Federal High Court sitting in Lagos has dismissed three cases filed against the Securities and Exchange Commission (SEC) by BGL plc and its chief executive, Alfred Okumagba and the company’s subsidiaries.
In its rulings, the court dismissed all the cases “for being incompetent”, handing a major victory to the regulatory and investor protection mandates of the commission.
The SEC received complaints from 33 persons concerning their investment in the Guaranteed Premium Notes (GPN), Guaranteed Consolidated Notes (GCN), Private Placement and other Schemes promoted by the BGL Group.
The complaints were centred on the inability of the BGL Group to meet its financial obligations to its investors under the respective schemes as a result of which they were paid neither the returns nor principal on their investment upon maturity.
These left the firm indebted to its investors to the tune of N5.7 billion. In line with its powers under the Investment and Securities Act (ISA), 2007, the Commission conducted an investigation into the activities of the BGL Group to ascertain the authenticity of the complaints.
Upon conclusion of the investigation, the Commission confirmed the complaints of the affected 35 persons and also observed that the BGL group had acted in violation of the provisions Sections 38, 60 (1), 61 (1), 160 and 161 (1) of the ISA 2007, and suspended BGL Asset Management Ltd, BGL Capital Ltd and BGL Securities Ltd from all capital market activities .
Other infractions observed during the investigation were breach of the provisions of Rules 3 (4), 22 (4), 34 (1e), 65 (5) and 60 (1f) of the SEC Rules and Regulations.
Some of the violations by BGL identified by SEC include: Violation of SEC Rules on separation of client funds from company’s funds, performance of a capital market function without registration, non–compliance with the Code of Corporate Governance of the Commission, carrying on business with negative shareholders funds, promoting/marketing products not registered by the Commission, non-compliance with the Commission’s rules relating to Assets mix ratio, unauthorised sale of client’s shares, and failure/refusal to resolve client’s complaints.
SEC explained that all suspicious transactions observed in the course of the investigation had been referred to the appropriate law enforcement agencies for further investigation.
In reaction, the BGL Group proceeded to the Federal High Court and instituted the following actions against the Commission:
FHC/L/CS/767/2015 BGL PLC & 4 ORS VS Securities and Exchange Commission, challenging the suspension and sanctions pronounced on them by the Commission on the ground inter alia that the Executive Management Committee of the Commission is not the competent body to pronounce such sanctions.
FHC/L/CS/1050/2015 BGL PLC & 12 ORS VS Securities and Exchange Commission & 2 ORS seeking among others, a declaration that the APC of SEC cannot adjudicate on the subject matter of the complaint in APC/1/2015 as doing so would violate the Plaintiff’s right to fair hearing as enshrined in the rules of natural justice and guaranteed by the Constitution.
FHC/L/121/2016 BGL Assets Management Limited & 22 ORS VS Securities and Exchange Commission & ANOR, seeking among others an Order prohibiting the Commission from conducting a hearing on the complaints against them, pending the hearing and determination of all the pending cases.
However, in a decision recently delivered by the Federal High Court, the cases have been dismissed for being incompetent. Okumagba, prior to the investigation, was the President, Chartered Institute of Stockbrokers (CIS) but was asked to step aside by the institute because of investors’ to maintain confidence.
