For any business to thrive there must be a high standard of transparency and accountability. That is what the Securities and Exchange Commission had in mind when it made it a prerequisite for every corporate body in the Nigerian stock market. And that is what is at the heart of the matter in the clampdown on Oando plc, BENJAMIN UMUTEMEreports
There is no gain saying the fact that adopting and operating a high standards of corporate governance is essential for a company’s sustainable long-term growth, performance and value creation.
Part of the 10-years capital master plan is the issue of good governance practices which will ultimately promote the development of the capital market. On the other hand, weak corporate governance practice does not only inhibit growth and development, it on the long run erodes investors confidence in the capital market with its potential wider implications for the Nigerian financial markets and the general economy.
Going back memory lane, one will not fail to recall that the crisis that hit the market in 2008 was largely corporate governance issues.
And in April 2011, SEC issued a new code of corporate governance to align governance in public institutions with global best practices.
The commission raised the bar to strengthen its monitoring capacity, in order to address issues arising from various market infractions.
The Commission has made a lot of efforts to promote good corporate governance practices and reposition the Nigerian capital market for development.
Since then, the SEC continues to wield the big stick by sanctioning any company that run foul of the rules and regulations guiding the market.
The reaffirmed commitment by the regulator to do anything to compel operators in the market to obey the rules guiding it informed the decision to tighten the noose on market infractions and other miscellaneous capital market crimes.
The steps being taken by the Commission on the Oando issue is therefore not a surprise to capital market watchers.
Genesis of the crisis
Oando Nigeria Plc has been in the news since 2017 for allegations of breach of corporate governance and sharp dealings. Before the Annual General Meeting held on 11th September in Uyo, SEC had received a petition alleging breach of corporate governance by the management of the company.
Despite protest by aggrieved shareholders at the AGM, Wale Tinubu was eventually returned as the Group Chief Executive Officer amidst a palpable atmosphere of cynicism. After the AGM, shareholders continued to express their grievances at different forum, including the Nigerian Stock Exchange, Ibadan and the National Assembly, Abuja.
Investigating Oando
As a regulator of the stock market SEC launched an investigation into the activities of Oando after the receipt of two petitions in 2017 from shareholders of the company, accusing the management of financial misappropriation.
As a validation of the allegations leveled against Oando Plc by the shareholders, on the 18th of October 2017, the Commission responded to the petition written to it by Ansbury Incorporated. It discovered among other things that Oando had breached the provisions of the Investments & Securities Act 2007. The company had also breached SEC Code of Corporate Governance for Public Companies just as there were discrepancies in its shareholding structure. It was also discovered that there were suspected insider dealings with related party transactions properly conducted.
Consequently, the Commission directed the immediate suspension of the trading of the company’s shares on the floor of the Nigerian stock Exchange. Also, the regulatory body also constituted a consortium of experts made up of auditors, lawyers, stockbrokers and registrars to carry out a forensic audit on the company.
To further compound the woes of the company, the Johannesburg Stock Exchange suspended trading of Oando stocks until further notice.
Welding the big stick
Following the completion of the forensic audit, SEC was left with no choice than to step in to act in the best interest of the market.
According to the Commission “Certain infractions of Securities and other relevant laws were observed. The Commission further engaged Deloitte & Touche to conduct a Forensic Audit of the activities of Oando Plc.
“The findings from the report revealed serious infractions such as false disclosures, market abuses, misstatements in financial statements, internal control failures, and corporate governance lapses stemming from poor board oversight, irregular approval of directors’ remuneration, unjustified disbursements to directors and management of the company, related party transactions not conducted at arm’s length, amongst others”.
The SEC, therefore, directed the payment of monetary penalties by the company and affected individuals and directors, and refund of improperly disbursed remuneration by the affected Board members to the company.
As required under Section 304 of the Investments and Securities Act, (ISA) 2007, SEC said it would refer all issues with possible criminality to the appropriate criminal prosecuting authorities.
To ensure, there is a clean break from the past, the Commission last Friday directed among others the immediate resignation of Group Chief Executive Officer of Oando Plc, Wale Tinubu, his deputy, Omamofe Boyo and other directors of the company.
The apex regulator also barred the Group Chief Executive Officer (GCEO) and the Deputy Group Chief Executive Officer (DGCEO) from being directors of public companies for a period of five (5) years.
The SEC further directed the convening of an Extra-Ordinary General Meeting on or before July 1, 2019, to appoint new directors.
These among others the SEC stated, are part of measures to address identified violations in the company.
In addition, the SEC stated that other aspects of the findings would be referred to the Nigerian Stock Exchange (NSE), Federal Inland Revenue Service (FIRS), and the Corporate Affairs Commission (CAC).
“The Commission is confident that with the implementation of the above directives and introduction of some remedial measures, such unwholesome practices by public companies would be significantly reduced.
“Therefore, in line with the federal government’s resolve to build strong institutions, boards of public companies are enjoined to properly perform their fiduciary duties as required under extant securities laws” the statement added.
The Commission stated that it maintains its zero tolerance to market infractions, and reiterates its commitment to ensuring the fairness, integrity, efficiency and transparency of the securities market, thereby strengthening investor protection.
Appointing Interim management board
Not done, SEC late on Sunday, issued another statement appointing an interim management for the company.
The Commission in a statement said, “Further to our press release on Oando Plc, dated May 31, 2019, the commission hereby informs the public of the constitution of an interim management team headed by Mr Mutiu Olaniyi Adio Sunmonu CON, to oversee the affairs of Oando Plc, and conduct an Extraordinary General Meeting on or before July 1, 2019, to appoint new directors to the board of the company, who would subsequently select a management team for Oando Plc.
“The commission wishes to reiterate its commitment to maintaining the integrity of the market.”
SECs action, step in right direction
In all of these, it is obvious even to observer that to be able to drive a process there needs to be a strong leadership, and that the Commission under the leadership of its acting Director General, Ms. Mary Uduk has shown.
The capital regulator has not shied away from its responsibility any time the need arises.
Attest to the bravery of the Mary Uduk led commission, the Chief Operating Officer, InvestData Ltd., Mr Ambrose Omordion, hailed the courage of the SEC in suspending the duo saying it would send signal to other managing directors and executives in the market.
Omordion said that the outcome of the forensic audit showed that SEC could bite and not only bark.
“Other companies and their directors will seat up seeing how Oando management and its directors ended up.
“SEC decision will further boost corporate governance and transparency in quoted companies at same time investors’ confidence going forward,” Omordion stated.
For his part, National President, Constance Shareholders Association of Nigeria, Malam Shehu Mikail, expressed shareholders satisfaction with the commission’s decision.
Mikali said that the ban would instill transparency and corporate governance in the nation’s capital market just as it has show that nobody is above the law in the market.
Shareholder Activist and CoFounder,Nigeria now “NOBLE” Alhaji Gbadebo Olatokunbo, said that as a shareholder of Oando, he had always believed that the company was very clean with most of the financial reports over the years.
Olatokunbo said the management and board of the company had taken the shareholders for a ride for too long, before the intervention by SEC adding that it would serve as deterrent to other companies.
“Oando is two companies in one, it’s an offshore/onshore oil company, yet every year in and out the annual report and accounts and dividends payments were nothing to commensurate the nature and size of the company.
“Check the performances of other companies in the same sector with that of Oando, then you will appreciate my point of view, that Oando is a great disgrace, disappointment and embarrassment to the corporate Nigeria, because no multinational company in it’s shoe would have performed so badly like the management and board of Oando did, to be candid it was a dent to the Nigeria Corporate World.
As the ag. DG of the Commission did herself say at the journalists’ academy last year in Uyo, Akwa-Ibom state. SEC under her leadership is committed to the growth and development of the capital market, and the action of the Commission with respect to Oando is a confirmation of her statement.
Ends
Ends