Fresh N5bn Fraud rocks NSE

Strong indications emerged over the weekend that about N5 billion Investors' Protection Funds (IPF) under the custody of the Nigerian Stock Exchange (NSE) ...

have been allegedly tampered with by the erstwhile management of the Exchange.
Some investors and other stock market participants, who spoke with Business Hallmark, stated that the need to investigate the status of the IPF became pertinent following the outcry by Alhaji Aliko Dangote, that the NSE was broke.
They stressed that the alleged bankruptcy of the Exchange levelled by the former principal council member should be seen as an opportunity to ascertain the state of the funds, saying that as a former senior council member, his allegations should be taken seriously.
The total funds in the IPF as at 2006, a source disclosed was about N440 million. This, he argued had increased to over N5 billion, following the significant growth recorded by the stock market immediately after the banking sector recapitalisation. 
The Securities and Exchange Commission (SEC) last Wednesday sacked the Director-General of the Nigerian Stock Exchange (NSE), Prof. Ndi Okereke-Onyiuke. It also asked business mogul, Dangote, to stop acting as the President of the NSE and directed council members “elected in defiance of the court order” to cease acting as members of the council “pending the outcome of the ongoing litigation”.The election into the council last year is still a subject of litigation and SEC is said to be determined to restore order to the exchange as the council is already tainted with the court pronouncement.
The Investors' Protection Fund (IPF)
The IPF fund is simply a pool of fund where every stock broking firm contributes the sum of N1 million. This funds are kept by a trustee, appointed by the NSE, so that in the event of defalcation (any act of stealing or fraud by a stock broking firm or its principal officer(s) against an investor(s)), there would be compensation. What that means is that if an investor pays a stock broking firm to purchase shares for him and the firm was not able to buy the shares and could not refund the money, the investor would be compensated from that fund at the ruling of the Investment and Securities Tribunal (IST). More so, if an investor had given his 'sale' mandate to a stock broking firm and the firm was not in a position to pay; such an investor would be compensated from the IPF, at the ruling of the IST. 
For instance, Business Hallmark recalls the case of Jenkins Investment Limited in December 2006, when the then Managing Director, allegedly sold investors' shares running into billions of Naira and took the money away and investors were supposed to be compensated from the IPF. The Managing Director of a leading stock broking firm, who did not want his name to be mentioned for fear of retribution, alleged that as at 2006, the funds which stood at N440 million, were domiciled in four accounts at the First Bank of Nigeria on the ground floor of the NSE building, Customs Street, Lagos. 
 Business Hallmark further recalls the case of Chief Livinus Ezemegbu against the NSE as first respondent as well as SEC as second respondent in 2007 over compensation from the IPF. In that case, the court decided and awarded the sum of N3.7 million against the NSE and SEC. It had ordered them to compensate the plaintiff from the IPF. Both the NSE and SEC had appealed then. Similarly, the case of Boat Nigeria Limited, against the NSE and SEC, where the court also awarded the sum of N22.5 million against both regulators and ordered them to pay from the IPF. The NSE and SEC had, also gone to court to challenge the decision of the IST on that case, which they lost because court of appeal dismissed the case and ordered them to pay. Again, there was the case of Ademola JohnBosco which he had claimed the sum of over N700 million from the IPF against the NSE and SEC.
Shareholders' Representatives' Opinion
To the President, Renaissance Shareholders Association, Mr. Olufemi Timothy, shareholders can only be confident if the SEC comes out to inform them of the state of the IPF
He added, “It's long overdue. That is what we have been clamouring for. The woman has been a suspect for a long time. It will allow for thorough probe of the NSE activities. It is good for Investors' confidence restoration.”
The President, Nigerian Constance Shareholders Association, Mallam Shehu Mikail, expressed support over the action of SEC. He also said such action would help boost the earlier reforms by the CBN.
“Ordinarily, the NSE is not supposed to mix its funds with that of the IPF. But I think there is need for a probe by relevant security agencies to determine if these funds are really intact because of these complaints arising from a principal council member of the Exchange. 
“Because if it true that they have borrowed over N900 million from the CSCS, a subsidiary of the Exchange, it is possible that the IPF may have been tampered with. I think there is need for the EFCC and other relevant bodies to move in for us to know the state of the IPF. If they do that, I think would shore up investors' confidence in the market that if anything happens to their investment, there would be a fall back that if anything happens to their investment, there is a fall back which has been provided for in the relevant law books, which is the IST 2007,” he declared.
Also, the President, Nigerian Professional Shareholders Association, Mr. Godwin Anono, insisted that the Okereke-Onyiuke led management of the NSE should be held responsible if anything happens to the IPF.
According to him, “She must tell us what has happened to the fund; otherwise she should be thrown into jail along with all other management staff that were found to be involved. It is a sad development for the capital market.  
Tension grips NSE staff
Tension has gripped the entire staff of the Nigerian Stock Exchange (NSE) over the shocking and sudden sack of the Group Chief Executive Officer (GCEO), Prof. Ndi Okereke-Onyiuke, by the Securities & Exchange Commission (SEC). Their fear hinges on the fact that they do not know what other plans SEC might have, as well as the direction of the new Interim Administrator, Mr. Emmanuel Ikhazoboh. A visit to the exchange last week revealed a palpable nervousness among most of the staff. Insider sources confirmed to Business Hallmark that the senior officers are much more likely to be affected by the shake up. The source however, explained that those whose jobs were advertised may also go the way of their big bosses sooner than later. 
Given that arrangement, those whose jobs are on the line includes Mr. Kene Okafor, Head of Quotation & Listings Department, Binos Yaroe, Head of Operations& Information Technology Department, Farooq Oreagba, Head of Strategy & New Products Department. 
The source said that Mrs. Yinka Idowu and Mr.Uzoma Onyekuru, who were Heads of Corporate Affairs and Compliance /strategy respectively had retired to create room for the emergence of a new GCEO and four executive directors. 
This is because SEC, according to the source, believes that the senior officers, especially those who have worked at the exchange for long may have participated in the looting of the finances of the organization.
There are also, insinuations that both the immediate past President of NSE, Mr. Oba Otudeko and the retired top senior officers may have been involved in the sharing of the alleged booty. It was also garnered that the new Interim Administrator plans to run the organization without any infringement, concessions of any kind, internal sentiment or meddling.
 “Nobody seems to be safe. Everybody is afraid now. You know madam was so strong that her assurances were final but it will be different now. There is a new administration here”, a middle cadre officer confided in Business Hallmark.
Former President of the NSE, Alhaji Aliko Dangote, had prompted SEC to action with the allegation of financial mismanagement by the management of the organization through a strongly worded petition.
Dangote had alleged that, “In the last four years (2006 – 2009), the Nigerian Stock Exchange grossed a total income of N42.2 billion with a surplus of only N5.6 billion, representing 13 percent growth over the four year period. “Careful review of the expenditure shows major cost elements are salaries, pension, travel and marketing. At the end of 2007, NSE had a cash position of over N9 billion and as of today, the Exchange is in deficit and is unable to meet its obligations as and when due,”. With regards to inter-company and associated companies' investments, the petition stated that “current inter-company balances with inter-company/associated companies amounts to N3 billion, which have been built over a period of years. Similarly, investment in such companies is now in excess of N1.3 billion without any commensurate return being accounted for.” Dangote who, also, expressed fear that the pension funds was in trouble, called on SEC to urgently audit the accounts of NSE, adding that out of the funding of the NSE pension, more than N423 million was with a named insurance company, but that the existence of the funds was yet to be ascertained.
However, SEC explained that its intervention was a result of inadequate oversight of the exchange, on-going litigation, allegations of financial mismanagement, governance challenges and inordinate delays in the implementation of the succession plan for the exchange. SEC had also recently dragged over 260 entities, individuals, including Banks, to the Investments and Securities Tribunal accusing them of price fixing, fraud and insider trading and share price fixing. All these, many believe took place under the nose of Okereke-Onyiuke. 
The management had been accused of aiding and abating corruption in the exchange. Recently daily reports punctured the management's claim that the reputable consultancy firm, Accenture, was involved in the search for a new helmsman for the NSE. 
Analysts have expressed mixed feelings on the developments at the exchange.
National coordinator, Chief Sunny Nwosu, feels that the sacking of council members of the Nigerian Stock Exchange (NSE) was a calculated attempt by the Securities and Exchange Commission (SEC) to cover up her inept regulatory inadequacies.
According to Nwosu, the punitive massive sack was done to provide soft landing for the estranged member of the council in defiance to the order of a court of competent jurisdiction, adding that the Commission has proven to the investing public particularly, some discerning shareholder groupings, that investor's protection were calibrated and measured.
President of Solidarity Shareholders Association of Nigeria (SSAN), who said their interest was to see the market move forward, added that Ndi Okereke –Onyiuke failed to consult and listen to useful advice during her time. “She succeeded in making it impossible to listen to complaints or advice”.
 Former President of Chartered Institute of Bankers (CIBN), Mazi Okechukwu Unegbu, had faulted SEC's action describing it as punitive. He added that the commission should have investigated the matter before intervening the way it did.
Onyiuke's international passport seized, Elakama travels out
Prof. Ndi Okereke-Onyiuke's international passport and other travel documents may have been seized by the Nigerian security agents to ensure a thorough investigation into her years at the NSE.
Insider sources who comfirmed this to Business Hallmark, revealed that the action was taken last Friday in order that she stays around to assist investigators into the financial state of the exchange.
It was also, learnt that former Assistant Director, Alhaji Musa Lance Elakama, has also disappeared from the country to avoid being arrested for the financial mismanagement at the exchange.
Sources Close to him confirmed to Business Hallmark that Elakama who was a signatory to NSE's account until his retirement last two months had suspected that the mismanagement issue which has received so much media reports would affect him.
Elakama who was said to have flown in the Air Nigeria to an unknown destination on Tuesday, August 3, 2010, worked at the exchange for more than 15 years. Elakama had fought for the position of Director General before he was forcefully retired a few months ago.
Fasinro to take over at stock exchange
Even though Emmanuel Ikhazobor, has taken over as interim administrator to oversee the Nigeria Stock Exchange (NSE) pending the appointment of a new director general, his tenure will short lived. His mandate, however, was limited to ensuring a smooth transition to usher in a new Group Chief Executive Officer (GCEO) sooner than later. 
Whereas many qualified persons within and in the diaspora have indicated interest for the top job, including the three heads of departments who are currently the most senior officers at the exchange, sources revealed to Business Hallmark that Mrs. Yvonne Fasinro, JP Morgan Chase Country Lead for Nigeria, will soon be named the substantive director general. 
Mrs. Fasinro, a seasoned banker, has an impressive pedigree. Her husband is Habeeb Fasinro, the House of Representatives member representing Eti Osa federal constituency, Lagos State whose father is the first town clerk of Lagos City Council. Her father, Christopher Kolade, was Nigeria's former high commissioner to Britain, and a management expert.
Mrs. Fasinro is a Senior Vice President at JP Morgan Chase, one of the world's biggest financial services institutions with assets worth $1.1 trillion and operations in more than 50 countries. She is an Ernst and Young trained Chartered Accountant who holds a BSc in Economics. She joined JP Morgan in 1994 and since that time has worked in the private bank, investment bank, and in a variety of roles in the fixed income, credit, equity, and equity derivatives businesses.
Dangote, after weeks of infighting, last week declared that the NSE was insolvent due to mismanagement and lack of corporate governance. He therefore called for an investigation into the financial records of the stock exchange to determine its true state as a going concern.
Business Hallmark recalls that Ms Otteh announced Mr Ikhazoboh as the interim administrator and Balama Manu, former chairman of the Federal Inland Revenue Service (FIRS), as interim president of the council of the NSE. She also said the interim administrator will run the exchange until a substantive director general is appointed. 
 Stakeholders flays Ikhazoboh as Interim Administrator
Stakeholders have kicked against the appointment of Mr. Emmanuel Ikhazoboh as the Interim Administrator of the Nigerian Stock Exchange (NSE), saying he is not the appropriate person for the job of steering the organization out of the current mess. 
Their opinion is that Ikhazoboh lacks the moral right to seat and claim to be rescuing a sinking ship which he may have participated in its misdirection over the years.
Their grouse is that since Mr.Ikhazoboh could not speak up about the mismanagement at the exchange as a Managing Partner of Akintola Williams Deloitte, which has been the auditing firm to the NSE over the years, he cannot perform any different from the previous officers.
Chairman, Solidarity Shareholders Association of Nigeria (SSAN), Mr. Timothy Adesinya, who said this in a telephone interview with Business Hallmark, faulted his credibility on the bases that he may have noticed the mess before now without commenting on it.
“The new administrator is, also, part of the mess. He did not expose these problems earlier when he was auditing their books. He was part of the rot. How come the Securities & Exchange Commission (SEC) is making him an administrator”, Adesinya said
Adesinya faulted SEC's decision, explaining that the commission should have a more qualified and transparent person to run the organization.
Speaking further, Adesinya said the information he received from Akintola Delloit was that Mr. Ikhazoboh behaves the same way as Ndi Okereke-Onyiuke who likes to frustrate other colleagues.
“Don't you know that he was, also, forced to go from his former office.”
National Coordinator, Independent Shareholder Association of Nigeria (ISAN), Chief Sunny Nwosu, also, accused SEC of emulating the wrong approach of the Central Bank of Nigeria (CBN) to act on the affairs of the NSE.
“That SEC's punitive regulation and actions on the ongoing court rulings over the Presidency of the NSE has lowered the confidence level of the nation's capital market to an abysmal level”.
Business Hallmark recalls that SEC sacked the Group Chief Executive Officer of the NSE, Prof. Ndi Okereke-Onyiuke, as well as the illegal council members on account of mismanagement, bad corporate governance and delayed announcement of a successor and appointed an administrator. 
 Okereke Onyiuke's days in Exchange
An era has ended in the Nigerian Stock Exchange (NSE). Though it ended abruptly, it will definitely be remembered for many things. Whereas the era consumed and truncated huge and interesting career of Prof. Ndi Okereke-Onyiuke, former Group Chief Executive Officer of NSE, many would miss her either for good or bad. In fact, capital market, the financial industry, other sectors and the general economic environment are going to miss her most.
 As a bright young lady, Okereke-Onyiuke launched into the NSE in 1983 from the reputable New York Stock Exchange (NYSE), to head the Research and Information Services Department. Seven years after, she took over the mantle of leadership in 2000 from Mr. Hayford Alile. 
Since then, the market capitalization grew to the peak of N13 trillion in 2007 from the figure of N256 billion in 2000. The market growth in terms of volume, quantity and value has also been credited to her ingenuity. The NSE has, also, recorded significant increase in the number of branches to about 15 from two, while more equities have continued to be listed. Today, the exchange boasts of over 300 listed equities in the market. Interestingly some significant innovations which have eased operations in the capital market are also some of the major achievements of the management of NSE. For instance, the Exchange has moved call over system to T+5 and to T+3. 

She was highly instrumental to the computerization of the Exchange in 1985, a development which included the creation of “The Nigerian Stock Exchange” All Shares Index - a barometer that gauges the mood of the economy. 
In April, 1997, her efforts as the Project Director of the Central Securities Clearing System (CSCS) Limited was crowned with success with the commencement of automated delivery that is Central Depository, Clearing and Settlement System. It was after the development of CSCS that the 'Trade Alert' which has greatly reduced fraud incidents in the market. The world class modern trading floor with automated system was not only built by her, the capital market gained unquantifiable awareness both domestically and internationally. However, even as she presided and transformed NSE into a world class exchange, her integrity was also questioned when the Chartered Institute of Stockbroker (CIS), raised allegations of corruption during the introduction of Trade Alert. Recently and surprisingly, also the former President of the exchange, Alhaji Aliko Dangote, the man who was supposed to work with her, raised alarm to alert the Securities &Exchange Commission (SEC) of an alleged mismanagement of huge funds at the NSE.
Dangote's petition, however, stated that, “In the last four years (2006 – 2009), the Nigerian Stock Exchange grossed a total income of N42.2 billion with a surplus of only N5.6 billion, representing 13 percent growth over the four year period. “Careful review of the expenditure shows major cost elements are salaries, pension, travel and marketing. At the end of 2007, NSE had a cash position of over N9 billion and as of today, the Exchange is in deficit and is unable to meet its obligations as and when due,”. With regards to inter-company and associated companies' investments, the petition stated that “current inter-company balances with inter-company/associated companies amounts to N3 billion, which have been built over a period of years. Similarly, investment in such companies is now in excess of N1.3 billion without any commensurate return being accounted for.” Dangote who, also, expressed fear that the pension funds was in trouble, called on SEC to urgently audit the accounts of NSE, adding that out of the funding of the NSE pension, more than N423 million was with a named insurance company, but that the existence of the funds was yet to be ascertained. 
This is beside other controversial side of her. She defiantly became Chairman of the Controversial Transnational Corporation of Nigeria (Transcorp) even when Companies and Allied Matters Act (CAMA) ruled against it. She, also, knew and did not report that former President Olusegun Obasanjo, owned over 200 million shares in Transcorp as a seating head of State.
Her involvement in Corporate Nigeria - a group of corporate individuals, who raised funds to support the political ambition of former President Olusegun Obasanjo was deeply controversial. She was accused of using her influence as the DG of NSE to cajole listed companies to contribute money to support Obasanjo.
She also pursued a controversial cause on the international scene, involving President Barack Obama of United State. In 2008, she floated an organisation called 'Africa for Obama' to raise funds for Obama. And on August 11, 2008, the organisation had a dinner/concert where about N100 million was reportedly raised.
Recent power tussle in which she allegedly refused to announce a successor in time before retire next November sparked off another controversy.