Oando PLC has challenged at the Appeal Court the findings and sanctions on it by the Securities & Exchange Commission (SEC), following an alleged investigation, which began in May 2017.
SECs had placed technical suspension on Oando PLC shares and ordered a forensic audit into the company’s affairs.
A statement published on Oando’s website on Friday states that in addition to legal action, it has written several petitions to various arms of the government expressing concern at the way the SEC under the leadership of ex-Director General, Mounir Gwarzo, managed the investigation and their belief is that the investigation was biased, did not follow due process and lacked fairness.
The company added that a recent leak of the signed September 18, 2017 report of the Technical Committee that was set up by Gwarzo to investigate them is further proof that under his leadership actions taken by the commission were illegal, invalid and calculated to prejudice the business of the company.
Gwarzo set up a five-man committee to investigate the company and on conclusion present a report with findings and recommendations for sanctions. The report shows that the committee found that Oando had satisfactorily responded to all the issues raised by the petitioners and had further recommended that the responses provided by the company and its independent external auditors be forwarded to the petitioners for their information and further escalation if they deemed it necessary.
The report makes no recommendation for the shares of the company to be suspended or for a forensic audit of the company to be conducted.
Instead, the committee recommended that certain unresolved issues be forwarded to the Securities and Investment Services (SIS) department of the Commission to determine whether there was in fact a breach of the ISA or the SEC Rules.
On 27 September, 2017, the Committee of the House of Representatives on Capital Markets and Institutions summoned Gwarzo and mandated him to complete his investigation into Oando and issue a report within two weeks of that meeting.
They also requested that they be sent a copy of the report of the investigation, its findings and recommendations.
“It is interesting to note that Gwarzo failed to inform the House of Representatives that at the time the meeting was held, the signed Technical Committee report had already been submitted. It wasn’t until a month after, on Wednesday, 18 October 2017 that the SEC published a statement on its website detailing alleged infractions committed by Oando and weighty penalties, which included a directive to the Nigerian Stock Exchange (NSE) for a 48-hour full suspension followed by a technical suspension in the trading of Oando shares and for a forensic audit into the affairs of the company to be conducted,” the website explained.
Against this background, the company cites a multitude of other reasons why it believes the investigation was biased and thus flawed.
Among the reasons were the fact that some of the actions taken by the then DG were against SECs rules and regulations.
Under the SEC rules, the Administrative Proceedings Committee (APC) is the committee empowered to look into matters of the nature of which the petitioners alleged.
However, Gwarzo did not utilise this committee but instead set up a Technical Committee and later a Special Task Force to investigate Oando.
SEC laws state that the DG does not have the legal or administrative authority to set up committees; only the board can do this.
However, at the time of the investigation, SEC had no board and even if it did, there was a committee already in place that could investigate the company.
There is also the legality of SEC investigating a petition brought by an indirect shareholder and one that is currently in arbitration when SECs rules categorically state that it will not consider any complaints regarding matters that are already the subject of arbitration or court proceedings.
In Oando’s statement, it cites the example of MRS Oil and Gas PLC, where the SEC stopped investigating and a call for a forensic audit into MRS when it was brought to the regulators attention that there were ongoing arbitration proceedings in France between Petroci Holdings and MRS.
The company and its shareholders have continuously raised concerns at the public nature of the investigation. At the company’s AGM in August, shareholders had spoken out about the substantial amount of media attention the investigation was receiving.
According to the Group Chief Executive Officer (GCE), Oando PLC, Wale Tinubu: “The SEC investigation and continued media leaks have had a deleterious impact on market confidence, our share price and a negative impact on other critical stakeholders.”
The statement makes mention of further bias by SEC agreeing to meet with the petitioners but not Oando during the course of the investigation despite several requests by the company for a meeting.
The reclassification of one of the petitioners, Ansbury Inc. as a whistleblower despite the fact that Ansbury brought its petition to the SEC as an indirect Oando shareholder and previous SEC investigations, ie Ikeja Hotels, where the SEC did not suspend the shares of the company when it embarked on a forensic audit.
More recently when SEC released its alleged findings and sanctions, the company was quick to respond and point out to the SEC and the public that the alleged infractions all have specific SEC penalties, none of them whether singularly or together warrant the suspension of the trading of Oando shares or the institution of a forensic audit.
The company’s most ardent objection to the forensic audit is the fact that SEC has itself said it needs to do an audit to confirm its weighty findings. It is unjust to make a company pay N160 million to be investigated so the regulator can confirm whether its findings are indeed correct or true. It begs the question how did the regulator come about its weighty findings?
The company’s biggest concern is that because all actions to date have been illegal and biased then a forensic audit could also be biased.
This is not the first legal action taken by the company against SEC on this investigation but its recent actions is evidence that it won’t back down and will fight SEC until justice prevails.
Consequent to the indefinite suspension of Gwarzo on allegations of corruption by the Minister of Finance, the SEC had notified Oando that it would commence the forensic audit with effect from December 6, 2017. According to the company, the appointed auditors are yet to approach the company to commence the audit.
Oando concluded the statement by expressing willingness to comply with the directives of the commission.
The company said: “Despite our objections to the forensic audit, the company would like to reiterate that we recognise and respect the authority of the commission and in the spirit of cooperation, transparency and full disclosure, the company will comply with the directives of the commission whilst reserving our legal rights in this matter.
“Accordingly, we welcome the appointment of Dr. Abdul Zubair as the Acting Director-General (ADG) of the SEC and see this as an opportunity for the regulator to act independently and for a new and enduring relationship to be established. We trust that he will investigate the matters raised in an independent and transparent manner and look forward to his support in ensuring due process is indeed followed.”
The company reiterated that it recognises and respects the authority of the SEC and is hopeful that a new and independent DG will act in the best interests of the company and its 274,000 shareholders.
