SEC Takes 260 Entities and Individuals to Court for Market Abuse
Category: Capital Market
SEC PRESS RELEASE
July 27, 2010
The Securities and Exchange Commission (SEC) in its avowed commitment to restore investor confidence, enhance market integrity and protect everyday investor, is taking two hundred and sixty (260) entities and individuals to the Investments and Securities Tribunal (IST) for alleged violation of the Investments and Securities Act (ISA), 2007.
These entities and individuals including banks and other capital market operators are alleged to have been involved in price fixing, share price manipulation, fraud, and insider trading. These activities are contrary to the provisions of the Act.
The ISA 2007 prohibits the employment of any device, scheme or artifice that would operate as a fraud or deceit on any person in connection with the purchase or sale of securities. Many of the respondents were alledgedly engaged in such deceptive and manipulative activities.
Several entities and individuals that are being proceeded against have allegedly engaged in false trading which is prohibited by the ISA. False trading is where an individual or entity engages in activities that may create a false or misleading appearance of activity in any securities.
Another alleged violation by these entities and individuals wasthe purchase or sale of securities that did not involve a change in the beneficial ownership of the securities and transactions conducted to maintain, inflate, depress or fluctuate the price of a security.
Actions were also filed against some individuals who were alleged to have engaged in insider trading by using unpublished price sensitive information in relation to purchase or sale of securities.
The Commission is seeking injunctions, monetary penalties and the disgorgement of profits gained in violation of the ISA. The Commission appreciates the cooperation of all who aided the investigation and particularly the assistance of the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC). The benefits of collaborating have meant that the Commission was able to achieve much more with the very little resources that it had. Between the SEC and its partners we want to ensure that regulation and enforcement have a crowding out effect on criminal activites in the capital market.
Finally the Commission would like to emphasize that a credible enforcement programme is a key component for ensuring the fulfillment of its critical mandate of protecting the everyday investors in the Nigerian capital market.
Assistant Director/ Head Media
Securities and Exchange Commission (SEC)
PROSHARE COMMENT: CAVEAT EMPTOR IN THE MARKET:
This news came in at 22.15pm today; some four weeks after the SEC had moved against some 36 stockbrokers. It is instructive to note that the SEC has refused to provide the names of these individuals which we intend to source directly from the ISA tribunal as part of our effort to keep the public dully informed. We therefore issue a CAVEAT EMPTOR on those firms which have had a history of infractions, some of which are notable names and for which there have been a long list of pending cases outstanding against them at the SEC, some of which dating back to 2007.
We await SEC’s list of firms involved in the infractions noted here and placed before a public court.
Kindly visit our site to read our expose on quoted firms and the games played to the detriment on investors which will be launched on Friday this week.
Exclusive jurisdiction of the Investment and Securities Tribunal
Ajayi v. Securities and Exchange Commission (2009) 13 NWLR (Pt. 1157) 1
Thursday, 11 March 2010 01:10
By: Ayokunle Ogundipe
A decision of the Court Of Appeal affirming the exclusive jurisdiction of the Investment and Securities Tribunal in disputes arising under the Investment and Securities Act.
Specialized courts” although somewhat novel in Nigeria are not entirely so on the global landscape. Their evolution is owed largely to the exigencies of modern business which demand flexibility, speed and cost-effectiveness in the formal adjudicatory process. In some ways comparable to foreign tribunals such as the United Kingdom’s Financial Services and Markets Tribunal, although perhaps not as widely acknowledged is the Nigerian Investment and Securities Tribunal (IST).
The IST is responsible for the resolution of all disputes arising out of the application and enforcement of the Investment and Securities Act 2007 (ISA 2007) and appeals from its decisions lie directly to the Court of Appeal. An award or judgment of the IST upon registration with the Chief Registrar of the Federal High Court shall be enforced as though it were a decision of the Federal High Court. This is however not indicative of a shared jurisdiction between the two courts in disputes relating to or arising from the operation of the IST 2007, as the Court of Appeal hastened to restate in the case under review.
The appellant was the former Finance and Accounts Manager of African Petroleum Plc (AP Plc) until his retirement in 2001. Sometime in May 2004, the appellant became aware that the Administrative Proceedings Committee (APC) of the respondent had found him culpable as one of those who authorized the issue of his former company’s prospectus in 2000, which was later found to have contained incorrect statements.
The appellant further discovered that the committee’s findings were potentially injurious to his career as a chartered accountant and in addition, exposed him to criminal prosecution. The appellant felt aggrieved more so as he claimed he was not one of those who authorized the issue of the said prospectus. He was never served with a hearing notice of the allegation against him, nor was he afforded the opportunity of making any representation to the committee before the decision was reached.
The appellant accordingly filed a motion ex parte at the Federal High Court, Abuja seeking leave to apply for judicial review of the respondent’s decision. Leave was granted and subsequently the appellant filed a motion on notice seeking inter alia for an order of Certiorari. Certiorari is a remedy in administrative law that seeks, as in this case, an order to remove the decision of the respondent into the Federal High Court for the purpose of quashing same.
The trial court after hearing arguments from both parties declined jurisdiction to entertain the suit and accordingly transferred it to the Investments & Securities Tribunal (IST) pursuant to its powers conferred by virtue of Section 22 of the Federal High Court Act Cap F 12 Laws of the Federation of Nigeria (LFN) 2004. Aggrieved, the appellant appealed to the Court of Appeal.
The Issues for Determination and Judgment:
The appellant contended on appeal that the Federal High Court had jurisdiction to entertain its complaint being a complaint against an Administrative Tribunal. The respondent on the other hand raised a preliminary objection on the grounds that by virtue of Section 22 (4) of the Federal High Court Act, the decision by the Federal High Court to transfer the suit could not be appealed against to the Court of Appeal.
The appellate court adopted the following issues for determination as raised by the Appellant; Whether the Federal High Court was right in law when it held that the ISA confers exclusive jurisdiction on the IST in respect of matters relating to the operations of the Investment and Securities Act 2007.
Whether the Federal High Court ought to have quashed the decision of the Administrative Proceedings Committee of the respondent complained about by the appellant on the grounds that the committee’s proceedings were conducted in violation of the rules of natural justice.
In arriving at its decision unanimously dismissing the appeal, the Court interpreted the provision of Section 22 of the Federal High Court Act alongside Section 241 (1)(a) of the Constitution of the Federal Republic of Nigeria 1999 (CFRN 1999). Having regard to the superior status of the latter, it found that notwithstanding the provision of the ISA, the decision upon which the appeal was based was a final one and therefore appealable as of right according to the CFRN 1999. The respondent’s preliminary objection was therefore dismissed.
The Court of Appeal however further found that before a court is competent to adjudicate, the subject matter of the case must be within its jurisdiction and must come to the court by due process of law and on fulfilling any conditions precedent. In this case, upon a combined reading of sections 224 (1), 234 (1), & 236 (1) of the Investment and Securities Act Cap I 24 Laws of the Federation of Nigeria (LFN) 2004, the proper forum was found to be the IST which the court held, disqualified the Federal High Court from exercising jurisdiction.
On the second question, the court considered whether in administrative law, it was permissible under any circumstance, for a tribunal to conduct proceedings in the absence of the party in question and find him culpable without hearing his side of the story contrary to the rules of natural justice.
Following the precedent established in the case of Falomo v. Lagos State Public Service Commission (1977) NSCC 230 per Idigbe JSC, the court held that where a statutory provision excludes the need for prior hearing but provides for an administrative appeal or judicial review on the merits of the decision of that body, the duty to apply the audi alteram partem rule (that is, the rule that requires the other side be heard in any adjudicatory process) in its proceedings becomes waived.
Citing the case of Itseghosimhe v Ogbeta (2001) 13 NWLR (Pt. 729) 26 at 36 in support and having found that the trial court had not erred in principle and had, in fact, acted appropriately within the provisions of the necessary laws, the court held that the trial court indeed lacked the competence to quash the decision of the Administrative Proceedings Committee of the respondent. The entire appeal was accordingly dismissed and the decision of the trial court affirmed.
Ordinarily, where a judicial or quasi-judicial body disregards the principles of natural justice, the courts will intervene to protect the aggrieved party and an application for any of the prerogative orders of Mandamus, Certiorari and Prohibition will ordinarily not be treated lightly by any court of law. They are discretionary common law remedies which the High Courts may grant in exercise of their supervisory jurisdiction over inferior courts, tribunals and administrative bodies.
However, where a statute provides for a means of seeking redress in relation to disputes of a specific nature, the courts in their wisdom would be unwilling to act otherwise. This is not a denial of fair hearing nor does it trivialize the constitutionally guaranteed rights of the individual in question. However, specialized courts/tribunals such as the IST are established bearing in mind the peculiarities of the various sectors over which they adjudicate. As such, the rigid posture of the courts to decline entertaining such actions will only help to further strengthen and develop their growth and acceptance to the extent experienced in more developed nations. This will ultimately step up the pace of doing business in Nigeria.
*Ayokunle Ogundipe is an Associate in the commercial law firm of Perchstone & Graeys