Monitoring the Stock Market operators on integrity by EFCC

Emeka Ibemere

For the second time in one year, the Economic and Financial Crimes Commission, EFCC, has visited the Nigerian Stock Exchange in its effort to have a Stock Market that is free from manipulation.

Last week, Tuesday 24 the Commission was at the NSE and charged stakeholders in the Nigerian capital market to be transparent and operate by the rules guiding the market.

 Executive Chairman of the EFCC, Mr. Ibrahim Lamorde, gave the charge at the Joint EFCC-Nigerian Stock Exchange Awareness Programme in Lagos.

Lamorde, who spoke through the Commission’s Deputy Director, Public Affairs Osita Nwajah, observed that the Stock Exchange was the life wire of the ordinary Nigerian, who is daily investing in stocks and shares, and who must be assured that his investments are being handled with utmost integrity and transparency.

“The stock market is literally the life of many ordinary Nigerians. Other than the handful of employers and employees, who earn their daily living directly from the activities on the NSE, many Nigerians have their life’s savings invested in what goes on inside this building and they need to be assured that they have put their lives in safe hands. It therefore behoves every stakeholder-investors, brokers, dealers, regulators - to play by the rules guiding the market”, he said.

 Lamorde also appreciated the upward swing in the stock market, made possible by the new management of the NSE, led by Mr. Oscar Onyema. This development, according to him, accounted for a Memorandum of Understanding, MoU, and EFCC signed with the NSE on October 4, 2013. He, however, cautioned the NSE, to be vigilant and address any weakness in its operations that could be exploited by unscrupulous individuals and groups.

The Joint EFCC-NSE Awareness Programme is a major component of the MoU between the two organizations. Through it, the EFCC is “seeking to enhance the capacity of NSE members and other players on the market, to easily meet their obligations under the Money Laundering (Prohibition) Act, 2011 (as amended) and the Economic and Financial Crimes Commission (Establishment) Act, 2004, among other laws relevant to the Exchange”. General Manager, Legal and Corporate Services, NSE, Mrs. Tinuade Awe, expressed satisfaction with the relationship between the EFCC and NSE. “Our relationship with the EFCC is excellent and we are proud of our MoU with it”, she said.

The awareness programme was attended by trading members of the stock exchange, top officials of the EFCC and NSE. They include, Mr. Ezima Akaninyene, Head, Advance Fee Fraud, EFCC; Mr. Femi Shobanjo, Head, Broker-Dealer Department, NSE and Mr. Godstime Iwenkai, Head, Monitoring and Enforcement, NSE.

It would be recalled that on Friday October 4, 2013, both Economic and Financial Crimes Commission and the Nigerian Stock Exchange NSC signed a Memorandum of Understanding (MOU). It was the day both organisations sealed a marriage of convenience in the fight against money laundering and financial terrorism.

Aside that, it was the first day; a known security organization in Nigeria would close the market on the floor of the stock exchange after ringing the traditional bell to signify the close of the trading on the trading floor of the market. That was the day the EFCC and the Nigerian Stock Exchange in formal collaboration to tackle financial crimes, money laundering and sanitize the Nigerian Securities Market in order to ensure a fair and orderly market.

“The Nigerian Stock Exchange is pleased to announce its formal collaboration with the Economic and Financial Crimes Commission, EFCC for the purpose of strengthening its efforts to sanitize the Nigeria Securities Market and ensure a fair and orderly market”, Onyema explained.

“Although The Exchange has for a couple of years been working with the Lagos office of the EFCC to achieve the aforementioned purpose, there is a need to make the relationship more formal and extend it to all the branches of the EFCC nationwide.”

According to the Chief Executive Officer of the Exchange, both groups want to establish stronger ties of collaboration to tackle financial and economic crimes with greater efficiency in order to deter unscrupulous individuals. He disclosed that it was in that line that the institutions decided to cement the agreement in a symbolic ceremony of the bell ringing on the floor of the Nigeria Stock Exchange by the Chairman of the EFCC, which Onyema said signifies the market partnership towards changing the Nigeria Capital Market to be one of the best in Africa.

“The Exchange as you are well aware is a self-Regulatory Organization which has a primary duty to protect its members and the investing public. A duty it performs by amongst other things, applying the provisions of the investments and Securities Act 2007 and other relevant legislation”, Onyema stated.

Explaining further, he said that although the investment and securities Act 2007, provided for several criminal offences, that such as insider trading, securities market manipulations, false trading and market rigging transactions, false and misleading statements as well as misstatements in prospectus or statements in lieu of prospectus; and the money laundering prohibition act 2011, has several money laundering offences which apply to fraudulent Nigeria Capital Market activities, which he said the level of involvement of the Exchange is limited.

“This is not only because of the criminal nature of these activities, but also because they may be perpetuated by different groups and classes in the society such as non oversight over its members and issuers”, Onyema added.  “You will agree that based on the nature of securities business, our stakeholders are constantly exposed to risks associated with impersonation and identity fraud, unauthorised sales of securities, misappropriation of assets and other types of sophisticated scams which require prompt escalation, investigation and prosecution by the law enforcement agencies to achieve our regulatory objective of maintaining the integrity of our market”.

Onyema explained that failure to properly manage criminal activities could have damaging effect on the image and integrity of the capital market and at the end of the day tell on the investor’s confidence. He said that was what happened during the 2008 market crash. “It is time to completely sanitize and eradicate the criminal activities which have continued to work against our collective effort towards totally rebuilding the market and investors’ confidence,” he said.

Onyema who agreed with the EFCC boss on the need for collaboration said that such relationship would guaranty effective preservation, record keeping, and regular updates and restore respect for capital market and pave way for thorough investigation. “This collaboration paves way for thorough investigations, effective preservation of documents and records. Timely prosecution and regular updates in respect of capital market related offences”, he said adding that:

 “we also expect enhanced synergy from this formal relationship and look forward to producing results both in the short and long term in areas such as elimination of Nigeria from FATF list, capacity building and training of personnel, effective surveillance, timely and effective information sharing and consistent conduct of nationwide fora to educate stakeholders on capital market offences.”

The Nigerian Stock Exchange Chief Executive Officer ended his speech by commending the EFCC anti-financial and money laundering Czar.

According to him, Lamorde has shown zeal and effective leadership in combating the menace of corruption and financial crimes which constitutes a major setback to the nation’s economic progress and growth.

“It is our desire to align with this vision by channelling it towards transforming the Nigeria Capital Market, so that we can achieve our goal of becoming the leading Exchange in Africa and the gateway to African Market”, Onyema concluded.

Reacting to Onyema’s brief remark, Ibrahim Lamorde who was unassuming by the opportunity provided by The Exchange as a quest of honour said.

“I wish to put on record, my delight and appreciation of the honour being accorded me today by the Nigeria Stock Exchange, to be a part of events with significant historic ramifications.” EFCC boss praised the Exchange’s executive officer for his starling leadership by steering the chequered Exchange out of its former self.

According to Lamorde, Onyema came into the Exchange when the Exchange was at a very difficult time in history which affected the life of millions of Nigerians who had either directly or indirectly lost trillions of Naira to the global economic melt-down.

“Investor-confidence in the market crashed from all-time high to an all-time low. Nigerians voted with their feet, when they discovered that their losses may have been mitigated; if there were some basic systemic safeguards in place. Those safeguards are being installed today by this management of the NSE and  we are today seeing their benefits, as many of the discerning investors who turned their backs on the Nigeria Stock Exchange have been finding their ways back”, Lamorde said.

Lamorde observed the innovations being carried out by the new management under Onyema and said the recent launch of the X-Gen trading platform, which he said deserved commendation, was the most advanced in the world. He said other strategies so far adopted by Onyema and his team, would put the Nigerian capital market at par with any other one anywhere in the world.

“Ladies and gentlemen, the fact that EFCC is at the Nigerian Stock Exchange today and signed a memorandum of Understanding MOU is an acknowledgement of the obvious significance of the NSE in the lives of millions of Nigerians and the nation as a corporate entity”, he stated.

“The MOU seeks to promote cooperation between the Exchange and the Commission; to guard against infractions on the extant rules by players on the Exchange. The Commission will duly meet its obligations as spelt out in the MOU, in order to help achieve the highest levels of transparency and accountability in the operations of the Nigeria Stock Exchange and take the Nigerian stock market to the next level”.

According to the EFCC boss, why he may not have in person visited the Exchange, in the past, the activities of certain individuals and organizations had made the coming together of both organizations inevitable.

 “The stock exchange of any nation, is the window on the economy of that nation; the snapshots it provides on a daily basis, mirrors the nation’s economic essence. Thus when the stock exchange is healthy or perceived to be sick, the nation is concurrently healthy or perceptibly sick”, Lamorde explained. According to the EFCC boss, EFCC has nothing to do in a situation where government policies or global crises affected the market but has responsibility to act where the players on the NSE engage in practices that negates laid down rules and good corporate governance, with the predetermined end being to confer undue advantage on themselves or their interests.

 “The EFCC will most certainly be interested. And in the past 10 years, the Commission has had occasions to intervene decisively, in events or outcomes of activities on the Exchange that were criminal.” He stated.

Ladies and gentlemen, let us go down memory lane, a little, on the 7th June 2005, at the Lagos State High Court, only a few meters away from here, Justice Joseph Oyewole sentenced Mr. Kingsley Ikpe, Managing Director of Thomas Kingsley Securities Limited to 163 years imprisonment for capital market infractions”.

According to him, the conviction and sentence was significant, not just because of the number of years the man was to be behind bar or that it was one of the very first the commission secured but because of the pedigree and professional antecedents of the convict; at the time of his conviction, Mr. Ikpe an alumnus of the Harvard University was 61 years old and had held such important positions as Managing Director of Nigeria-Arab Bank and Chairman Fidelity Bank,

“it would stand to good reason that the experience of Ikpe would have put some fear in all capital market operators, but it did not seem to have done so as in the eight years since then, EFCC has been inundated with calls for intervention either from individual investors or by the market regulators”, Lamorde said.

Lamorde disclosed that the Commission has in the last decade uncovered all the criminally ingenious strategies used by the people he called unscrupulous capital players to scam and defraud hapless citizens of their life savings and investments.

 “Some of these methods which are very much known to many of you, includes, market shares manipulation through insider dealings, fraudulent falsification of accounting records, clearing of third party dividend warrant and impersonation of dead investors, among several others.” Lamorde revealed that the Commission has 20 cases in his kitty at the various stages of prosecution in courts across the country. He further explained that the Commission secured seven convictions in some of the cases that had been under trial. The total value of capital market infractions that the EFCC has intervened in between 2003 and today stands at over billions of Naira. While the figures are indeed staggering, I can confirm that the values of individual capital market infractions are fluctuating southwards in relation to those of the early years of the EFCC interventions”, he stated adding that:

“it is possible that this may be on account of better corporate governance on the part of the market players and stricter regulation coupled with the enforcement efforts of the EFCC, but it must be underlined that the loss of even one kobo by an investor through the shady deals of those he has entrusted his hard-earned money, to invest and guard is totally unacceptable to us”.

Lamorde assured the NSE that the EFCC would continue to partner with it in the best interest of the investing public and the overall interests of the nation. The event was spiced up with the traditional ringing of the bell which brought the market closed signifying the seal of agreement reached by both organizations.  But questions begging for an answer were whether the NSE will be ready in trading with EFCC on the floor of the market any other time, the later called for investigation of their records?