On Tuesday, 13th March 2012, the House of Representatives Committee on Capital Markets and other Institutions commenced a public hearing “to identify the manifest causes of the markets’ near collapse with a view to finding lasting solutions.”
In our belief that such a step aligned with the expectations of most Nigerians, many of whom suffered losses as the equity market plummeted from a capitalization of N12.6 trillion at its peak in March 2008 to N3.99 trillion at its lowest in February 2009, we prepared and presented a submission on the first day of the hearing. (Read here).
We outlined the causes of the market downturn in Nigeria, what steps we have since taken to salvage the market from further decline and what further steps we plan to take to fully restore investor confidence.
Since Ms. Oteh assumed office as SEC DG on 7th January, 2010 she has led a reform programme to restore market integrity and revive investors’ confidence.
These reforms included charging over 260 individuals and entities before the Investment and Securities for market abuses that led to the downturn, and seeking orders of disgorgement and restitution of investors.
Based on evidence of financial mismanagement and corporate governance lapses, the SEC in 2010 also replaced the leadership of the Nigerian Stock Exchange (NSE).
As a result, equity market capitalization now stands at N6.6 trillion.
There are also new products, new listing requirements, greater capacity among operators and regulators and a drastic reduction in market infraction among others.
Aware of the sensitivity of the capital market to information, we have generally exercised restraint despite the use of some media publications by some vested interests to tarnish the reputation of the DG and the SEC
These facts are provided to avoid creating room for persons pursuing personal vendetta to damage the reputation of our Director General, to diminish the authority of the apex regulator to fight market infraction and to undermine the integrity of our market.
The DG SEC recognizes the need to follow due process, probity and fairness, given her vigorous war against white-collar crime and other capital market improprieties.
The SEC therefore welcomes investigations by relevant authorities into its operations, actions and processes, as well as requests for information by members of the public.
At the public hearing, several frivolous and false allegations were made against the SEC and the person of Ms Oteh, Director General of the SEC. This release presents the facts as follows:
a. Did Ms Oteh consume a meal of N850,000 or did the SEC pay a meal bill of N850,000 for the DG SEC?
b. Did SEC DG stay at a hotel prior to getting her rented accommodation
c. Did the SEC procure official accommodation for Ms Oteh?
d. Did the SEC purchase four cars for the DG SEC, Ms Oteh?
e. Did SEC or the DG SEC compromise her regulatory function by engaging Access Bank staff?
Did Ms Oteh consume a meal of N850,000 or did the SEC pay a bill of N850,000 for the DG SEC?
Answer: No, Ms Oteh has never consumed a meal worth N850,000 nor has she ever submitted such a bill to the SEC.
The bill referred to at the public hearing related to Ms Oteh’s hotel expenses during her stay at the Hilton following her assumption of duty.
We have reviewed her hotel expenses during her stay, and the highest charge for food was N83,400 on March 24, 2010.
This bill was in respect of an official dinner hosted by the SEC with a group of international capital market experts who were visiting Nigeria to provide technical assistance to SEC Nigeria.
The bill for the official dinner was charged to her room, and therefore the SEC’s account.
This was a single incident, and was not a personal affair. Hilton’s billing records can corroborate this.
Did SEC DG stay at a hotel prior to getting her rented accommodation?
Answer: Yes, and this was in line with the terms and conditions of her employment verbally communicated to her on January 7, 2010 and confirmed in writing on January 11, 2010.
At the time of Ms Oteh’s assumption of duty as SEC DG, she had no home in Abuja.
The official policy of the SEC is to provide official accommodation for the DG. Pending the provision of such residential facility, the DG is lodged in a hotel.
Ms Oteh however voluntarily left the hotel before an official residence could be provided, unhappy with the lack of privacy at a hotel accommodation and for security reasons.
Did the SEC procure official accommodation for Ms Oteh?
Answer: No, she lives in a rented accommodation procured in her personal capacity, on her account.
In accordance with its policy of providing official residential accommodation for its DG, the SEC began on January 7, 2010 to search for official residence for Ms Oteh.
This policy on official accommodation was communicated to Ms Oteh in writing upon assumption of duty.
The transaction referred to at the public hearing was in February 2011, in respect of rental property in Maitama, Abuja at N25 million per annum, actually lower than the going rate of similar property in the area. The transaction collapsed when the property owner required the SEC to pay as much as four years rent in advance.
The issue of high rents has been a source of concern and been the subject of a bill debated on the floor of the House of Representatives. (Read here)
All the negotiations for an official accommodation failed for reasons relating to high cost, availability, and frequently changing terms.
These transactions never materialized; the SEC NEVER leased any property for Ms Oteh.
The SEC was not successful in finding accommodation for the DG. In line with its policy, the Commission offered rental allowance to Ms Oteh in lieu of official accommodation.
Did the SEC purchase four cars for the DG, Ms Oteh at N42 million
Answer: No. She uses the two pool cars assigned to her, one in Lagos and one in Abuja.
Pool cars are official cars that belong to the Commission and used for the purposes of the Commission
Since the DG’s arrival, only two pool cars have been purchased by the SEC and assigned to the DG
The two pool cars were purchased to replace two old cars that were subject to frequent breakdowns.
The purchase of these cars followed due process and the provisions of the public procurement laws.
Did the SEC or DG SEC compromise her regulatory function by engaging Access Bank staff on secondment?
Answer: No. Laid down rules, procedures and processes have been strictly complied with by the SEC since January 2010 (including in the processing of any transaction involving Access Bank). The seconded Access Bank staff were: a project adviser and a communications assistant, and these two areas are not at the core of the SEC’s regulatory function.
Prior to Ms Oteh’s assumption of duty, two independent studies commissioned by the SEC’s Board indicated that there were human capacity gaps at the Commission.
One of the initiatives she took to quickly address the capacity issues was to reach out to development agencies, sister regulators and the private sector for assistance.
This way, the SEC received technical assistance from a multilateral development bank, a sister regulator and the private sector to revamp its sub-optimal ICT infrastructure, to complement the in-house ICT staff.
Equally, the IFC/ESMID provided a Resident Bond Adviser, for 18 months, to help develop the fixed income market.
In addition, the SEC requested and received pro bono secondment of two employees of Access Bank, one a project adviser (on facilities management), the other on brand communication support (communication assistant).
These Access Bank employees have no connection with the core regulatory functions of the Commission in any manner as would create a conflict of interest.
In fact, Access Bank has disclosed the details of the secondment in its 2010 annual report.
The fact that the SEC has bank accounts and investments with a number of banks has not undermined our capacity to regulate or approve transactions relating to them.
The Access Bank secondment in 2010 happened because recruiting full-time staff at the SEC, as in many government agencies, takes a long time. For instance, the SEC’s recent recruitment of 52 Young Professionals lasted one full year.
Note also that Access Bank is primarily regulated by the CBN.
The transaction involving Access Bank that has required the SEC’s approval was that bank’s recent acquisition of Intercontinental Bank.
Most significant securities transactions involving a bank, such as a merger or acquisition, involve shareholders, the Central Bank, the Ministry of Finance, various departments at the SEC and the Federal High Court.
For a merger, an acquisition or takeover, there are laid down procedures for the SEC’s approval.
The DG’s office receives all applications to the SEC, and in the case of a merger or acquisition, forwards it to the Executive Commissioner Operations (ECOP). The ECOP in turn forwards the application to the Director of the Securities and Investments Services (SIS) Division who then forwards the application to the Head, Mergers & Takeover department, the Head, Legal Division of SIS. The Director of SIS receives the analysis of the transaction from M&T and the legal opinion of the Legal Division, both of SIS. The Director SIS then makes a recommendation to the Executive Commissioner, Operations who in turn reviews and either endorses or disapproves the transaction and submits to the DG for final approval. The DG’s decision is based on the recommendations made and is communicated to the parties through the ECOP and Director SIS.
The Access Bank transaction was recommended for approval by all the departments and officers of the SEC who reviewed it.
The other stakeholders including the shareholders, the CBN, the Ministry of Finance and the Federal High Court also approved and endorsed the transaction.
On a review of the SEC’s records, we find that secondment is not a new practice and the public sector.
Indeed as far back as 1988, the DG SEC as a member of the Technical Committee on Privatization endorsed the involvement and appointment of private sector officials in the privatization process.
For: Securities and Exchange Commission