Yemi Osinbajo
Prof. Yemi Osinbajo, Nigerian vice president



Implementing decisions reached at the recent judges workshop on resolutions in the capital market will go a long way in protecting investors and restoring confidence in the market, writes Goddy Egene

The low patronage of the Nigerian stock market has been attributed to many reasons. Prominent among the factors is the ugly experience by many investors in the hands of fraudulent operators. Some investors, who invested most of their savings in the market in the past, lost their money to stockbrokers. Such investors are scared to return to the market.
In some cases, individuals who took their stockbrokers to court, gave up after long wait. Hence, some decided to stay away from the market because of the delayed resolution of cases in the market.
That was why it was a very encouraging development when Mr. Tajudeen Folaji, a former stockbroker with First Allstate Securities Limited, was sentenced to seven years imprisonment by the Lagos State High Court presided over by Justice Kudirat Jose. The court found him guilty of unauthorized sale of shares and stealing for fraudulently converting 31,886,200 units of IPWA Plc shares worth N331,297,618 belonging to an investor on 3rd April, 2008. In addition to the imprisonment, the court has directed the Economic and Financial Crimes Commission (EFCC) to trace and liquidate properties belonging to the convict in order to restitute the investor while imposing a N20 million fine on First Allstate Securities Limited where he was the Managing Director and dealing clerk.
According to the Securities and Exchange Commission (SEC), the successful conviction is a testament to the excellent collaboration between the commission and the EFCC to advance the goal of investor protection.
“Following complaints against Folaji by the affected investor, the Commission launched a detailed investigation that revealed evidences of the infractions committed. The Commission consequently suspended the license of his firm on 6th April 2010 and transferred the case to the EFCC to prosecute the criminal element of the case,” SEC had said.
Although it is good that the broker has been convicted, the conviction came eight years after the fraud was committed. It is possible that some of the victims must have given up on the cases.
Market stakeholders, who, however hailed the conviction of the broker, said the judiciary and market regulators should work closely to ensure speedy determination of cases so as to encourage patronage by investors.

Judges’ Workshop

This is why the 2016 SEC Judges’ workshop has been seen as very timely. The workshop, with the theme: “Effective Dispute Resolution-A Panacea for Transformation of the Nigerian Capital Market,” held in Abuja from February 24 to 25.
The Chief Justice of Nigeria, Hon. Justice Mahmud Mohammed, declared the workshop open through his Lordship, Hon. Justice Ibrahim Tanko Muhammad.
Several distinguished personalities from the legal profession, the capital market, the legislature and top government functionaries attended the workshop.
Notable amongst them were: the former Chief justice of Nigeria, Hon. Justice Dahiru Musdapher, Professor Dalvinder Singh Sangha (a Professor of Law from the University of Warwick, United Kingdom), Senator Isiaka Adeleke (Chairman, Senate Committee on Capital Market), Hon. Tajudeen Ayo Yusuf (Chairman, House Committee on Capital Market), Justices of the Court of Appeal, Chief Judges of States and Honourable Judges of the Federal High Court.

Participants’ Views

Delivering the special paper titled: “Contextual Approach to Enforcement Strategy and Sanctions, Sangha posited that a regulatory-enforcement strategy needs to be built around a relationship between the regulator and regulated where enforcement through legal channels of rules is not necessarily its first response. He advocated for the application of both a compliance and a deterrence based approach to enforcement, stressing that there was need for the existence of both approaches to deal with the variety of enforcement issues a regulator will confront during its day to day oversight of the financial system.
Speaking on the topic: “The Nigerian Securities Market and Regulation: Industry Challenges and Expectations from the Judiciary” Professor Konyinsola Ajayi, of Olaniwun Ajayi explained the important role of the capital market to the development of an economy.
The learned SAN, who was represented by Mr. Muyiwa Balogun of Olaniwun Ajayi LP, noted that an efficient and effective capital market is the foundation of any meaningful and sustainable economic growth.
He added that the efficiency and effectiveness of the capital market, however, depends on the robustness of its legal and regulatory framework. He stated that the provisions of the Investment and Securities Act 2007 (ISA) and the Rules and Regulations of the SEC as well as the other capital market related rules prevalent in Nigeria cannot, in themselves, achieve investor protection.
“The courts have a critical role to play in applying the relevant laws and rules in order to foster effective regulation of the capital market, achieve investor protection and legal certainty. This would enable investors and capital market operators understand the laws and rules applicable to them, predicate the consequences of their actions and properly order their affairs,” he said.
He added that the ongoing jurisdictional controversy between the Federal High Court and the IST, would have a negative impact on the capital market and the nation’s economic growth.
In his presentation, on “Dispute Resolution in the Capital market: A Review of Administrative and Judicial Mechanisms,” Chief Anthony Idigbe, SAN, of Punuka Attorneys, advocated for deference to the decisions of both the Administrative Proceedings Committee (APC) of the Commission and the IST by the Nigerian Courts.
He urged the courts to act in this regard giving consideration to the level of expertise and special knowledge applied by the assessors of both bodies in adjudicating over capital market disputes.
Idigbe submitted that challenges to decisions of these bodies should be subjected to judicial reviews, rather than a jurisdictional conflict as it exists today.
According to him, there was need for the courts to adhere strictly to the principles applicable for the administration of judicial reviews, which would reduce the rate at which the decisions of these bodies would be overturned by the courts.
Also speaking, Chairperson of IST, Dr. Ngozi Chianakwalam, outlined the importance of the Tribunal and also elucidated on some of the judgments delivered by it and their impact on investors’ confidence.
Justice Abdul Kafarati of the Federal High Court, shared his thoughts on the controversies surrounding the jurisdiction of the IST vis a vis the powers of the Federal High Court as provided in the Constitution of the Federal Republic of Nigeria.
Participants at the workshop agreed that the jurisdictional controversy around adjudication on capital market related matters between the IST and the Federal High Court was a constitutional one that could permanently be cured by a constitutional amendment.
In this regard, Senator Adeleke, assured the forum that the National Assembly was willing to assist the Commission in advocating for legislative amendments to laws which would enhance the development of the capital market.

The Communiqué

Having deliberated exhaustively on the issues raised, participants adopted a communiqué at the end of the workshop. According to the communiqué, in the quest to develop a vibrant capital market, the central role of the Judiciary in the maintenance of market integrity cannot be overlooked.
“Without fair, prompt and effective dispensation of justice, the Nigerian capital market cannot achieve its aspiration of becoming a world class capital market that catalyzes Nigeria’s emergence as a major global economy. The current market wide reforms by the SEC, which is part of the full implementation of the 10-year Master plan (2015-2025), such as the electronic-dividend initiative, full dematerialisation, direct cash settlement and the complaints management framework, are ground breaking initiatives that would revolutionize the Nigerian capital market. However, a robust framework for National capacity building, continuing education and enlightenment in the market is central to consolidating the gains of these reforms,” the communiqué added.
Other communiqué stressed that issues surrounding the Judicial review of decisions of SEC’s APC by the IST and the Federal High Court need to be decisively addressed to preserve and enhance the integrity of the dispute resolution mechanism in the capital market.
“A comprehensive reform agenda for the IST needs to be urgently instituted. This would address issues pertaining to the Jurisdiction, funding and constitution of members of the Tribunal. In the interim, the IST should be supported by all stakeholders to continue performing its responsibilities under the ISA 2007,” it said.
The participants also agreed that SEC should promote Securities Arbitration and other Alternative Dispute Resolution (ADR) mechanisms to facilitate expeditious dispensation of justice in the capital market.
“Judicial pronouncements and decisions on capital market issues should be progressive, taking into consideration the overriding well-being of the market and the protection of investors. Injunctive reliefs that inhibit the statutory powers of the Regulator to sanction erring capital market operators should only be granted after a careful analysis of the impact such orders have on market integrity and investor confidence. The adoption of the doctrine of judicial deference in capital market matters should be encouraged. This connotes the acknowledgment by the Courts (in their adjudication of capital market disputes) of the specialized (technical) knowledge and expertise of the SEC and other market Regulators,” they said.
The communiqué noted that the entire gamut of regulation in the capital market is the protection of investors and the hallmark of investor protection is dispute resolution.
“However, the investor protection and dispute resolution mechanism in the market must be supported by an equally robust enforcement framework. The controversies and conflicting Judicial decisions with respect to the jurisdiction of the IST vis a vis the Federal High Court on capital market matters need to be conclusively tackled via a Constitutional amendment. The capital market should present a position in this regard to the National Assembly, which may be accomplished either by streamlining constitutional the powers of the Federal High Court in respect of capital market matters or bringing the IST under the appellate purview of a specialised division of the Federal High Court,” it was resolved.