As a result of the crisis in the Capital Market, which began in 2008, members of the House of Representatives recently set up a committee to examine the issues that caused the near crash of the market in a public hearing.Unfortunately, the first committee bungled its assignment through personality clash, resulting in its disbandment and a fresh one empanelled.Chief Zik Chukwuka Obi, a revered corporate solicitor and the vice-chairman of the Securities and Exchange Commission (SEC) sub-committee on Rules and Compliance, as well as member and trustee of the Capital Market Solicitors Association, examines the issues involved in the capital market probe, its legal implications and many more in this interview with JOSEPH ONYEKWERE.WHAT is the legal implication of the revelations in the stock market probe'So far, there has not been any revelation concerning the stock market. All we have heard is an attack on the credibility and integrity of the Director General of Security and Exchange Commission (SEC), Ms Arunma Oteh.For the period that the probe lasted before it was suspended, what we saw was not really a probe. I think that the whole matter was mis-handled by the chairman of the panel and his members. It was most unfortunate because we were all looking forward to a hearing that would bring out much of what had happened in the market or the events that led to the crash or near collapse of the capital market in 2008/2009. But we heard no such things, rather all we heard were accusations by the chairman of the committee directed to the DG of SEC, accusing her of incompetence and not being able to protect investors when there was no basis for that, because nothing had been said. Facts had not been collated and already, he drew conclusions and I think that it was most unfortunate. Capital market involves a lot.To begin to talk about money for food, which cost X amount or whether she paid rent or whether she lived in a hotel, those things, I would not say, are inconsequential but they are matters that should come in at the tail end of the inquiry.Happily, the House of Representatives that set them up the committee had disbanded that panel and set up another one. And also, the SEC DG had also responded to those allegations.We now know that she didn't consume food worth N85,000. We have been told that there was an official delegation of international capital market experts who visited and SEC hosted a dinner at the hotel where the DG was staying at that time. And of course, the bill for that dinner was charged to her account, which is normal. So everything appears more as a witch-hunt. As if the former chairman had an axe to grind. So far, I don't see what the legal implications are in respect of that. As far as we are concerned, nothing really had happened. We are happy that the EFCC is already probing the allegations and counter-allegations made. We just have to wait for the result of that investigation.There are regulatory frameworks in the capital market. Can we have an idea of some of the frameworks that we have at the market'There are quite a number of them. SEC has been there. I do know because I happened to be a member of Capital Market Committee of SEC. That there is this committee that meets once every quarter of the year. The membership comprises members of various trade groups. Trade groups such as the solicitors group, stockbrokers, the issuing houses, the registrars and the accountants. They all belong to that Capital Market Committee. We have observer groups such as the Corporate Affairs Commission (CAC), the debt management office, the Abuja stock exchange and a few others who attend the meeting like the Board of Inland Revenue and the CBN. Then, you have the regulatory bodies such as SEC and NSE, they are all members. And this meeting has been going on quarterly for years. We go there and rub minds together. Even within the Capital Market Committee, there is the Rules Committee that works out all the rules. I happen to belong to the Capital Market Sub-committee on Rules and Regulations, which has now been changed to rules and compliance. And there are several other sub-committees that are set up to look at the various aspects of the capital market.When did these committees start to exist'They have been there since 2000What are their mandates'It depends on which one. But I can take it on the revised mandate because there were lots of changes last year. Last year, at the third quarterly meeting of SEC's Capital Market Committee, there was a review on the mandate of the sub-committees. The sub-committees are the rules and compliance, product and business development, fixed income, commodities, equities exchange, market infrastructure, technology and investment management. In my own committee, for instance, we review the laws, rules and regulations and they are quite enormous. We look at the code of corporate governance for instance; we look at the code of conduct for capital market operators. All these are there and we review them following the development in the market.Since the crash, a lot of these rules have been revised. As things happen every day, you look at areas where there have been abuses or where there have been loopholes and many of them have been revised.In fact, based on our input and of course, the input of the main rules of the committee of SEC, in the last two years, the rules have been revised from about 312 to over 570.Last year, there was a 21-man committee set up to see how they could review the Nigerian Stock Exchange to make it more effective. That committee just submitted its report last month but I can't tell you what the recommendations were.The capital market crisis was a global thing when it started. What is the reason for the probe in Nigeria' Do you suspect that some people were responsible for the crash'It was a global phenomenon. It happened globally on the economy of America, Europe and other places. If you can recall, companies in America crashed and banks in the United Kingdom (UK) also crashed. And people lost a lot of money in those continents. In Nigeria, the capital market crashed.May be the reason the probe came up is that there have been complaints about what SEC did not do or what it did, about what the Stock Exchange did not do or what it did, what it may have done to help prevent the crash or what it did that contributed to the crash. There have been questions. And the only way, really, and from what we heard from the National Assembly, was to set up this committee to look into the reasons the capital market crashed and look at what needs to be done to ensure that the market moves forward. There is nothing wrong with that. Even the SEC itself welcomed the probe. There may be a few things that we don't know that we needed to know. There may be some other things that SEC doesn't know that other experts, may be, from the National Assembly, can give ideas. It also helps to know where the laws are deficient so that they can enact more stringent legislations to be able to move us forward. It is also more important to look before 2010 when Arunma Oteh came. Everything now seems to be centred on the current DG as if she has been there all along. She resumed there at the beginning of 2010 after the crash had occurred.As an insider, what would you say contributed to this near crash'They are so many factors. In Nigeria, there are many people who do things just to make money regardless of consequences of these actions. We have seen it in so many areas. We have just finished the probe on fuel subsidy. Look at the way people were taking money that belongs to all of us' The story is the same on the pension scam. Every day, we watch on the television our fathers and mothers, our relations in the queue collapsing. Nobody is paying them their pensions. We don't know that some people were looting the money. The thing is that a lot went wrong. Shareholders' association has a responsibility, which it is not carrying out. Today, try and attend the AGM of any company that you own its shares. What you will notice there will baffle you. Most of these companies pay for the leadership of these shareholders to attend the AGM. That is why, if you watch the television, you will see virtually the same faces in almost all the AGM's because that is what they do. They don't have any other job. Because they sponsor you there, when the audited accounts are presented, you would expect that they would ask questions, query those accounts' But in most cases, they don't query anything. And those people who are quite knowledgeable, who came there on their own to query those accounts are faced with serious hostility. They shout them down. So when they have problems, they are covered up and those problems continued.Now let me talk about public offer. Some of the share prices are not real. A lot is done to boost the value of the shares of those companies. When the prices at which they sell on the day that they are opening the offer, for most companies, in another one month, the price would go down because they now face the real market value. You then wonder, why do people have to put in money to buy at that very high price' Obviously, there are a few areas where the controls were not there; otherwise, those things shouldn't have happened.What is the role of the regulatory agencies if there is no control in certain areas'Well, that is whether they have done the job, as they ought to do it. That is why I told you that a lot of things are wrong in this country. For example, the same James Ibori that the court in Nigeria said that over a hundred charges that were filed that no prima facie case was made out and the court in Asaba discharged and acquitted him; those same facts were the facts that were used to convict him in the U.K. It is a problem. Don't forget that corruption plays a major role in the country, terrible role and that is why nothing seems to be working. It is not something that is isolated to only SEC. If you want to build a house, you go to the appriopriate authorities, give someone money and he approves it for you even when you have not met the criteria. Also, there is what is called the margin loans. They are the loans that the banks give to people to buy shares. That is what killed most banks because at that time, there was a supposed boom of the capital market. And as far as I am concerned, they were artificial. I know some people who would not buy shares at that time from a public offer because they believed that they were over- priced. We were hearing at that time that every offer was over-subscribed. Who was buying them up'Sometimes, it is the stockbrokers who would use different company names to buy up the shares. If you put your money there, they hold it for several months or weeks, at the end of the day, they won't pay you, or they return your money sometimes without interest until the rules were changed, such that anybody returning any money must return it with interest. Such were the changes that had been made after these problems have come. So they are quite numerous. So many factors contributed to the crash.How can we enhance the system'That is the reason for what has been going on in the last two, three years. After the crash, the DG then resigned and an acting DG was appointed. She did her best. Then, Oteh was appointed in 2009, though she didn't resume untill 2010 and when she came, she followed up from where her predecessor stopped. SEC has always had a public service structure because government owns it. And you know that in most government agencies, people don't do any serious job. They see it as a place to go and while away time or go and make some money without doing serious work. The way most of them work, is not the way people work in the private sector because most of them in the public sector can't really survive in the private sector.At present, a lot of rules have been revised. As these problems come up and you do your research and investigation, you know that may be the operators are not doing what they should do or they are exploiting the system. You may find out that the capital market operators, which include the solicitors; accountants and the stockbrokers are not doing what they supposed to do properly, especially the stockbrokers because they are the ones that are there. If you want to buy share, it is the stockbrokers that you will go to and there were a lot of abuses.Now SEC has really been dealing with a lot of them. But the rules are being changed every day in the last two years. Since then, they have been a new code of corporate governance for companies. Now for companies, you can no longer be an auditor indefinitely. It's been pegged. After a number of years, you can go to another company.Where the laws are constantly changing, do you think it can boost investors' confidence in the market'When I talk about the rules changing, the main rules and laws are there. The Investment and Securities Act of 2007 is there. It is the Act that controls most of the things. I am talking about the rules for the day-to-day operations. It is not like the laws are changing every day. Capital market is not like the courts where the rules are constant for many years. It is not that the rules are changing but you are tightening up those rules to make sure that you plug those areas where problem come from because you have to make sure that you protect the investors.For instance, the Code of Corporate Governance was not there before. There was no doubt that some directors in every share offer as insiders manipulate the shares.In America and UK, people go to jail every day because of insider dealings, but the case is different in Nigeria.What is the role of the Capital Market Solicitors in the whole market process'When there is a public offer or a private placement, you need the solicitors ' solicitors to the company and solicitors to the offer. Their roles are slightly different. First of all, both of them, to be able to act in that offer must be registered with SEC. That means that you must have some knowledge of the stock market and the investment and securities act; the laws that guide the market. Solicitors to the company will have to advise them on all the legal documentation because there are so many things you need to write in the prospectus.For instance, the share capital history and structure must be there. Then, the solicitor to the offer is supposed to be appointed by the issuing house. The reason I said so is that in the recent times, it is no longer the case. Also, this area has worsened or helped to do with the problems in the capital market. Formally, the company will appoint its own solicitor. The issuing house has a duty to appoint the reporting accountant. It is supposed to appoint a solicitor to the offer. These two persons are supposed to be advising the issuing house in respect of that offer. The reporting accountant must review the account prepared by the auditor who is appointed by the company. They must review the profit forecast and must be satisfied that the basis of your forecast is fine, if not he will not sign the papers. The solicitor to the offer must ensure that the documents provided complied with the law.In view of this, do you subscribe to the view that solicitors should be separated from advocates as it is being practised in the UK'I don't think it should be done now. The reason is that already in Canada it is a fused profession. It is only in the UK that we still have that. But here our problem is not whether we have a fused one or not. What is important is that people should specialise in whatever they do. In the UK for instance, you are a company's solicitor and they have a litigation to do, you can't do that litigation. You have to hire a barrister to do that. But here, as a corporate lawyer, if I have a client who has a litigation problem, he expects me to go to court to defend the matter or prosecute it. If you tell the client that you do corporate law and not litigation, you will go and get a barrister but you are likely to lose your clients to the barrister.So, I think that it is important to do both of them. Both of them go hand in hand. Don't forget that most of the advice you give to corporate clients are based on decided cases in court. So, unless you do litigation, you won't be able to advice your client properly. That is one of the advantages of a fussed profession. In this country today, even though it is fussed in practice, you know the way that the senior advocates are appointed. The major criterion is that you must have been attending courts. Many solicitors who are more devoted to it have not been able to secure the position of senior advocates because they rarely meet up with the number of case since they are not in court very often. I think that the mistake that we made in this country was by copying the SAN, which is equivalent of the QC.QC was meant for those in advocacy but we copied it, forgetting that our own is a fussed profession. Why couldn't they have what I called SSAN (Senior Solicitor Advocate of Nigeria)' There are several intricate corporate matters of solicitors' work that are being done every day and there are many who are vast in that area and have done over 50 capital market transactions. If they were in litigation, that would have qualified them for three senior advocates. But that is the problem we have. We are not recognized.
Click here to read full news..
