Nigeria’s Securities and Exchange Commission’s Ruling Against Oando Raises Eyebrows

After two years of waiting for the forensic audit into Oando PLC, following the receipt of two petitions, the Securities and Exchange Commission (SEC) released the report on May 31, 2019; six months after the report was ready and submitted by Deloitte and Touche.

A media source at the Oando press briefing revealed that the forensic audit report was ready and submitted by Deloitte and Touche in December 2018 but for unknown reasons, the  SEC thought it best to withhold the report from Oando and the general public. Upon getting the report, the SEC did not engage Oando where necessary but decided to publish on its website weighty infractions with attendant sanctions against Oando.

The report alleges that Oando is guilty of serious infractions such as false disclosures, market abuses, misstatements in financial statements, internal control failures, and corporate governance lapses stemming from poor board oversight, irregular approval of directors remuneration, unjustified disbursements to directors and management of the company, related party transactions not conducted at arm’s length, amongst others.

Based on the allegations, the SEC ordered payment of monetary penalties by the company to affected individuals and directors, and refund of improperly disbursed remuneration by the affected Board members to the company. The SEC also constituted an interim Oando management team headed by Mr Mutiu Olaniyi Adio Sunmonu.

The new team is to oversee the affairs of Oando Plc and conduct an Extraordinary General Meeting on or before July 1 to appoint new Directors to the Board of the Company, who would subsequently select a management team for Oando. However, the question remains, does the SEC have the right to institute these penalties?

Business personality Atedo Peterside, founder of Stanbic IBTC bank has lent his voice alongside the general public to ask about Oando management team’s crimes to warrant such steep penalties. Peterside took to social media to publicly ask the SEC why it would not share the findings of the forensic audit with Oando thus giving them an opportunity to defend themselves.  He went on further to challenge the SEC to share the forensic audit findings and Oando’s response with the general public so all can judge.

Meanwhile, Oando, in a press statement issued on its website,  responded to the SEC’s report saying, “Oando is of the view that these alleged infractions and penalties are unsubstantiated, ultra vires, invalid and calculated to prejudice the business of the Company. The Company has not been given the opportunity to see, review and respond to the forensic audit report and so it’s unable to ascertain what findings (if any) were made in relation to the alleged infractions and defend itself accordingly before the SEC. The Company reserves its rights to take all legal steps to protect its business and assets whilst remaining committed to acting in the best interests of all its shareholders.”

According to the guidelines of the SEC, the acting Director-General of SEC Mary Uduk, is to submit her findings to the Board of the SEC. Unfortunately, the board has been non-existent since Mounir Gwarzo was appointed DG of the SEC in 2015. In the absence of a Board, a sign off from the Minister of Finance is required. However, it was not stated if the Minister of Finance signed off on the Oando Forensic Audit Report and the consensus following the press conference was that the publishing of the report was contrary to best practice. This shows that these are not the actions of a regulator working in the best interests of the market specifically minority shareholders and that singular action is damaging to the Nigerian capital market and will further discourage foreign direct investment (FDI) into the country.

With that said, the details of the infractions should be released as opposed to a summary. Secondly, the associated penalties for each infraction according to the SEC rule book should be stated. The NSE owes it to Oando and the general public to do things the right way, they ought to show that Nigeria as the giant of Africa is not regressing, and that they, as a regulator are fair, transparent and fully focused on protecting the Nigerian capital market.

Oando’s Chief Finance Officer, Olufemi Adeyemo who noted that the company has witnessed a lot of damage since investigations began noted that “the damage cannot be quantified. We require credit to run our business and this has come at an extra cost, one that we would ordinarily not have incurred. Despite these challenges we’ve kept making milestones and running the business as usual.”  It would interest you to note that the damage, financial and reputation, caused by the SEC fiasco is worth significantly more than the alleged infractions levelled against the company and its management team. Making a public spectacle of the company, its management team and eroding shareholder value is not acceptable by any standards – especially because some of this damage is irreversible. At the end of the day, this is a public listed company, so any erosion of value affects the general public who are shareholders.”

According to a social media user “If the SEC think removing Wale and Mofe is the solution, then they don’t understand the tie between the company and its founders.  Removing them equates to taking the Company down and our money with it.”