Oteh fingers Onyuike-Okereke as mastermind of capital market crash

Former head of the Nigerian Stock Exchange (NSE), Ndidi Okereke-Onyuike, led a debilitating era of broad financial abuses and violations of processes, which in large part accounted for the capital market crash that cost investors billions of life savings and funds, Director General, Security and Exchange Commission (SEC), Arunma Oteh, said on Monday.

Under Mrs. Okereke-Onyuike, particularly between 2006 and 2008, Ms. Oteh told the House of Representatives Committee on Capital Market investigating the near collapse of the sector that the market was characterized by financial slimmings, misappropriations, false accounting, misrepresentations, and questionable transactions.

The former Director General of the NSE was removed in August 2010 following the appointment of Ms. Oteh. But the violations perpetrated under her tenure, many of them reportedly in connivance with commercial banks, continue to haunt the nation’s capital market today, the SEC boss said.

“The extent and nature of the market abuses carried out between 2006 and 2008 are the primary reasons for the continuation of the investor apathy that we see today,” Ms. Oteh said.

The SEC DG resumed testimony before the House panel on Monday after a botched hearing that was suspended in March following the controversial N41million bribery allegation between the SEC boss and former members of the House capital market committee.

Under a new leadership led by Ibrahim El-Sudi, the committee pledged to adhere to only the details of the how the capital market operated over the years, with exchanges with Ms. Oteh lasting several hours into late evening to shed light into the abuses that allegedly perpetrated at the NSE.

Ms. Oteh herself provided no satisfactory answers when accused by the lawmakers of causing heavy loss of investors’ funds by handing over the mediation duty of the regulatory commission to the Investment and Security Tribunal (IST) resulting in delayed treatment of complaints, while in many cases, grievances received no attention.

Again, the SEC boss did not explain why more than 260 individuals and organizations indicted by the commission as having perpetrated violations under her predecessor are yet to be prosecuted.

Recalling some of the monumental fraud that took place at the Stock Exchange under Mrs. Onyuike-Okereke’s tenure, Mrs. Oteh said the NSE bought a yacht for N37million and wrote down the book value within one year by recognizing it in the books as a gift presented during its 2008 Long Service Award (LSA), without any records of the beneficiary till date.

Besides, she said the Exchange spent about N186million on the purchase of 165 Rolex wrist watches presented as gifts for awardees, out of which only 73 were actually presented to the beneficiaries, while the outstanding 92 watches valued at N99.5million are still unaccounted for.

“These were the kinds of financial imprudence that were perpetrated at the NSE,” she said. “These transactions were routed through companies owned by some senior officers of the Exchange. In 2009, several billions of the year 2008 operational surpluses were distributed to the Council members and employees of the Exchange in violation of Capital market and SEC rules.”

Other fraudulent transactions, Ms. Oteh said, include the reclassification of the sum of N1.3billion originally expended on business travels. Of this sum, N953million was reclassified under “Software Upgrade” and subsequently expended as against being capitalized.

Some of the most shocking abuses were amongst the banks, according to the SEC boss. For instance, Defunct Afribank (presently Mainstreet bank), Afribank Trustees, Afribank Registrars and their Directors, who committed various infractions in share buyback schemes, as well as misrepresentations in the returns to the SEC to prevent detection that the bank funded its public offer.  

“Shares owned by 1,258 entities (some fictitious) and individuals were merged into 14 accounts of nine companies, some of which were owned by Afribank and its Directors. These transactions were done outside the floor of the exchange. Falcon Securities, Fidelity Finance and Spring Capital were some of the entities used.  

“Between August 2006 and December 2008, the Executive team of Finbank engaged six law firms to incorporate 95 companies and transferred more than 4425 billion of depositors’ funds to nine of these companies, and purchased 2.8 billion units of its own shares against SEC Rules.  

“Between June 2007 and December 2008, Intercontinental Bank (now under Access bank), its Directors and principal officers engaged in unlawful share buyback schemes, buying about 3.4 billion units of shares using depositors’ funds. It violated Section 105, 106 and Section 110 of ISA 2007 as well as Section 160 of CAMA and Rule 109b of SEC Rules.

“Then, in 2007, Union Bank borrowed amounts totalling £430.4billion from two foreign investment banks. The funds were transferred to Union Trustees, which in turn transferred the funds to 

Falcon Securities. In four days in November 2007, Falcon purchased 620.4million units of shares worth $430.8 billion ahead of a public offer/rights issue.

“In 2007, Falcon Securities carried out 181,088 transactions with respect to Union Bank shares. This drove up the share price of Union Bank stocks from a low of $423.30 in January 2007 to £450.33 in November 2007, in other words, a price appreciation of over 110% within 11 months.

The breaches were uncovered by an investigation ordered by the SEC. When meetings were scheduled to address the issues, Mrs. Okereke-Onyuike, according to Ms Oteh repeatedly refused to attend the meetings.

Mrs. Okereke-Onyuike is expected to appear before the committee Tuesday.


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