17 March 2013

Nigeria: IST - the Unfinished Tasks As New Helmsman Chianakwalam Takes Over

The inauguration of a new chairman for Investments and Securities Tribunal Ngozi Chianakwalam last week has thrown up some challenges, which the new helmsman should tackle with dispatch in view of the open declaration of the supervising ministry, Ministry of Finance, to give the tribunal all the necessary backing.

A new Chairman of the Investments and Securities Tribunal (IST) took charge last week. She is Dr. NgoziChianakwalam, a 1977 graduate of the University of Ife. She took over from Nnenna Orji, the immediate chairman who ran the organisation for ten years.

Before her appointment, Chianakwalam had served as Abia State Solicitor-General and Permanent Secretary, Ministry of Justice and Director of Registry, Corporate Affairs Commission, Abuja. She attended the University of Ife (now ObafemiAwolowo University), Ile-Ife where she graduated in 1977. She was called to the Bar in 1978. Chianakwalam obtained an MBA in Management Technology in June 2001 from the Federal University of Technology, Owerri, and Ph.D. in Criminal Law at Rochville University, West Hollywood, California. She started legal practice in July 1979 as a Pupil State Counsel with the Imo State Ministry of Justice, where she rose to the position of deputy director in 1991.

When she was being inaugurated in Abuja last week, the Finance Minister and Coordinating Minister for the Economy, Dr. NgoziOkonjo-Iweala, described Chianakwalam as a seasoned lawyer and veteran public servant, who is more than qualified to lead the tribunal. She said the appointment of a lawyer with varied experiences in civil service and the corporate world was a key component of the law and order being championed by the Ministry of Finance to promote investments in the country. The minister said the tribunal had been doing a wonderful work, which has remained largely unsung, adding that President Goodluck Jonathan had to personally review and approve the nominees to the tribunal to ensure that the best hands were picked.

The Minister of State for Finance, Dr. YerimaLawanNgama, said IST is critical to the growth and smooth operation of the capital market, adding that it is doing a lot to lift the confidence of investors. Consequently, he added, the ministry has proposed new amendments to the Investments and Securities Act (ISA 2007) to be sent to the National Assembly.

According to him, the essence of the amendment is to enhance the work of the tribunal and streamline appointments into the body so that its chairman and other members can seamlessly transit to the Court of Appeal and Supreme Court, as the IST is equivalent to the Federal High Court. He urged the new chairman to liaise with the National Judicial Council (NJC) to obtain members' input to the amendments.

The Return of Infractions

Analysts said the call for a serious action on the part of the tribunal is underscored by the recent incidence of price manipulation in the capital market. The development, which observers described as a reminder of the chain of crisis that nearly brought the Nigerian capital market to its knees in 2008, may have begun to manifest in the capital market.

A couple of weeks ago, the Nigerian Stock Exchange had to wield the big stick on three dealing member firms alleged to have engaged in price manipulations in the market. The three firms were collectively fined N21m for market and price manipulations.

The affected firms are Apel Securities Limited, EDC Securities Limited and Calyx Securities Limited. NSE said "Apel Asset & Trust Limited was suspended from trading for one week; a fine of N15m and public shame via public announcement of the infraction and sanctions; while EDC Securities Limited was suspended from trading for one week with a fine of N5m and public disgrace via public announcement of the infraction and sanctions. Calyx Securities Limited was barred from trading for one week; a fine of N1.5m imposed on it was reduced to N1m given that Calyx admitted its infraction, fully co-operated with the investigators, pleaded for leniency and is a first time violator; and public censure via public announcement of the infraction and sanctions."

Expectations from IST

Capital market analysts said with a change of baton at IST, the investing public would be happy to see a new regime of effective policing of the investment world especially in the areas of activities in capital market and pension administration.

One of the tasks, which market watchers said would define the tenure of the new IST boss, is the need to win the confidence of the investing public in such manners that will make the tribunal the next point of call for any aggrieved parties seeking timely resolution of issues. As all eyes will be on the tribunal to settle all cases in the capital market, there is need for the tribunal to put a bite into its activities and stamp its authorities.

Perhaps, the issue of the jurisdiction of the tribunal in some of the pending and future cases is one of the most important expectations from the members of the public. In 2011, a surprise twist of event took place at the Investment and Securities Tribunal (IST) during the report of settlement of the case brought by 14 representatives of investors of Nospetco Oil and Gas Limited against the Securities and Exchange Commission (SEC), the Central Bank of Nigeria (CBN) and the company also known as 'Wonder Bank' when its counsel made a volte-face and announced the decision of his chambers to opt out of the peace pact initiated by claimants counsel, and challenged the jurisdiction of the tribunal to entertain the matter.

The counsel to the Wonder Bank in his application said he was contesting the jurisdiction of the court on the ground that the subject matter of the suit was a simple contract and not securities issues, which the tribunal is empowered to adjudicate on.

Another very important challenge before the new helmsman at the tribunal is the urgent need to adjudicate on all the cases pending before it.

In October last year, the management of SEC expressed its determination to ensure a speedy conclusion of investigations into the 260 cases of fraudulent manipulation of the capital market, and insider abuses that resulted in huge losses to investors.

The capital market regulator had dragged the affected firms and individuals before the Investment and Securities Tribunal in 2010 for several infractions in the wake of the 2008 crash of the market, in an attempt to restore investor confidence.

SEC Director-General Arunma Oteh said it was important that the tribunal concludes its investigations into the cases to ensure that investors who suffered losses are compensated.

"When investigations were carried out around the intervening banks, we initiated actions against 260 firms and individual operators by alleging that they were fraudulent entities that investors should beware," Ms. Oteh said. "We hope the Investment and Securities Tribunal would conclude on those investigations so that the fund that would be recovered can be used to pay investors," said last year.

The former chairman of the tribunal had pledged to ensure that IST delivers judgment on cases brought before it within a time limit of 90 days.

The Need for Investment Tribunal

"In view of the importance of the capital market to the development of a nation, governments world over have found it necessary to create institutions and equip them with strong regulatory powers to regulate the conduct and operations of the capital market.

In Nigeria, the capital market is currently regulated by SEC deriving powers from the Investments and Securities Act (ISA) 2007, SEC Rules and Regulations 2000 (as amended) made pursuant to the ISA 1999. Despite these laws and rules and regulations, disagreements and or disputes between participants, regulators and other stakeholders do occur. How these disputes are redressed within the existing legal structure of the Nigerian capital market is fundamental as it has an impact on the inflow of investment by both local and foreign.


The tribunal is empowered to hear all issues including all disputes and controversies arising under the Investments and Securities Act (ISA) 1999 (now ISA 2007) and the rules made there under; interpretation of any law or regulation to which the ISA applies; disputes between the Securities and Exchange Commission (SEC) and any exchange; disputes between capital market operators and any exchange; disputes between capital market operators; disputes between capital market operators and their clients; and disputes between quoted companies and the regulators.

It is also empowered to hear all civil disputes in both the capital market and pensions administration. These disputes may be between participants; investors, self-regulatory organisations and operators as well as the Securities and Exchange Commission (SEC), the apex regulator in the capital market and also between the National Pensions Commission (PenCom) and all parties involved in any pension dispute.

Capital Market Cases

Cases, which may be brought before the tribunal, include misappropriation of clients' funds by a stockbroker; non-remittance of issue proceeds by an issuing house to the issuer/company; non-remittance of dividends by a registrar/ public company/ stockbroker; late transfer and/or registration of shares/ stocks by any stockbroker; disputes over mergers and acquisition between the shareholders and the public quoted company, self-regulatory authority, the SEC etc.

Others include disputes between operators and any SRO in the market (e.g.: stockbrokerage firm and a stock exchange and dispute between a registrar and exchange) etc; disputes arising from the rules, regulations and such other guidelines made by the SEC, any securities exchange; dispute arising from any decision, notice and/or decision issued by the SEC; appeals against disciplinary measures by SEC, like suspension and/or baring participants from the market; appeals against delisting of any security or company by an Exchange; and disputes/claims arising from misrepresentations or false statements in offer documents or in a Securities transaction.

Pension Disputes

By virtue of the Pensions Reform Act 2004, the Investments & Securities Tribunal is also empowered to adjudicate on pensions disputes in Nigeria, on reference from the PenCom.

Under Section 93 of the Pensions Reform Act, 2004, a party or body corporate aggrieved or dissatisfied with any action or decision of the National Pension Commission may refer the matter to the IST. These disputes can be between Pensions Fund Administrators (PFA) and their clients, the beneficiaries of the pension funds, Pension Fund Custodians (PFC) and PFA and their clients or any of these parties against the National Pension Commission (PenCom).

Examples of Pension disputes that could be brought before the tribunal include misappropriation of client's money by Pension Funds Administrator (PFA) and/or Pension Fund Custodian (PFC); non-payment of pension as at when due by a PFA; non-crediting or wrong crediting of a beneficiary's contribution(s) benefits arising from investments of his/her fund by a PFA/PFC; disputes over pensions between the beneficiaries /pensioners and the PFA/PFC, (PenCom) etc; disputes between PFA and PFC; disputes arising from the rules, regulations and such other guidelines made by (PenCom); disputes arising from any decision, notice and / or decision issued by (PenCom); appeals against disciplinary measures by PenCom such as suspension and/or barring of any participant from the market; appeals against de-licensing of any PFA/PFC by the PenCom; and disputes/claims arising from misrepresentation or false statements in PFA reports/documents or in pensions investments.

The tribunal has, as its primary objective, the timely and efficient resolution of investments/capital market and pensions disputes with fairness, flexibility and transparency. It aims at being a world-class financial markets tribunal that dispenses justice to all participants without fear or favour.

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