010
INSPECTION
Spot Check inspectors were carried out by the Zonal Office at the following
Operators’ offices in Gombe on March 25, 2010:
Tiddo Securities Ltd
APT Securities Ltd
Sigma Securities Ltd
ONITSHA ZONAL OFFICE
OPERATIONAL ACTIVITIES
COMPLAINTS
During the period under review, the Onitsha zonal office received a total of
forty eight (48) complaints from investors out of which twenty nine (29) were
Registrar-related, while nineteen (19) were Stockbroker-related complaints.
SUMMARY OF COMPLAINTS AGAINST MARKET OPERATORS S/N MARKET OPERATORS FREQUENCY
1 FIRST REGISTRARS LTD 9
2 UBA REGISTRARS LTD 2
3 CITY SECURITIES (REGISTRARS) LTD 4
4 UNITED SECURITIES LTD 3
5 DIAMOND SECURITIES LTD 1
6 OCEANIC REGISTRARS LTD 3
94
7 STERLING REGISTRARS LTD 2
8 INTERCONTINENTAL REGISTRARS LTD 1
9 AFRIBANK REGISTRARS LTD 1
10 UAC REGISTRARS LTD 1
11 UNION REGISTRARS LTD 2
12 AMYN INVESTMENT LTD 5
13 GOSORD SECURITIES LTD 3
14 DYNAMIC TRUST LTD 2
15 AIMS ASSEST MGT. LTD 1
16 FORTE ASSET MGT. LTD 1
17 EDC SECURITIES LTD 1
18 SOLID ROCK INVESTMENTS LTD 1
19 MIDLAND CAPITAL LTD 1
20 UIDC SECURITIES LTD 1
21 QUANTUM SECURITIES LTD 1
22 STANWAL SECURITIES LTD 1
23 GMT SECURITIES LTD 1
TOTAL 48
ENFORCEMENT
During the quarter, the Zonal Office referred eight (8) case files to the Head
Office for enforcement action against market operators.
ROUTINE MONITORING OF THE NIGERIAN STOCK EXCHANGE, ONITSHA
BRANCH
Trading activities on the floor of the Onitsha branch of the Nigerian Stock
Exchange was low. This was because most stock broking firms traded from
95
Lagos branch of the Exchange. Records of trading activities recorded are
stated below:
Frequency of trading activities was as follows:
S/N STOCKBROKING FIRM DATES TRADED 1 Gidauniya Investment & Securities Ltd 28-1-10 2 Gidauniya Investment & Securities Ltd 02-2-10 3 Yobe Investment & Securities Ltd 04-3-10 4 Gidauniya Investment & Securities Ltd 11-3-10 5 Networth Securities & Finance Co. Ltd 16-3-10 6 Prudential Securities Ltd 18-3-10 7 Prudential Securities Ltd 22-3-10
MARKET DEVELOPMENT
EXCURSION VISIT:
The Zone received members of the Association of Business and Accounting
Students from the University of Nigeria, Nsugbe Campus, Onitsha, Anambra
State on Wednesday, 17th March, 2010 and they were lectured on “Functions
of the Securities and Exchange Commission”.
OTHER OPERATIONAL ACTIVITIES
ALL PARTIES MEETINGS:
During the period under review, the Zonal Office convened the following all
parties meetings:
The Parties Included: Orji Jude Amachi VS Amyn Investment Ltd.
Subject: Failure of Amyn Investment Ltd to submit share application
for 3,100 units of Access Bank Plc shares during its initial public offer in
2007 and non lodgment of 26,932 units of Access Bank Plc shares
purchased from the secondary market since 2006.The meeting was held
on March 16, 2010 at the Onitsha Zonal Office.
The meeting resolved that Amyn Investment Ltd should pay the Complainant
the sum of N2, 268.04 being difference of the Underpayment of the
96
complainant’s accrued dividends for Access Bank 2007/2008 financial years.
The Minister was advised to Approach BGL Securities Ltd on the outcome of
the form he filled for the transfer of his shares from Amyn Investments Ltd to
BGL Securities Ltd.
The Parties Included: Ezenwosu Ngozi azuka VS Monument
Securities Ltd.
Subject: Unlawful And Fraudulent sale of shares belonging to
Ezenwosu Ngozi Azuka, Osita Uchenna and Chukwudi Daniel by
Monument Securities Ltd on March 22, 2010 at Onitsha Zonal Office.
Monument Securities & Finance Co. Ltd promised to restitute 40% of the solid
shares because It was discovered that money for the purchase was paid into
the private account of Monument Securities branch manager by jobber, while
the jobber was to Contract the director of the defunct illegal operator in
respect of the 60%.
PORTHARCOURT ZONAL OFFICE.
OPERATIONAL ACTIVITIES:
INVESTIGATION AND ENFORCEMENT The Zone received sixty-eight (68) complaints from
shareholders/investors during the period. It resolved 34 of the cases
vide All-Parties Meetings, phone calls and directives to the affected
operators. However, four (4) complaints against Alliance Capital
Management Limited were referred to the Head Office for further action.
Breakdown of the resolved cases were:
No
n-R
ece
ipt
of
Sh
are
Ce
rtif
ica
tes
No
n-R
ece
ipt
of
Div
ide
nd
an
d
Re
turn
Mo
nie
s
Wa
rra
nts
No
n-R
ece
ipt
of
Bo
nu
s
Ce
rtif
ica
tes
No
n-
Ve
rifi
cati
on
of
Sh
are
Ce
rtif
ica
tes
Mis
cell
an
eo
us
Issu
es
(Ch
an
ge
of
Po
sta
l
Ad
dre
ss, R
e-
issu
an
ce o
f
Mis
sin
g
Ce
rtif
ica
tes,
etc
.
To
tal
16 6 7 0 5 34
97
ON-SITE/SPOT CHECK: The Zone conducted On-Site inspection on Lead Capital Asset Management Limited, Port Harcourt Branch on Monday, March 15, 2010, which on Site Inspection was also carried on Euro Comm. Securities Limited, Port Harcourt Branch on Monday, March 29, 2010. Spot check on Integrated Capital Services Limited, Port Harcourt, Rivers State was conducted on Wednesday, March 17, 2010. The office was however found to have been closed and had relocated from Port Harcourt.
MONITORING OF TRADING ON THE FLOOR OF THE NIGERIAN STOCK EXCHANGE Trading activities on the floors of the NSE in Uyo, Owerri and Port
Harcourt were closely monitored by the PHZO within the review period.
REGISTRATION/RECOGNIZED INVESTMENT EXCHANGES
FRESH REGISTRATION The following firms applied for registration with the
Commission.
S/NO NAME OF FIRM CATEGORY OF
APPLICATION
APPLICATION
DATE
STATUS OF
APPLICATION
1. Neighbourhood Thrift
and Corporative
Society
Community
Savings Scheme
14/01/2010 Still being
processed
MARKET DEVELOPMENT ACTIVITIES (a) Trinitate International School, Eneka Road Igwuruta, Rivers State
was on an excursion visit to the Zonal office on Friday, 12th
February, 2010. A Paper on Introduction to the Nigerian
Capital Market was presented. The students were also taken on a
tour of The Nigerian Stock Exchange to have a practical view and
activities on the trading floor.
98
(b) The Zone also carried out enlightenment programmes to NYSC
members at Akwa Ibom and Rivers States respectively during
their orientation camp.
INTERNATIONAL DEVELOPMENTS
REPORT OF THE 24TH AMERC MEETING/CONFERENCE HELD IN ACCRA, GHANA, FEBRUARY 15 – 16, 2010 The Africa/Middle East Regional Committee (AMERC) of the International Organisation of Securities Commissions (IOSCO) rose from its 24th Annual Meeting/conference in Ghana with the resolution to adopt Risk Based Supervision in their various capital markets. This constituted part of the Committee’s renewed drive to strengthen regulation and reinvigorate the sub-region’s capital markets, most of which had dropped to their lowest performance levels. Following the recent global financial and economic down turns, reports from members, however, indicated that most of the markets were already showing signs of recovery as activities had gradually picked up. Other strategies being adopted to uplift the markets in line with global best practices include, the migration to International Financial Reporting Standards (IFRS), intensifying and broadening the scope of investor education, regulatory and operators capacity building. The 24th AMERC meeting/conference was a successful one. The meeting/conference which was hosted by the Ghana Securities and Exchange Commission at the Alisa Hotels, Ridge, Accra – Ghana from February 15 – 16, 2010 brought together regulators and key stakeholders in the capital market to deliberate on “Information and Capital Market Development in Emerging Economies”. The first day of the two – days event was devoted exclusively for the meeting of regulators of the Capital market in the African and Middle East region. In his welcome remarks, Dr. Nii Sowa, Director-General of Ghana Securities and Exchange Commission noted that AMERC was an interesting group
99
comprising “more of learners than experts”. He stated that by this nature of AMERC, members had a lot to learn from each other, this would help strengthen the group and promote growth in their various markets. While delivering her welcome address, the new Chairman of AMERC and Director General, SEC Nigeria, Ms. Arunma Oteh, thanked members for the support given to her predecessor, Ms Daisy Ekineh, Executive Commissioner, Operations. She expressed her joy of becoming a member of the prestigious and distinguished AMERC/IOSCO family of regulators. She said that the role of IOSCO was very important in its bid to continue to raise the standards of securities market regulation, particularly at this time of global financial crisis. She observed that the financial crisis made it more imperative for all regulators to migrate to the International Financial Reporting Standards (IFRS) and ensure full implementation of all IOSCO recommendations which were geared towards market development and sound regulation. She urged the region to step up its capacity building activities as a way of equipping regulators to be on top of developments in the market. She further informed the delegates that the region recorded nearly hundred percent (100%) in signing the IOSCO MMoU as 10 members of the region were now Appendix A signatories, while 10 more countries were in the Signatory B category.Bahrain, Israel, Jordan, Kenya, Morocco, Nigeria, South Africa, Tunisia, West African Monetary Union were all Signatory ‘A’ countries, while Algeria, Egypt, Ghana, Malawi, Mauritius, Oman, Tanzania, Uganda, United Arab Emirates and Zambia are in Appendix B category. During the meeting which had thirty (30) representatives of capital market regulators from thirteen countries in attendance, deliberations were made on issues that include report on the Technical Committee, Emerging Market Committee and the Executive Committee meetings. The presentation on the state of play of the review of the IOSCO Strategic Direction 2010 – 2015, individual country reports and the report on the modifications to the IOSCO objectives and principles of securities regulation were also looked at. At the end of the meeting, participants were treated to a special dinner and cultural performances at the prestigeous La Palm Royal Beach Hotel.
100
Day two of the meeting /conference was not a Regulators affair, as about forty Stakeholders in the capital market and financial institutions joined the Regulators to partake in the conference.
While delivering the opening remarks at the Conference, Chairman of the Securities and Exchange Commission, Ghana, Dr. E.V.O Dankwa drew a parallel bewteen the open markets and the capital markets. He said that the key characteristics of all good markets was “a strong flow of information” from sellers to buyers and vice versa. He called on regulators and participants to encourage the culture of seamless flow of information in the capital markets. He also suggested that the markets should be develoveped in such a way that it would provide a dynamic price discovery mechanism that would enable buyers buy with assurance that they were not buying over-valued stocks and to assure sellers that their equities were not being under-valued. The Special Adviser to the Minister of Finance, Ghana, who was the special guest of honour at the conference urged Regulators to find a way of breaking down financial market terminologies into what the ordinary people would understand so that they could better appreciate the market and invest in it. This is because most of the terminologies in the market were too complex. In the keynote paper titled “Information and Capital Market Development in Emerging Markets”, Professor Victor Murinde of the University of Birmingham, United Kingdom, said that information was critical for capital market development. “An informative efficient capital market”, he said, “plays very important roles in efficient resource allocation, it eases the problem of raising finance, enhances the cost of capital and serves as ‘invisible watchman’. To maximise the benefit of information and capital market development in emerging economies, he made the following recommendations: Given the global financial crisis and its impact on key African capital
markets, a new regulatory regime for gathering and disseminating financial market information was required
101
Regulators needed a new infrastructure to collect and analyze adequate information from large financial institutions, particularly of the ‘too big to fail’ category and foreign multinational banks.
The purpose of the new information framework was to bolster the government’s ability to foresee, contain and, most importantly prevent disruptions to the fragile financial services industry in African economies.
The lesson from the global financial crisis was that a new information architecture for ECMs was needed.
Monitor information signals from macro policy changes – monetary policy, fiscal policy and exchange rate policy which directly and indirectly influence capital market behaviour.
When public utterances were required, it was important that managers devise a corporate ‘communications’ policy and speak truthfully in order to minimise the likelihood of investors’ misinterpretation.
The communications strategy should encompass the following principles:
Assume that your words and actions have consequences on asset prices and stability of financial markets.
Bear in mind that loose lips sink corporate ships Consider honesty to be the best policy
The Keynote paper was followed by panel discussions with Dr. Japheth Katto, CEO, Uganda Capital Markets Authority chairing the session. During the session, Mr. Jeff Van Rooyen, a Chartered Accountant and Former CEO of the South African Financial Services Board presented a brief on “Information and Capital Market Development: A South African Perspective.” Michael Wells, Director, IFRS Education Initiative, presented a talk on “International Financial Reporting Standards for Small and Medium Scale Enterprises”; Mr. Reginald Prince of Boulders Advisors made a presentation on “Information and Development of Capital Market in Emerging Markets”; Dr. Rose Ngugi of the School of Economics, University of Nairobi, Kenya made a presentation on “Information Flow and Well Functioning Capital Markets, while Mr. Joe Aboagye Debra, a Commissioner at the Ghana Securities and Exchange Commission presented a perspective on “Information and Capital Market Development”.
102
The Commission also continued the Self Assessment project of IOSCO’s 30 Objectives and Priniciples of Securities Regulation. Questionnaires are being collated from market intermediaries. The Commission also participated in IOSCO’s Technical Committee and Executive Committee meetings in Spain. It also concluded arrangements for the publication of the AMERC QUARTERLY REVIEW.
103
INTERNATIONAL SCENE
MARKET ABUSE: REGULATORS TURNED THE HEAT ON PERPETRATORS
According to Thisday newspaper March 31, 2010.
Stung by the venom of the now easing global financial crisis, Securities Market
Regulators are turning the heat on perpetrators of sharp practices in the
capital market to prevent manipulations of the system and forestall re-
occurrence of the market abuse that led to the financial crisis. In the United
Kingdom, eight people suspected of being involved in an insider dealing ring
were arrested in a dawn raid across London, by the Financial Services
Authority (FSA).
The arrest was part of an effort by the FSA to get tougher on insider dealing,
the illegal trading on price sensitive information not available to the wider
market. The operation was the biggest of its kind in the United Kingdom
which had involved 40 FSA staff, with back-up from officers of city of London
police. Search warrants had been executed in what the financial watchdog
described as a “major ongoing investigation into insider dealing rings”
104
DEVELOPMENTS IN THE DOMESTIC SCENE
NO PLANS TO LIMIT SHAREHOLDERS’ INTEREST IN BANKS CBN
Although there had been speculations over plans by the apex bank to limit the
shareholding percentage of the Nigerian investors in order to allow foreign
partners take over, Daily Trust of February 3, 2010 reported that, the CBN of
Nigeria said it does not intend to limit the percentage of shareholding of
investors in the Nigerian banks.
The CBN said action would not only negate the provisions of the Banks and
other financial institutions of the Act of 1991 as amended, but also the
Nigerian enterprises promotion Act which also encouraged unfettered
participation of both local and foreign investors in all the Nigerian enterprises,
including the banking secto
Senate Begins Consideration of AMC Bill
The Senate had begun the consideration of the Asset Management Bill.
According to the Punch of March 5, 2010, the bill when passed will become an
Act, and will see to the establishment of Management Company to efficiently
resolve issues surrounding non-performing loan assets of banks estimated at
about N1trn in Nigeria.
The Senate Leader, Senator Mr Teslim Folarin, who led the debate on the bill,
said this was aimed at providing a legislative framework to strengthen Asset
Management in order to forestall chaos in the financial sector.
.
The Director of enforcement at the FSA, Margaret Cole said the regulator
intends “to be bolder and more resolute about proceeding with market abuse
and insider dealing cases so that, they can actually bring about a change in the
culture of the city”.
105
She admitted that the threat of civil fines had not been strong enough
deterrent and signalled a shift to more criminal prosecutions, in her words ,
she affirmed that “If people have to go to prison for us to achieve that aim,
then that is what we are prepared to do.”
In a similar development, the United States SEC has commenced probe on the
Lehman Brothers alleged accounting trick and market abuse.
As both the US SEC and the FSA of United Kingdom were not leaving any stone
unturned by taking stringent actions in dealing with perpetrators of sharp
practices in their capital markets, Nigeria SEC should also draw inspirations
from these two institutions in dealing with market abuse , insider trading
and other forms of sharp practices in its market. Happily, the SEC DG, Ms
Arunma Oteh had said “ I am determined to eliminate sharp practices, deter
any form of malpractice and change behaviours by ensuring that both the
institutional and personal costs of any wrong doing is extremely high.’’
Ms Oteh’s undertaking is in agreement with the position of the UK’s Financial
Services Authority director of Enforcement, Margaret Cole that “the threat of
civil fines had not been a strong enough deterrent and signalled a shift to
more criminal prosecutions.”