Four stockbroking firms – Kapital Care Trust Securities, UIDC Securities Limited, Union Registrars Limited, and Gosord Securities have been sanctioned by the Investment and Securities Tribunal (IST) over gross misconduct ranging from the illegal sale of an investor’s multi-million naira shares to irregular transactions.
Details of the misconduct
A case was instituted against the Securities and Exchange Commission (SEC) by one Dr Okam Kalu Ugwu over the illegal sale of several thousand units of his Union Bank shares. He also alleged that about 2,083 units of his Guinness Plc shares were unlawfully verified and transferred to third parties without his consent.
He further alleged that many thousand units more of his Union Bank shares were goggled by the brokers and remained unaccounted for. These incidents took place as far back as 2007. And upon becoming aware of them, the complainant tried to contact the defendants to seek redress but all to no avail.
IST’s response and verdict
This prompted the Investment and Security Tribunal to nullify and declare as illegal every transaction in the shares which include- 9,740 units, 20,740 units, 13,333, units, 9, 740 units, 25, 000 units, 16, 000, and 12, 986 units as contained in different share certificates.
In the same vein, the Tribunal ordered the removal of more units of Union Bank shares (876 units, 5,000 units, 850 units and 2,813 units) which were supposedly covered by four other certificates that could not be verified.
In a statement issued by the Tribunal’s acting Director of Corporate Affairs [Mr Kenneth Ezea], Union Registrars Limited, UIDC Securities Limited and Gosord Securities Limited were ordered to restore/compensate Dr Okam with 549,453 units of Union Bank shares, complete with bonuses and dividends according to capital market rules. They are to do this within a one-month period.
In the same vein, Union Registrars is to restore the complainant’s name in the shareholders’ register of Union Bank Plc, in line with capital market procedures and in no later date than 30 days from the day of the verdict.
Still on the verdict, the Tribunal declared as null and void every irregular transaction in Dr Okam’s Guinness Plc shares. It ordered Union Registrars Limited and UIDC Securities Limited to restore and restitute the claimant with 2,083 units of Guinness Nigeria Plc shares, along with accrued bonuses and dividends. Union Registrars is also mandated to restore Dr Okam’s name in the shareholders’ register of Guinness Nigeria Plc.
Kapital Care Securities was also ordered to restore Dr Okam’s 72, 151 units of Union Bank shares along with accrued interests, according to the rules of the stock market.They will also pay the sum of ₦100,000 to the Federal Government of Nigeria as fine for breach of the professional code of conduct.
Union Registrar Ltd, UIDC Securities Limited and Gosord Securities Ltd are to jointly pay Dr Okam Kalu Ugwu the sum of ₦5m as damages.
From the totality of evidence before us, we do not think the 1st Defendant [Securities and Exchange Commission has breached his statutory role as apex regulatory body. We therefore hold that the 1st Defendant has performed its duties reasonably well.
Although SEC was exonerated from the suit, it was enjoined to become more proactive in monitoring, supervising and ensuring the compliance of brooking firms; particularly the other defendants. The SEC is also to ensure that Dr Okam’s shares are restored and restituted accordingly.
This case sheds some light on some of the risks involved in the capital/stock market; risks that can be averted should the stakeholders (particularly investors and regulators) become more proactive at ensuring transparency.