N1.2bn Share Fraud: NSE Absolves Itself of Negligence

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Goddy Egene

The Nigerian Stock Exchange (NSE) has absolved itself of negligence and complicity in the misappropriation of N1.2 billion being proceeds of shares of a former Chief Executive Officer of Ecobank Transnational Incorporated (ETI), Mr. Arnold Ekpe.
Partnership Securities Limited (PSL), which is a registered member of the NSE, sold Ekpe’s ETI shares valued at valued at N1.2 billion without remitting the proceeds into his account. Lawyers to Ekpe, Sofunde Osakwe Ogundipe & Belgore, had blamed the NSE’s negligence for fraud.
However, in a letter signed by the NSE General Counsel/Head of Regulation, Ms. Tinuade Awe, the exchange denied any negligence and complicity in the matter.
According to the NSE, a review of the Central Securities Clearing System (CSCS’) records revealed that neither the CSCS nor the Exchange was aware that Ekpe had opted for the settlement of the proceeds of sales by PSL directly into his bank account.
“The records further showed that the Direct Cash Settlement form, completed by your client (Ekpe)….was not submitted to CSCS by PSL in direct contravention of the Exchange’s rules. There being no information as to your client’s bank account details, reliance was properly placed upon Rule 16.3(c)(2) of the exchange Rulebook 2015, Part 1 in making the payments to PSL. The exchange can therefore, not be liable for such fraudulent concealment or for the deliberate actions of PSL”, the NSE stated in the letter.
The exchange noted that under the X-Alert platform of CSCS, Ekpe was duly notified and received not less than 80 telephone alerts on transactions made by PSL on his behalf, particularly relating to his shares in ETI between June 30 and October 14, 2016.
“Your client was, therefore, aware as of early July 2016 that the proceeds from the sales of his shares were not remitted directly into his bank account but neglected to contact CSCS to query the transactions. Notwithstanding the above, your client failed to inform CSCS, the exchange or any other regulatory authority of PSL’s deliberate infraction of the capital market rules for over three months. The exchange asserts that, had your client informed it at the earliest opportunity, that proceeds from the sale of the his ETI shares were not being remitted directly into his bank account, in spite of his selection of this option, the exchange would have been better placed to prevent the fraud by PSL and mitigate the losses suffered by your client as a result of PSL’s deliberate actions,” it added.
The NSE said while denying the allegation of negligence in its entirety, it reiterated that it takes its mandate on investor protection very seriously in accordance with the prevailing regulatory environment and modern industry best practices.