How Operators, Companies Plotted to Dupe Investors in 2008—SEC DG
By Dipo Olowookere
Prior to the crash of the global economy in 2008, the Nigerian capital market was the darling of many local investors, attracting many people, with good amount of money made by regulators, investors, stockbrokers and companies. It was a time money was flowing in the country like a river.
But in this, some investors had a very sad tale to tell because they lost huge amount of money during the period, which the country may never experience again.
Companies were listing their shares on the Nigerian Stock Exchange (NSE) at premium rates and some others promised to join the exchange after private placements, which never came.
Last week, the Securities and Exchange Commission (SEC) held a joint conference with the Department of Finance of the University of Lagos (UNILAG) and the acting Director General of the agency, MS Mary Uduk, explained why some investors became victims of private placement ‘fraud’ during the period.
Commenting on the private placement bubble of 2007 and 2008, the head of the apex regulator in the nation’s capital market said this happened with the connivance of many market operators who encouraged issuers to take advantage of loopholes in the relevant investment laws at the time.
She lamented a situation where many private companies took advantage of gaps in Nigerian laws, especially between 2007 and 2008 to defraud many investors, by embarking on private placements, with promises to list the shares for trading on the Nigerian Stock Exchange, when in reality they had no such intention.
Ms Uduk recalled several efforts and appeals to such issuers, to list their shares without success, stressing that “market operators encouraged private placements knowing that the law did not allow the SEC to regulate private companies.”
“Insider trading is what we have to prove. A lot of us are in the market and we have whistle blowing mechanism. It is the operators who will be in a better position to know and report such infractions. For those that have been reported to us, we have been carrying out investigations and once we have evidence, we will invite them and also refer them to the relevant authorities
“With the whistle blowing provision, we have always asked operators in the market to come to our aid if they find any unwholesome activity going on. It is our market and so we all have to do our bit. The market should not be left to us alone; you need to provide information for us to take the necessary actions.
“Anyone that is caught engaging in any activity that is against the laid down rules, be rest assured that such an operator will be made to face the full wrath of the law,” she declared.
She urged operators to cooperate with the commission for the good of the market and the economy, realizing that “it is our market, please let us join hands and revive this market.
“Let us come together and sanitise this market,” she stressed, urging them to bring incidences of market abuse to the attention to the commission and enjoy protection under the law.
Ms Uduk said SEC has been doing its best to ensure that offenders are not left off the hook, hence the Commission is collaborating with EFCC and office of attorney general to be able to do much.
The DG has assured investors that the commission was committed to ensuring that suspicious transactions are not allowed in the capital market.
“We are committed to protecting investors in the work we do. We will keep working on our rules and the possibility of amending them when the need arises, we want more transparency in the market so that investors will feel comfortable and the market can be better,” she added.
The Acting DG said the commission also has the complaints management framework that enables investors to know where to complain to and how long it takes for such complaints to be resolved and for those of the investors that are averse to risks, they are advised to get their financial advisers to tell them where to invest.
“In doing all these, we advise retail investors to invest in Collective Investment Schemes and Mutual Funds because those are managed independently by professionals and they are diversified thereby reducing risks. We also implore investors to take ownership of their investments. They have to be able to monitor their investments, attend annual general meetings as well as read the annual reports sent out to them.