Court reaffirms SEC’s regulatory powers

Doubts over the regulatory influence of the Securities and Exchange Commission (SEC) has been cleared by the Court of Appeal that reaffirmed its powers to intervene in the management and control of any public company which is considered to have failed, is failing or in crises.

The Commission is statutorily mandated as the apex regulator of the Nigerian capital market to ensure the protection of investors and maintain a fair, efficient and transparent market.

It would be recalled that in 2008, SEC conducted an investigation on Big Treat Plc a public listed company (1st respondent) and its directors which revealed several infractions of the Investments and Securities Act 2007 such as inadequate internal control systems and a breakdown of corporate governance in the company.

Based on the foregoing, and pursuant to the provisions of Section 13 (v) of the ISA 2007, the Commission in 2010 approached the Federal High Court seeking a number of reliefs against Big Treat Plc (1st respondent), three of its directors – Pamela Wu, Harries Wu, Steve Wu – and two entities owned by them – New Frontier Engineering and Construction Company Limited and Skyone Group of Companies Limited with a view to preserving the assets of the 1st respondent.

In the course of the proceedings, the Commission applied for and was granted an ex-parte order of interim injunction restraining the 2nd– 6th respondents, their agents, servants or privies from obstructing the Commission in the exercise of its statutory oversight responsibilities to the 1st respondent including the appointment of an interim management to take charge of the day to day administration of the 1st respondent with a view to preserving its assets in the interest of its stakeholders pending the determination of the Motion on Notice already filed in this suit.

However, the ex-parte order was subsequently vacated on the grounds that the 1st respondent (Big Treat Plc) “was not a capital market operator amenable to the control and management of the appellant in times of financial distress”.

The Commission appealed against the decision of the Federal High Court and the sole issue for determination as raised by the Commission before the Court of Appeal was “whether the lower court was right when it held that the 1st respondent (Big Treat PLC) is not a capital market operator because it does not play any specific role in the capital market and as such, not registerable or subject to the control of the Appellant (the Commission)”.

The Court of Appeal in a judgement delivered on 31st January 2019, held thus; “That the 1st respondent, an issuer of securities, having been duly registered with the Appellants and was at all material times performing the specific function of issuing securities in the capital market was subject to the intervention of the statutory powers of the Appellant as the pinnacle regulatory authority for the Nigerian capital market whose sole purpose is to ensure the protection of investors and to maintain fair, efficient and transparent capital market as well as reduction of systemic risk as stated in the preamble of the ISA- the beacon light to the powers of the Appellant under the ISA.”

The Court of Appeal further held that; “In conclusion, I most respectfully hold that the court below should not have vacated the interim preservative order made by it to protect the imminent collapse of the 1st respondent but the Appellant who at all material times was exercising statutory powers under the ISA to stem the tide of decay in the internal management of the 1st respondent”