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SECURITIES AND EXCHANGE COMMISSION (SEC) AND ITS FUNCTIONS

The Securities and Exchange Commission (SEC) is the apex regulatory institution of

the Nigerian capital market. It is a statutory body supervised by the Federal Ministry

of Finance.

The Commission has evolved over time. In 1979, the Securities and Exchange

Commission Act was enacted to provide a statutory backing for the establishment of

the Securities and Exchange Commission (SEC).SEC commenced operations in 1980

The SEC Act has been reviewed several times. The current Act is known as the

Investment and Securities Act No. 29 of 2007. The ISA 2007 provides guidelines for

the operation and regulation of the Nigerian Capital Market.

Section 13 of the ISA empowers the Commission to:

a) Regulate investment and securities business in Nigeria as defined in this Act. b) Register and regulate Securities Exchanges, Capital Trade Points, Futures,

Options and Derivatives Exchanges, Commodity Exchanges and other recognized Investment Exchanges;

c) Regulate all offer of Securities by public Companies and entities d) Register Securities of public Companies and entities e) Render assistance as may be deemed necessary to promoters and Investors

wishing to establish Securities Exchanges and Capital trade points. f) Prepare adequate guidelines and organized training programmes and

disseminate information necessary for the establishment of Securities Exchanges and Capital trade points;

g) Register and regulate cooperate and individual Capital Market operators as defined in this Act.

h) Register and regulate the workings of venture capital funds and collective Investment Scheme in what ever form

i) Facilitate the establishment of a nation-wide system for securities trading in the Nigerian capital market in order to protect investors and maintain a fair and orderly market;

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j) Facilitate the linking of all markets in securities with information and communication technology facilities.

k) Act in public interest having regard to protection of investors and maintenance of fair and orderly markets and to this end establish a nation-wide trust scheme to compensate investors whose losses are not covered under the Investors’ Protection Fund administrated by Securities Exchanges and Capital Trade Points;

l) Keep and maintain a register of foreign portfolio investment. m) Register and regulate securities depository companies, clearing and

settlement companies, custodians of assets and securities, credit rating agencies and such other agencies and intermediaries;

n) Protect the integrity of the securities market against all forms of including insider dealing;

o) Promote and register self regulatory organizations including Securities exchanges, capital trade points and capital market trade associations to which it may delegate its powers;

p) Review, approve and regulate mergers, acquisitions, takeovers and all forms of business combinations and affected transactions of all companies as defined in this Act;

q) Authorize and regulate cross- border securities transactions; r) Call for information from and inspect, conduct inquiries and audits of the

Securities Exchanges, Capital market operators, Collective Investment schemes and all other regulated entities;

s) Promote investors’ education and the training of all categories of intermediaries in the securities industry;

t) Call for , or furnish to any person, such information as may be considered necessary by it for the efficient discharge of its function;

u) Levy fees, penalties and administrative costs of proceedings or other charges on any person in relation to Investments and Securities business in Nigeria in accordance with the provisions of this Act;

v) Intervene in the management and control of capital market operators which it considers has failed, is failing or in crisis including entering into the premises and doing whatsoever the Commission deems necessary for the protection of investors;

w) Enter and seal up the premises of persons illegally carrying on capital market operations;

x) In furtherance of its roles of protecting the integrity of the securities market, seek judicial order to freeze the assets (including bank accounts) of any

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person whose assets were derived from the violation of this Act, of any securities law or regulation in Nigeria or other jurisdictions;

y) Relate effectively with domestic and foreign regulators and supervisors of other financial institutions including entering into cooperative agreement on matters of common interest;

z) Conduct research into all or any aspect of the securities industry; aa) Prevent fraudulent and unfair trade practices relating to the securities

industry; bb) Disqualify persons considered unfit from being employed in any arm of

the securities industry cc) Advise the Minister in all matters relating to the securities industry; and

dd) Perform such other functions and exercise such other powers not inconsistent with this Act as are necessary or expedient for giving full effect to the provision of this Act;

In brief

SEC protects investors thereby

enhancing their confidence in the

capital market.

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FEATURE ARTICLE

THE NEED FOR RISK BASED SUPERVISION (RBS) IN THE NIGERIAN CAPITAL

MARKET

INTRODUCTION

The financial system plays an important role in the growth and development of national economies by promoting savings mobilization and ensuring efficient allocation of resources for productive investment. However, financial markets are prone to risks and uncertainties which sometime constrain the markets’ ability to impact the economy positively.

Sound regulation of financial market enhances its stability. This is, therefore, necessary to minimize the risks and uncertainties associated with the markets and provide the benefits especially in the area capital formation needed for economic growth. A sound regime of market regulation should not only be able to identify actual and potential sources of uncertainties in the system, but should also be able to nip it in the bud.

A regulatory framework which identifies gaps in risk management policies and practices of the different entities in the market which affect earnings and investments is Risk Based Supervision (RBS).

According to Odusola (2008), RBS allows supervisory authorities to take a

more proactive action as opposed to a reactive compliance/ rules based risk management approach.

The impact of the recent global financial crisis triggered by sub-prime mortgage lending in the US in 2007, coupled with the need for better allocation of limited resources, prompted regulators to seek improved methods of identifying and managing risks posed by new breed of market participants, new financial products

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and globalisation. Thus globally, financial regulators and supervisors have either migrated to RBS or mapped out strategies for migration to RBS.

CONCEPT OF RISK BASED SUPERVISION

Risk is a measure of the probability that something adverse will occur in the future. Using The Oxford Dictionary as a guide, risk can be defined as “a chance or probability of danger, loss or injury.” Risk Based Supervision (RBS) is a system which evolved during the 1990s following series of financial crisis that occurred in the 1980s. Prior to the financial crisis of the 1980s, regulators focused on Compliance (Rule) Based Supervision (CBS) which relied on review of historical performance and operations of the supervised entities regardless of any apparent or probable weakness. In the CBS framework, results were evaluated with little emphasis on systemic controls or risk management. It was the obvious inadequacies of the CBS in preventing financial crisis that led to the adoption of RBS. According to International Organizations of Securities Commission (IOSCO), RBS places emphasis on the process rather than on individual transactions. Market intermediary’s treatment is based on its risk profile and ability to manage risk. RBS is therefore proactive and a clear departure from the CBS which is mainly reactionary in approach.

The aim of RBS is to promote transparency, provide early warning signals and encourage the regulated entities to self evaluate their positions at regular intervals.

A Risk Based Supervision process provides flexible and responsive oversight to foster consistency, co-ordination and communication among supervisors. This relies on the risk assessments as well as on the development of a supervisory plan and procedure tailored to risk profile of individual institution.

The primary aim of the RBS is to focus supervision of entities that pose the greatest risk to the financial system and the economy in general. In other words supervisory attention would be focused on financial institutions whose failure could precipitate systemic crisis.

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TYPES OF FINANCIAL RISKS

Financial risks are risks associated with any form of financing, and they are usually categorised into Systemic, Market, Liquidity, Operational, Legal, Environmental, Reputational, Regulatory and Compliance etc.

Systemic risk is the risk of collapse of an entire financial system or entire market,

as opposed to risk associated with any one individual entity, group or component of

a system. Systemic risk is also known as "un-diversifiable risk" or "market risk. This

risk is outside the control of the investor and it is inherent in any investment.

Credit or default risk is the risk of loss due to debtor's default in payment of loan or other lines of credit (either the principal or interest (coupon) or both). Risk can arise here in case of delay in repayments, restructuring of repayments, or bankruptcy of the borrower.

Liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit) Liquidity Risk is the risk that a party to a securities instrument may not be able to sell or transfer that instrument quickly at a reasonable price, and as a result, incur a loss. Liquidity risk includes the risk that a firm will not be able to unwind or hedge a position.

Operational risk is the risk arising from execution of a company's business functions. It is a very broad concept which focuses on the risks arising from the people, systems and processes through which a company carries out its business. It covers risk of loss due to the breakdown in internal controls, unauthorized trading and fraud in trading or in back office functions, inexperienced personnel, and unstable and easily accessed computer systems etc.

Reputational risk is the risk arising from negative public opinion regarding an institution’s products or activities.

Legal risk is the risk of potential loss due to uncertainty of legal proceedings, such as bankruptcy, and potential legal proceedings.

Environmental risk These are losses that can arise due to natural occurrences in the environment where a company is located. Such events include earthquakes, tsunamis, volcanic eruptions, floods and other natural hazards.

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Political/Country risk relates to the level of political stability in the country. Frequent changes in government policy usually affect businesses due to restrictions /or new requirements.

Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions, or lack of responsiveness to industry changes.

Market RISK: Four major sources of market risk are stock prices, interest rates, foreign exchange rates, and commodity prices.

Equity risk is the probability that stock prices and/or the implied volatility will change.

Interest rate risk is the chance that interest rates and/or the implied volatility will change.

Exchange rate risk is the probability that foreign exchange rates and/or the implied volatility will change.

Commodity price risk is the risk that commodity prices (e.g. corn, copper, crude oil) and/or the implied volatility will change.

LEVEL OF IMPLEMENTATION OF RISK-BASED SUPERVISION

Financial Regulators and Supervisors have partly been blamed for the global financial crisis as a result of their inability to regulate and manage risks associated with derivative instruments, new market participants, and margin loans as in the Nigerian context. Consequent upon the experiences of the crisis, different financial supervisory and regulatory bodies worldwide have recommended the adoption of Basel II Accord Principle on Risk Management.

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BASEL II ACCORD PRINCIPLES ON RISK MANAGEMENT

The Basel Committee (Basel I of 1988 and Basel II of 1999-2004) recognized the need for effective risk management and control for the purposes of financial sector stability. Accordingly, Basel I made recommendations on prudential regulation while Basel II accord, initiated in 1999 but published in 2004, defines rules and procedures covering different types of risks due to business activities in its Three (3) Pillars which are highlighted below.

- Pillar 1: Capital structure/adequacy placed emphasis on minimum capital requirement to mitigate credit, market and operational risks faced by financial sector intermediaries.

- Pillar 11: Risked Based Supervision (RBS) (Supervisory Review Process). This focuses on standardised/basic indicator approach for each category of financial market intermediary operating in the capital or money market. It uses internal rating based on model and advance measurement approach. RBS advocates the development of internal processes based on evolving best practices to enable supervisors conduct regular review and ensure adequate capital. Where review fails, supervisors are to increase capital adequacy. In addition, financial supervisors are expected to demand for early remedial action to ensure adequate capital, and therefore principle based.

- Pillar 111: This deals with the enhancement of market discipline through imposition of discipline such as capital structure and level of risk of financial institutions.

In line with the Basel II Principles, Malaysia adopted the UK model of Risk-Based Capital Adequacy Requirements (CAR) in December 1999 with the following objectives:

To assist stock broking company (SBC) in managing its risk appetite. To ensure that the level of risk assured by a SBC matches with its level of

capital. To make regulatory capital requirements more sensitive to differences in risk

profile among SBCs. To minimize disincentive to holding liquidity low rise assets. To achieve greater flexibility in evaluation of capital adequacy among SBCs.

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Hasnah Omar of the Malaysian Securities Commission in a paper observed that before the introduction of CAR, the SBCs in Malaysia were required to maintain a prescribed level of liquid funds regardless of the risk profile of their portfolio as it is currently practised in Nigeria. It is obvious that the shortcomings of the compliance framework led to the introduction of the CAR in Malaysia.

FINANCIAL ACTION TASK FORCE (FATF) RISK CONTROL REQUIREMENTS

Financial Action Task Force (FATF) against Money Laundering and Counter Financing of Terrorism Recommendation No. 6 on Risk Assessment and Control in the Financial System provides that: “Financial institutions should be required, in addition to performing the Customer Due Diligence (CDD) measures, to put in place appropriate risk management systems that can determine whether a potential customer, a customer or the beneficial owner is a Politically Exposed Person (PEPS)”. Examples of measures that could form part of such risk management system include seeking relevant information from the customer, referring to publicly available information or having access to commercial electronic databases of PEPS.

SEC’s CODE OF CORPORATE GOVERNANCE

In Nigeria, the SEC’s Code of Corporate Governance Part E, Section 29 (1) on Risk Management and Audit was introduced to ensure good corporate governance and risk management within regulated entities. The Code 29 (1) provides that, the Board is responsible for the process of risk management as well as having its own opinion on the effectiveness of the process. It noted that Management is accountable to the Board for implementing and monitoring the process of risk management and integrating it into the day-to-day activities of the company.

Furthermore, Section 29 (2) of the Code provides that the Board through the Risk Management Committee should:

(a) Oversee the establishment of a management framework that defines the Company’s risk policy, risk appetite and risk limits. The framework should be formally approved by the board. The company’s risk Management policies should be communicated in simple and clear language to all employees to ensure the integration of risk awareness at all levels of the company.

(b) Ensure that the risk management framework is integrated into the day-to-day operations of the business. In addition, provide guidelines and standards for

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administering the acceptance and on-going management of key risks, such as operational, reputational, financial, market and compliance risks.

(c) Undertake at least annually, a thorough risk assessment covering all aspects of the company’s business. The results of the risk assessment should be used to update the risk management framework of the company.

(d) Obtain and review periodically relevant reports to ensure the ongoing effectiveness of the company’s risk management framework.

(e) Ensure that the company’s risk management policies and practices are disclosed in the annual report (and other relevant returns).

IMPLEMENTING RBS IN THE NIGERIAN CAPITAL MARKET Roles of Stakeholders and the Challenges In line with international best practice, the SEC is currently taking necessary steps to adopt RBS. Consequently, players in the Nigerian capital market (regulators, operators, listed entities and investors) have a significant role to play to ensure smooth migration from Compliance Based Supervision (CBS) to RBS. It is also important to note that the adoption of RBS in Nigeria would not bring about total abandonment of the rule/compliance based approach. The latter will compliment RBS where the need arises. REGULATORS

The Commission is responsible for regulating the activities of Securities Market with the primary objective of investors’ protection and capital formation needed for economic growth and development. To achieve the stated objectives, Investors’ confidence, trust in the Securities Markets, and integrity of the market must be high. To this end, SEC had undertaken a number of proactive measures, including self assessment to reposition itself and match towards quick recovery from the Global Financial Crisis, and attend to the objectives of the Federal Government vision 20-2020 and the Financial System Strategy (FSS)2020.

Furthermore, the SEC has the responsibility of scrutinizing potential market operators before they can function as market operators so as to maintain market integrity and sanctity. To this end, the SEC is putting necessary measures in place for risk identification, assessment for effective monitoring and control. The

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objective is to ensure that operators have sufficient capital to cover the risk they undertake in their business activities. To implement the above, the SEC is currently putting up Rules and Guidelines for market players to enable regulators and regulated entities put in place adequate framework for identifying potential capital market risks early enough to avoid associated multiplier effects. In pursuit of its developmental role and support of relevant agencies, SEC will promote capacity building among regulators, market intermediaries and staff of listed entities, on Risk management and control in the Nigeria capital market. The Nigerian Stock Exchange The NSE is expected to ensure that their members adhere to SEC rules, its own rules as well as other measures put in place for effectives risk management and control in the capital market.

MARKET OPERATORS AND PUBLIC COMPANIES

These Shareholders are expected to ensure that:

Establishment of best practices on risk management policies and procedures.

Establishment of risk management office with proper manning levels.

Establishment of business continuity plan (in the areas of disaster recovery to minimize the impact of unexpected adverse effect of business operations and customer services).

Constitution of top management committee to consider all business strategies on risk management of the company.

Conduct independent evaluations to ensure compliance and continued suitability of established policies.

Intermediaries are to ensure observance of high level of KYC/Customer Due Diligence and suitability principle for all customers. These principles are mostly adhered to through Risk Based Supervision approach, which operates with policies guidelines and procedures for identifying higher risk customers.

Above all, they should ensure that their minimum capital base is adequate to cover their risks exposures.

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INVESTORS Investors are expected to engage the services of registered/licensed market intermediaries in order to be guided in line with suitability principles when making investment decisions. Furthermore, investors need to be conversant with market rules, regulations as well as developments in the market, for self protection while playing in the market. Furthermore, Unit trust fund investors should note that mutual trust investment is subject to the volatility of the capital market, which includes stock market and other securities market. The capital market is influenced by certain factors, such as economic growth, movement in interest rates, overseas capital market performance and fiscal policies of the respective countries. Therefore, these factors affect the performance of a unit trust fund which is heavily invested in fixed income securities and equities. CHALLENGES OF IMPLEMENTING RISK BASED SUPERVISION (RBS) Experiences from pioneering countries show that it is difficult to migrate to RBS without proper understanding of the concept and the expected challenges. This is because the implementation of such an exercise requires, in some cases, reorganisation of regulatory framework (new laws, regulations, policies to accommodate such regulatory approach), adoption of appropriate mathematical models, engagement of the right skills, capacity building, buying in the support of market stake holders to support the process. There must also be appropriate developed and effectively deployed information technology (hard ware and soft ware) that is geared towards risk monitoring as well as adequate control system along with adherence to fit and proper test. The above situation notwithstanding, it is gratifying to note that the SEC Nigeria is in the process of finalising rules and guidelines on Risk Based Supervision which would be a composite code of the IOSCO guidelines, FATF recommendations, Basel II Accord and SEC’s Code of Corporate Governance on risk management and audit. CONCLUSION There is no doubt that the recent global financial crisis and its adverse effect on the global economy shook the foundation and stability of the financial markets around the globe. Its impact made governments across the globe to evolve measures to forestall further negative effects of the crisis. However, within the quarter under review, the Nigerian market showed signs of recovery as evidenced by major economic and capital market indicators in particular.

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Generally, there is a global consensus among financial Regulators/Supervisors and International financial bodies (World Bank, IMF, IOSCO) to move from Rule Based Supervision to Risk Based Supervision as a more efficient way of mitigating such crises in the future. It is believed that RBS is capable of improving Regulators’ efficiency and effectiveness of regulatory process by optimum utilisation of supervisory measures, and pro-active compliance culture among market Intermediaries. Finally, the ability of the Financial Regulators to proactively monitor and supervise actions of market intermediaries by ensuring strict adherence to principles of “naming and shaming” will not only strengthen the global and Nigerian financial system but will bring about sanity and fully restore Investors’ confidence.

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ACTIVITIES OF PRIMARY AND SECONDARY MARKETS

PRIMARY MARKET

NEW ISSUES

A total of seventeen (17) new equity and debt securities were floated in the market

in the quarter because, the sustained recovery of the market has encouraged some

new issuance activities which practically dried up in 2009. The summary of

activities in the primary market during the quarter is shown on Table 1 below:

Table 1: Summary of New Issues (January – March, 2010)

Mode of Offer No. of Issues

Value of Shares

(N’ m)

Rights 4 22,158.87

Private Placement 3 50,164.66

Total Equities 7 72,323.53

Corporate Bond 1 2,240.00

FGN Bonds 9 220,000.00

Total Debt 10 222,240.00

Overall 17 294,563.53

Source: SEC, DMO

Equities

In the Primary equity market, seven (7) new issues valued at N72.32 billion were

floated in the first quarter of 2010. All the issues were rights and private

placements. Given the state of the market, issuers were obviously staking their hope

on their shareholders and selected group of investors.

The issues were floated by;

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Oando Plc

The company issued 301.69 million ordinary shares of 50 kobo at N70.00 each

valued at N21.12 billion to refinance the acquisition of upstream assets, fund

upstream business development, and provide working capital for the company etc.

Hallmark Paper Products Plc

Right issues of 100 million ordinary shares of 50 kobo at N2.50 each valued at 250

million were floated by the company. The proceeds from the right issue was to

finance paper trading, working capital, factory extension, procurement of new

machineries and equipment, office expansion, upgrade /overhauling of existing

plant and machineries and to bridge loan repayment.

Nexans Kabelmetal Nigeria Plc

The Commission approved a right issue of 49.78 million ordinary shares of N2.00 at

N2.50 each valued at N129.42 million for this company. Proceeds from this offer

would be utilized on machinery and equipment and working capital.

Interlinked Technology Plc

The company floated 188.80 million ordinary shares of 50 kobo at N3.50 per share

valued at N666.80 million. The issue was floated to provide additional working

capital for the company and to finance the expansion of its operational facilities.

Nigeria Wire and Cable Plc

Private Placement of 1.180 billion ordinary shares of 50 kobo at N1.05 kobo each

valued at N1.239 billion was floated by Nig. Wire and Cable Plc, to provide working

capital for the company, payment of liabilities to banks and other creditors,

construction of new office building and to finance its operational facilities.

African Alliance Insurance Plc

African Alliance Insurance Plc privately placed to CONAG Limited its 4,585.00

million ordinary shares of 50k each at N0.50 per share for a value of N2,292. 50

million.

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Ecobank Nigeria Plc

The bank made a private placement of about 6.662 billion ordinary shares of 50k

each at N7.00 per share valued at N46.63 billion. This was to enable the bank inject

additional capital in order to sustain its current level of operations and also

maintained effective adequacy ratio.

Breakdown of equities issued in the quarter is as contained on Table 2 below.

Table 2: FLOATED NEW ISSUES IN THE FIRST QUARTER OF 2010

COMPANY

TYPE OF

ISSUE

NOMINAL

VALUE

(N)

OFFER

PRICE

(N)

VOLUME

(MILLION)

VALUE

N'M

DATE

OPENED

Nexans

Kabelmetal

Nig. Plc Rights 2.00 2.60 49.78 129.43 11/01/10

Interlinked

Technology

Plc Rights 0.50 3.50 188.80 660.80 11/01/10

Hallmark

Paper

Production

Plc Rights 0.50 2.50 100.00 250.00 18/01/10

Oando Plc Rights 0.50 70.00 301.69 21,118.30 25/01/10

Nig. Wire

and Cables

Plc

Private

Placement 0.50 1.05 1,180.00 1,239.00 07/01/10

African

Alliance

Insurance

Private

Placement 0.50 0.50 4,585.00 2,292.50 27/01/10

17

Plc

Ecobank

Nigeria Plc

Private

Placement 0.50 7.00 6,661.88 46,633.16 06/01/10

Total 13,067.15 72,323.19

Debt Securities

Corporate Bond: A N2.24 billion five (5)-year bond was issued during the quarter

by C&I Leasing Plc through a private placement. The unsecured variable coupon

redeemable convertible loan stock will be maturing in 2014. Proceeds from the

issue will be utilized to finance the following;

Acquisition of car spare parts, distribution and maintenance capacity 22.9% Repayment of borrowings 13.8% Increase in working capital 24.7% Additional investment in subsidiary

i. Leasafric Ghana 10% ii. C & I Motor Limited Nigeria 22.9%

iii. Citrans Global Services 5.71%

TABLE 3: CORPORATE BOND IN THE FIRST QUARTER 2010

Issuer Type Of Issue

Offer

Price

(N)

Volume

(Million)

Value

N'm Issuing House

Date

Opened

C & I Leasing

Plc

Unsecured

Variable

Coupon

Redeemable

Convertible

stock 1,000.00 2,240.00 2,240.00 Afri Invest W. A. Plc 04/01/10

Total 2,240.00 2,240.00

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Sub-national Bond: No sub-national bond was issued to the public during the

quarter. However the Commission received a number of applications from some

State Governments which are seeking to raise bonds for various infrastructural

projects.

The Commission during the quarter approved the Book building of the 2nd Lagos

State Government bond worth N50.0 billion.

FGN Bonds: During the quarter, FGN bonds worth N220.0 billion were offered in

nine (9) issues of 3, 10 and 20-year tenors. These issues, as shown on Table 4 below,

were significantly oversubscribed to the tune of N569.51 billion. However, the Debt

Management Office (DMO) allotted N238.50 billion in all.

Table 4: AUCTION SUMMARY OF FGN BOND FOR THE FIRST QUARTER OF 2010

Date Auctioned/Maturity Tenor (Yrs)

Amount Auctioned (N’Billion)

Level of Subs (% )

Amount Subscribed (N’Billion)

Amount Allotted (N’Billion)

*Marginal Rate (% )

January 20/May 22, 2012** 3 20.00 202.15 40.43 38.50 6.83 January 20/October 23, 2019** 10 25.00 168.40 42.10 25.00 8.14 January 20/November 20, 2029** 20 30.00 218.33 65.50 30.00 8.50 February 17, 2010/February 20, 2013 3 20.00 390.15 78.03 20.00 5.50 February 17, 2010/October 23, 2019** 10 25.00 212.80 53.20 25.00 7.00 February 17, 2010/November 20, 2029** 20 30.00 220.17 66.05 30.00 8.50 March 17, 2010/February 30, 2013** 3 20.00 410.70 82.14 20.00 5.50 March 17, 2010/October 23, 2019** 10 20.00 311.00 62.20 20.00 7.00 March 17, 2010/November 20, 2029** 20 30.00 266.20 79.86 30.00 8.50

Total 220.00 569.51 238.50 Source: Compiled from DMO Reports

** Re-opened

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REGISTERED BONUS ISSUES

As shown on Table 5 below, the Commission registered in the quarter eight (8)

bonus issues amounting to over 2.81 billion ordinary shares with a nominal value of

N1.58 billion.

Table 5: REGISTERED BONUS ISSUES IN THE FIRST QUARTER OF 2010

Company Volume (Unit) Nominal Value (Naira)

Date Registered

Bonus Ratio

Regency Alliance Insurance Plc 606,250,000 303,125,000 15/01/10 1 for 10 Niger Delta Exploration Products Plc 18,454,120 184,541,200 13/01/10 1 for 5 Nigerian Aviation Handling Co. Plc 246,093,750 123,046,875 04/01/10 1 for 5 University Press Plc 59,917,986 29,958,993 08/01/10 1 for 5 STACO Insurance Plc 482,947,796 241,473,898 04/02/10 1 for 10 Royal Exchange Plc 369,588,872 184,794,436 18/02/10 1 for 10 International Energy Insurance Plc 917,203,921 458,601,960 19/02/10 1 for 6 R. T. Briscoe Nigeria Plc 113,460,290 56,730,145 25/03/10 1 for 5 Total 2,813,916,735 1,582,272,507

Source: SEC

CONVERSION (DEBT TO EQUITY)

One (1) debt-to-equity conversion of 1,181,055,863 ordinary shares of 50k each was

approved in the quarter. The conversion arises from a loan of US$100 million that

International Finance Corporation granted to ETI Plc. The conversion as indicated

on Table 6 was based on US$0.08467 per unit.

Table 6: CONVERSION

Issuer Issue type Issued shares

Price

US$

Value

US$

Date

Registered

EcoBank

Transnational

Incorporated Plc

Debt-

Equity

Conversion 1,181,055,863 0.08467 USS100,000,000 11/2/2010

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ALLOTMENT CLEARANCE

Seven (7) allotment proposals, involving five (5) equities and two (2) corporate

bonds were cleared during the quarter. A look at the allotment summary on Table 7

below showed that the issues were all 100% subscribed. Hence, the total of about

N63.70 billion was capitalized by the companies involved.

Table 7: ALLOTMENT CLEARANCE IN THE FIRST QUARTER OF 2010

Issuer

Offer Price N

Volume of Shares

Value (N)

Level of Subscription (%)

Amount capitalized Approval

Date Private Placement:

Interlinked Technologies Plc 2.50

140,900,000 352,250,000 100% 352,250,000 10/02/10

African Paints (Nig) Plc 0.50

130,000,000 65,000,000 100% 65,000,000 02/02/10

Nigeria Wire and Cable Plc 1.05

1,180,000,000

1,239,000,000 100%

1,239,000,000 02/02/10

Ecobank Nigeria Plc 7.00 6,661,876,000

46,633,132,000 100%

46,633,132,000 02/02/10

African Alliance Insurance Plc 0.50 4,585,000 2,292,500 100% 2,292,500 01/03/10

Bond:

C&I Leasing Plc 4.75 471,580,000

2,240,005,000 100%

2,240,005,000 03/02/10

GT Bank Plc 1,000 13,165,000 13,165,000,000 100%

13,165,000,000 01/03/10

Total 8,602,106,000

63,696,679,500

63,696,679,500

Source: Securities & Exchange Commission

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SECONDARY MARKET

The market showed signs of recovery throughout the first Quarter of 2010 as a

number of key market indicators were on the upswing. The improvement was

driven by the gradual restoration of investors confidence in the market, positive

reception of the Asset Management Company proposed by the CBN, lower interest

rate obtainable in the money market, perceived under-valuation of prices of some

stocks in the market, better financial result posted by companies, the various

financial sector reforms which are improving transparency and financial disclosure

etc resulting in firmer equity prices.

Trading Activities on the Nigerian Stock Exchange

Trading statistics on Table 8 below show that about 26.96 billion securities valued

at N191.84 billion were traded on the floor of the Exchange during the quarter

compared to 19.03 billion securities of N106.91 billion which exchanged hands on

the floor of the Exchange during same period of 2009. The volume and value of

transactions grew by 41.67% and 79.44% respectively when compared with the

position in the first quarter of 2009.

In the reviewed quarter, the Exchange recorded no transactions in FGN bonds as

they were basically OTC trades. However, transaction worth N3.25 million on Lagos

State fixed rate redeemable bond were executed on the Exchange in 2 deals. There

were no transactions in the industrial loan/Preference shares segment during the

quarter.

Table 8: COMPARATIVE SUMMARY OF TRADING STATISTICS

SECURITIES

FIRST QUARTER 2009 FIRST QUARTER 2010

Deals

Volume

(M) Value (N’M) Deals

Volume

(M) Value (N’M)

Government

Stock - - - 2 0.003 3.25

Industrial

Loans/Pref.

Shares 1 0.005 5.0 - - -

22

Equities 420,807 19,033.12 106,907.80 614,971 26,961.18 191,838.84

TOTAL 420,808 19,033.13 106,912.80 614,973 26,961.18 191,842.09

Source: Compiled from reports supplied by The NSE

Figure 1

Sectoral Trading Analysis

The Banking sector remained the most active of all the thirty-five (35) sectoral

classification on the Exchange. During the quarter, investors traded over 14.17

billion units of bank shares for N123.35 billion 227,490 deals. With these figures,

the sector accounted for 52.59%, 64.30%, and 36.99% of the quarter’s total volume,

value and deals respectively as shown on Table 9 below.

In volume terms, Insurance, Food, Beverages & Tobacco and Information,

Communication & Telecommunication were behind the Banking sector with

over 4.36 billion shares, 1.09 billion shares and 1.03 billion shares traded in 33,272

deals, 43,656 deals and 3,857 deals respectively. Whereas in value terms, Food,

Beverages & Tobacco, Building Material and Petroleum (Marketing) sectors

trialed behind the Banking sector with the trading value of about N16.34 billion,

N8.78 billion and N8.61 billion respectively.

23

TABLE 9: SECTORAL TRADING STATISTICS FOR THE FIRST QUARTER OF 2010

Sector Deal

Volume

(unit of shares) Value (Naira)

2nd-Tier Securities 504 678,092,420 348,846,369.18

Agriculture 3,402 217,500,330 278,535,510.76

Air Services 8,041 89,523,419 681,647,625.40

Automobile & Tyre 2,301 180,863,808 242,768,182.58

Aviation 0 0 0.00

Banking 227,490 14,178,665,368 123,345,195,545.74

Breweries 12,651 142,385,930 7,801,114,789.33

Building Materials 13,617 344,422,497 8,780,369,459.30

Chemical & Paints 1,048 130,510,165 637,722,764.89

Commercial/Services 1,151 329,585,099 950,166,473.62

Computer & Office Equipment 1,069 81,590,636 55,299,718.38

Conglomerates 15,976 838,791,099 7,926,686,328.33

Construction 5,202 271,007,923 1,374,868,440.19

Engineering Technology 492 15,166,953 23,592,357.09

Food/Beverages & Tobacco 43,656 1,095,121,807 16,344,830,740.10

Footwear 9 4,146,628 16,377,282.94

Healthcare 7,035 309,308,067 911,658,195.89

Hotel & Tourism 821 82,203,554 153,845,616.19

Industrial/Domestic Products 2,333 70,783,427 338,337,326.41

Information, Communication &

Telecommunication 3,857 1,039,702,814 2,863,323,575.87

24

Insurance 33,272 4,363,276,809 4,829,774,687.34

Leasing 1,556 90,769,869 267,915,998.92

Machinery (Marketing) 0 0 0.00

Maritime 7,516 302,035,561 388,315,937.37

Media 1,996 66,695,718 47,259,713.59

Mortgage Companies 4,393 885,653,064 572,386,631.96

Other Financial Institutions 1,519 358,950,521 305,621,087.98

Packaging 195,612 398,163,914 906,852,966.23

Petroleum(Marketing) 13,578 191,750,456 8,609,528,323.92

Printing & Publishing 1,379 25,374,086 153,600,973.37

Real Estate 1,054 36,235,068 754,174,762.52

Real Estate Investment Trust 18 48,260 4,826,000.00

Road Transportation 615 20,745,045 19,688,266.07

Textiles 65 1,757,956 2,661,709.97

The Foreign Listings 1,743 120,347,723 1,901,043,542.03

Total (Equities) 614,971 26,961,175,994 191,838,836,903.46

Debt Securities 2 3,000 3,250,000.00

Overall Total 614,973 26,961,178,994 191,842,086,903.46

Source: Compiled from reports supplied by The NSE

Top Twenty (20) transactions by Volume in the First Quarter of 2010

The twenty (20) most traded equities by volume accounted for about 15.59 billion

(58.0%) of the total volume of shares traded in the quarter As shown on Table 10,

the top five (5), all bank equities, were Zenith Bank Plc, Fin Bank Plc, First Bank of

Nig. Plc, Access Bank Plc and GT Bank Plc.

25

TABLE 10: TOP 20 TRANSACTIONS BY VOLUME IN THE FIRST QUARTER OF

2010

S/N Equity Deals Volume (units)

1 Zenith Bank Plc 18,542 1,839,482,230

2 Fin Bank Plc 6,970 1,597,652,206

3 First Bank of Nig. Plc 53,433 1,368,273,503

4 Access Bank Plc 12,842 1,084,668,622

5 GT Bank Plc 27,277 1,003,851,355

6 UBA Plc 15,900 999,595,901

7 Fidelity Bank Plc 11,145 939,106,494

8 Diamond Bank Plc 6,896 921,255,748

9 Capital Oil Plc 457 663,240,549

10 Skye Bank Plc 11,540 653,637,135

11 Transnational Corporation Plc 3,141 587,536,217

12 Sterling Bank Plc 4,185 499,291,161

13 Guaranty Trust Assurance Plc 2,185 493,356,570

14 IHS Plc 67 488,802,725

15 FCMB Plc 4,891 468,791,851

16 Oceanic Bank Int’l Plc 8,802 453,309,591

17 Resortsal 412 403,249,778

18 Nigerian Bag Manufacturing Co. Plc 195,251 389,564,503

19 Aiico Insurance Plc 10,888 369,960,187

20 African Alliance Insurance Plc 136 363,340,685

Total 394,960 15,587,967,011

26

Market Capitalization

Equity market capitalization which opened the year at about N4.99 trillion rose to

N5.44trillion at the end of January 2010, and further to N5.54trillion in February. By

the end of the first quarter, equity market capitalization had gained about N1.29 trillion

or 26.0% to close the quarter at about N6.28 trillion.

Sectoral Market Capitalization

A Sectoral analysis of market capitalization on Table 11 showed that the Banking

sector led the pack with market capitalization of about N2.90 trillion i.e. 46.18% of the

total equities market capitalization. The Food/ beverages & Tobacco sector came

second with the value of about N825.0 billion. This was equal to 13.14% of the

aggregate equities market capitalization. The Breweries sector occupied the third

position with a market capitalization of N682.79 billion to account for 10.86% of total

equities values. This was followed by the Building Material and Conglomerates

sectors with market capitalization of about N414.28 billion and N319.59 billion

respectively.

TABLE 11: SECTORAL MARKET CAPITALIZATION AS AT MARCH 31, 2010

Sector Market Capitalization (Naira)

% of

Total

Banking 2,902,574,269,445.04 46.18

Foods Beverages And Tobacco 825,864,417,672.30 13.14

Breweries 682,791,464,502.95 10.86

Building Materials 414,277,138,074.50 6.59

Conglomerates 319,589,769,333.63 5.08

Petroleum(Marketing) 273,597,581,415.47 4.35

The Foreign Listings 220,149,606,493.56 3.50

Insurance 186,289,534,175.02 2.96

Construction 74,152,967,424.30 1.18

27

Information, Communication &

Telecommunications 68,802,593,355.56

1.09

Health Care 47,957,911,647.66 0.76

Packaging 38,663,558,555.52 0.62

Mortgage Companies 26,248,271,354.64 0.42

Real Estate 26,180,000,000.00 0.42

Commercial/Services 23,433,392,871.55 0.37

Agriculture/Agro-Allied 20,700,162,909.92 0.33

Airline Services 15,994,580,000.00 0.25

Hotel & Tourism 15,988,399,375.32 0.25

Chemical And Paints 15,314,321,158.43 0.24

Industrial/ Domestic Products 14,895,535,986.33 0.24

Media 11,258,103,626.57 0.18

Printing And Publishing 10,802,315,463.48 0.17

Maritime 10,646,592,917.20 0.17

Other Financial Institutions 9,275,083,629.19 0.15

Automobile And Tyre 7,811,534,207.50 0.12

Computer/ Office Equipments 5,491,027,871.04 0.09

2nd Tier Securities 4,405,690,474.20 0.07

Engineering Technology 3,047,801,051.48 0.05

Leasing 2,100,000,000.00 0.03

Real Estate Investment Trust 2,000,000,000.00 0.03

Aviation 1,740,000,000.00 0.03

Road Transportation 1,491,930,000.00 0.02

28

Textile 1,197,463,318.34 0.02

Footwear 270,131,638.70 0.00430

Machinery (Marketing) 1,290,520.00 0.00002

Total Equities Market Capitalization 6,285,004,440,469.40 100.00

Twenty (20) Most Capitalized Equities

At the end of the first quarter 2010, total market value of the twenty (20) most

capitalized equities, as shown on Table 12 below, closed at about N4.452 trillion,

representing 70.85% of equities market capitalization. The remaining one hundred and

ninety four (194) companies had market capitalization of N1.832 trillion i.e. 29.15% of

equities market capitalization.

Table 12: POSITIONS OF TWENTY (20) MOST CAPITALIZED EQUITIES AS AT

MARCH 31, 2010

S/N Equity

Closing

price on

31/03/10

Issued shares

(units)

Market Capitalization

(Naira)

1 Zenith Bank Plc 18.97 25,117,195,029 476,473,189,700.13

2 First Bank Of Nig Plc 16.39 29,006,297,206 475,413,211,206.34

3 Nigerian Breweries Plc 61.50 7,562,562,340 465,097,583,910.00

4 GT Bank Plc 20.90 18,653,748,613 389,863,346,011.70

5 United Bank for Africa Plc 15.20 21,556,462,462 327,658,229,422.40

6 Benue Cement Company Plc 61.00 3,915,527,343 238,847,167,923.00

7 Dangote Sugar Refinery Plc 18.63 12,000,000,000 223,560,000,000.00

8 Guinness Nigeria Plc 140.12 1,474,925,519 206,666,563,722.28

9 Stanbic IBTC Bank Plc 10.96 18,750,000,000 205,500,000,000.00

29

10 E TI Plc 18.92 9,873,614,567 186,808,787,607.64

11 Access Bank Plc 11.21 16,437,259,273 184,261,676,450.33

12 Nestle Nigeria Plc 270.00 660,546,875 178,347,656,250.00

13

First City Monument Bank

Plc 9.00 16,380,311,234 147,422,801,106.00

14 Diamond Bank Plc 9.50 14,475,243,105 137,514,809,497.50

15 Unilever Nigeria Plc 29.80 3,783,296,248 112,742,228,190.40

16 Flour Mills Nig. Plc 61.06 1,708,373,333 104,313,275,712.98

17 Lafarge WAPCO Plc 34.50 3,001,600,004 103,555,200,138.00

18 PZ Cussons Nig. Plc 31.35 3,176,381,636 99,579,564,288.60

19 Fidelity Bank Plc 3.33 28,963,174,117 96,447,369,809.61

20 Dangote Flour Mills Plc 18.53 5,000,000,000 92,650,000,000.00

Top 20 Market

Capitalization

4,452,722,660,946.90

Source: Compiled from reports supplied by The NSE

The All-Share Index

The All-share index gained 25% year to date as it closed the quarter at 25,966.25

points from 20,838.90 points at the beginning of the year. In the comparable period

of 2009, the index declined by about 37.0%.

The indicator, which closed December 2009 at 20,838.90 points, appreciated to

22,060.36 points with a gain of 5.92% by the middle of January 2010 and further

added a gain of 2.42% to end the month at 22,594.90 points, as shown on Table 13.

The upward trend continued in February as the indicator opened and closed the

month at 22,865.16 points and 22,985.0 points respectively. Between end of

February and March, the index appreciates by about 13.0% to end the quarter at

25,966.25 points. A graphical representation of the index is shown on Figure 2

below.

30

Table 13: NSE ALL-SHARE INDEX MOVEMENT (January – March, 2010)

DATE INDEX % Change

31/12/09 20,827.17 -

04/01/10 20,838.90 0.06

15/01/10 22,060.36 5.86

29/01/10 22,594.90 2.42

01/02/10 22,865.16 1.20

12/02/10 22,967.26 0.45

25/02/10 22,985.00 0.08

01/03/10 22,995.75 0.05

15/03/10 24,380.09 6.02

31/03/10 25,966.25 6.51

Source: Daily Official List of The NSE

Note: The Index were for the beginning, middle and end of the months under

consideration

Figure 2

31

PRICE PERCENTAGE GAINERS AND LOSERS

During the quarter, investors appear to be taking advantage of the perceived under-

valuation of some stocks in the market to enhance their holdings while better

financial result by companies particularly non banks have encouraged the upward

movement in prices of equities. A look at the price levels of the two hundred and

fourteen (214) listed equities in the quarter showed that the bulls dominated

market activities as the number of companies which made gains out numbered the

losers. In all, there were ninety one (91) price gainers and fifty five (55) losers while

the prices of the remaining sixty eight (68) equities remained unchanged.

Gainers

The top ten (10) gainers as shown on Table 14 recorded appreciation ranging from

80.78% to 155.80% while the remaining eighty one (81) gainers for the quarter

recorded appreciation ranging from 0.42% to 80.78%.

TABLE 14: TOP TEN (10) PERCENTAGE PRICE GAINERS IN FIRST QUARTER OF

2010

S/N Equity

Price on

31/12/09

(Naira)

Price on

31/03/10

(Naira)

Absolute

Gain

(Naira)

Gain

(%)

1 Capital Hotel Plc 1.38 3.53 2.15 155.80

2

Nigerian Bags Manufacturing

Company Plc 1.45 3.70 2.25 155.17

3 Ikeja Hotel Plc 0.87 2.17 1.30 149.43

4 Sterling Bank Plc 1.23 2.76 1.53 124.39

5 FTN Cocoa Processing Plc 0.52 1.11 0.59 113.46

6 Fidson Healthcare Plc 1.78 3.70 1.92 107.87

7 Daar Communication Plc 0.56 1.15 0.59 105.36

8 National Salt Plc 4.35 8.88 4.53 104.14

32

9 Dangote Flour Mills Plc 9.93 18.53 8.60 86.61

10 Eterna Oil & Gas Plc 4.98 9.01 4.03 80.92

Source: Compiled from the NSE Reports

Losers

The top ten (10) losers, as shown in Table 15, recorded depreciations ranging from

34.24% to 76.47% while the remaining losers recorded declines of between 0.24%

and 31.54%.

TABLE 15: TOP TEN (10) PERCENTAGE PRICE LOSERS IN FIRST QUARTER OF

2010

S/N Equity

Price on

31/12/09

(Naira)

Price on

31/03/10

(Naira)

Absolute

Loss

(Naira)

Loss

(%)

1 Unity Capital Assurance Plc 2.38 0.56 0.54 76.47

2 Alumaco Plc 27.71 10.5 0.35 62.11

3 Staco Insurance Plc 1.25 0.50 0.29 60.00

4 Incar Nigeria Plc 4.33 1.97 5.30 54.50

5 Nig. Wire & Cable Plc 0.97 0.55 0.21 43.30

6 African Alliance Insurance Plc 0.87 0.50 1.54 42.53

7 Crusader Nigeria Plc 1.57 0.91 0.32 42.04

8 DN Meyer Plc 5.39 3.40 0.80 36.92

9 Afromedia Plc 0.80 0.51 0.42 36.25

10 Ecobank Nigeria Plc 10.63 6.99 6.48 34.24

Source: Compiled from The NSE Reports

33

COLLECTIVE INVESTMENT SCHEMES

UNIT TRUST SCHEMES

Applications Received

During the period under review, a total of five (5) unit trust applications were

received and were being processed .These are:

Skye Islamic Fund: This was a proposed Offer of 200,000,000 Units of

N100 each at par- A reminder letter to earlier deficiency was sent.

Skye Guaranteed Income Fund: This was a proposed IPO of 200,000,000

Units at N10.00 each at par- additional deficiency letter was

communicated to the Issuing House.

Stanbic IBTC Bond Fund: This was an IPO of 10,000,000 Units of N1.00

each at N100 per unit- The Issuing house had forwarded a summary

report on completion of the offer which was being reviewed by the

commission.

Stanbic IBTC Money Market Fund: This was an IPO of 10,000,000 Units

of N1.00 each at N100 per unit- the allotment had been approved.

SIM Capital Alliance Fund: This was an IPO of 50,000,000 Units at

N103.50 each at par-additional deficiency letter had been

communicated to them.

Applications Approved

The commission approved five (5) applications during the review period,

these are:

34

Diamond Balanced Fund: This was an IPO of 50,000,000 Units of

N100.00 each at per unit- approval was given to hold completion board

meeting.

Access Fixed Income Fund: This was an IPO of 10,000,000 Units of at

N100 each at per-additional deficiency letter was communicated to the

Issuing houses, awaiting their response.

Access Balanced Fund: this was an IPO of 10,000,000 units at N100

each at par- additional deficiency letter was communicated to the

Issuing houses, awaiting their response.

The Lead Fund: This was an IPO of 1000,000 units of N1000 each at par-

additional deficiency letter was communicated to the fund manager.

Continental Capital Alliance Limited applied for registration as

community savings/esusu scheme operator, the application was

reviewed and forwarded for further action.

DRAFT AUDITED ANNUAL ACCOUNT RECEIVED IN THE QUARTER

The Audited Annual Accounts of the following companies were received

and analysed.

Nigerian Energy Sector Fund audited account for the year ended

31st March 2009.

DVCF Oil&Gas Fund audited account for the year ended 30th

September 2009.

Oceanic Vintage Fund audited account for the year ended 31st

March 2009.

Coral Growth, Coral Income and Coral Ethical audited account for

the year ended 31st December 2009.

Observed deficiencies were communicated to concerned fund managers.

VENTURE CAPITAL

The following companies submitted their quarterly return for the quarter

ended March 2010:

First funds limited

35

SME managers

IBTCventures limited

DVCF oil and gas

Diamond capital limited.

Below are the analysis.

ANALYSIS OF EQUITY INVESTMENT OF VENTURE FUNDS AS AT MARCH 2010

S/N NAME OF

COMPANY

AMOUNT UNDER

MANAGEMENT

AMOUNT DISBURSED

IN PREVIOUS

QUARTER

AMOUNT

DISBURSED IN

PRESENT

QUARTER

VARIENCE %

1. FIRST FUNDS

LIMITED

4,008,620,312.93 3,371,405,152.97 3,333,778,430.00 (37,626,722.97) 1.11

2. SME MANAGERS

LIMITED

3,942,640,909.00 420,000,000.00 300,000,000.00 (120,000,000.00) 28.57

3. IBTC VENTURES

LIMITED

1,485,902,000.00 2,778,415,000.00 2,102,231,000.00 (676,184,000.00) 24.33

4. DVCF OIL AND

GAS

942,494,902.00 505,425,565.00

5. DIAMOND

CAPITAL

5,000,000,000.00 542,588,393.00 29,850,000.00 512,738,393.00 94.49

TOTAL 15,379,658,123.90 7,112,408,545.97 6,271,284,995.00 841,123,509.97 11.82

36

2. UNIT TRUST SCHEMES

Inspection of Registered Collective Investment Scheme

The Commission inspected 26 unit trust schemes. They are as follows:

1. Zenith Ethical Fund, 2. Zenith Income Fund 3. Zenith Equity Fund 4. Indo Nigeria Unit Trust Fund 5. The Legacy Fund 6. ARM Aggressive Fund 7. ARM Discovery Fund 8. Coral Ethical Fund 9. Coral Growth Fund 10. Coral Income Fund 11. MBA Mutual Unit Trust Fund 12. Continental Unit Trust Fund 13. Stanbic IBTC Ethical Fund 14. Stanbic IBTC Equity Fund 15. Stanbic IBTC Guaranteed Income Fund 16. Kakawa Guaranteed Income Fund 17. Lighthouse Jubilee Fund 18. Nigerian International growth fund 19. FBN Capital Heritage Fund 20. DVCF Oil and Gas Fund 21. Afrinvest Equity Fund 22. Nigerian International Debt Fund 23. Nigerian Energy Sector Fund 24. Sky Shelter Fund 25. UBA Money Market Fund 26. UBA Bond Fund

Observed breaches have been communicated to concerned fund managers for

compliance. SEC would effect necessary sanctions where it establishes non

compliance.

37

The investment table on unit trust schemes (October - December 2009)

S/N

NAME OF FUND

CAPITAL MARKET INVESTMENT N

MONEY MARKET INVESTMENT N

OTHER INVESTMENT N

TOTAL OF INVESTMENT N

TOTAL EXPENSES N

NET ASSET VALUE N

NO. OF UNIT HOLD-ERS

1. DVCF Oil & Gas

101,016,205.04

25,513,280.70

390,814,320.99

520,575,533.89

6,809,019.91

538,174,102.69 27,180

2. NIDF - 1,857,950,492.46

270,180,000.00

2,307,149,033.14

20,792,349.55

2,191,081,244.65 39

3. Nigeria Global Inv. Fund

21,731,147.37

76,680,345.93

26,848,082.19

126,883,474.10

371,640,39

124,013,361.41 34

4. Coral Income Fund

- 457,044,728.99

- 457,044,728.99

1,776,354,57

455,044,728.99 -

5. Stanbic IBTC Guaranteed Income Fund

20,990,773.65

1,051,212,739.73

- 1,284,341,908.02

6,882,501.76

1,273,585,432.33 2,467

6. ARM Aggressive Growth Fund

1,745,540,776.58

398,689,687.68

9,798,853.27 2,221,773,326.33

19,603,683.17

2,175,741,391.26 8,637

7. Frontier Fund

141,704,334.53

60,316,097.66

- 202,744,992.23

3,253,910.32

196,074,485.63 814

8. Continental Unit Trust

6,912,688.21 - - 6,912,688.21 604,663.38

6,403,090.13 2,405

9. Afrinvest 139,963,090.57

241,266,069.20

- 38,122,915,977.00

2,867,987.37

441,111,863.19 2,023

10. Intercontinental Integrity Mutual Fund

164,812,223.05

153,515,977.56

- 321,803,918.82

603,809.11

8,683,853.48 2,420

11. Zenith Equity Fund

368,423,159.69

4,958,581,679.39

3,321,610.54 84,049,630,840.00

25,794,445.16

4,958,581,679.39 12,998

38

12. Lighthouse

3,121,760.00 - - 3,121,760.00 68,682.00 4,354,158.00 3,737

13. Coral Growth Fund

2,084,995,589.40

2,084,995,589.04

- 3,412,261,929.53

18,726,365.89

3,506,990,180.64 1,078

14. Stanbic IBTC Equity Fund

10,751,664,507.45

1,302,560,137.00

- 13,265,663,364.67

276,482,387.69

13,112,168,785.63 19,276

15. Indo Nigeria Unit Trust Scheme

21,005,446.32

- 653,539.07 21,658,985.39

79,422.69 21,584,849.93 1,692

16. Union Trustees Mixed Fund

20,489,578.65

- 1,884,140,805.85

1,904,630,384.45

13,966,236.03

1,862,523,876.37 2,808

17. UBA Money Market Fund

- 265,000,000.00

- 265,000,000.00

2,374,651.00

241,049,887.00 975

18. IMB Energy Master Fund

111,345,194.85

59,633,992.97

- 173,082,314.99

- 29,734,960.35 698

19. Women Investment Fund

57,191,634.08

- 135,187,103.67

192,378,737.75

3,340,158.36

184,170,809.82 955

20. Nigeria Energy Sector Fund

97,295,460.65

1,014,005,342.85

9,127,918.74 1,120,428,722.24

7,579,100.95

1,100,562,492.84 823

21. Abacus Unit Trust

104,948,637.57

- 11,531,940.95

116,480,578.52

5,000.00 115,422,828.52 -

22. Paramount Equity Fund

- - - - - - -

23. Nigeria International Growth Fund

1,425,797,101.10

- 667,130,750.00

2,849,451,855.55

7,730,637.63

2,703,919,061.97 2,157

24. Legacy - - - - - - -

39

Fund

25. UBA Equity Fund

1,149,457,061.02

880,000,000.00

- 2,056,339,593.93

11,029,284.46

1,964,643,962.58 3,191

26. Union Homes REITS Fund

- - - - - - -

27. Skye Shelter Fund

- 413,895,365.00

2,122,000,000.00

2,535,895,365.00

22,200,743.00

2,395,259,065.00 2,674

28. Zenith Income Fund

- - - - - - -

29. UBA Balanced Fund

441,778,306.19

1,187,006,000.00

258,020,000.00

1,886,798,306.19

10,071,286.74

1,862,075,325.54 1,480

30. Kakawa Guaranteed Income Fund

23,793,285.22

1,370,304,228.73

- 1,406,747,999.18

52,632,981.69

1,285,649,561.74 1,701

31. Denham Mgt. Millennium Fund

9,977,316.30 2,712,000.78 17,872,588.13

30,561,905.21

169,513.41

29,284,071.80 5,592

32. Zenith Ethical Fund

44,700,000.00

- 943,278,793.70

987,978,793.70

4,997,360.51

972,952,666.86 3,098

33. Coral Ethical Fund

4,517,451.45 - - 4,517,451.45 996,418.20

33,301,575.73 209

34. Oceanic Vintage Fund

558,488,289.75

137,022,191.78

170,501,680.00

866,012,161.53

5,481,574.21

1,862,075,325.54 5,268

35. FBN Heritage Fund

906,541,500.26

2,736,245,410.99

708,305,479.45

4,351,092,390.70

4,420,209,820.95

17,281,244.28 6,770

36. Stanbic IBTC Ethical Fund

3,116,242,552.92

522,874,082.19

- 3,914,171,104.35

62,291,026.73

3,873,450,646.37 12,276

37. UBA Bond - 219,000,000. 255,080,000. 474,080,000. 4,245,938. 427,298,013.28 919

40

Fund 00 00 00 50

38. ARM Discovery Fund

2,055,830,605.95

849,669,372,17

323,484,531.77

3,330,789,619.14

26,625,231.72

3,340,990,266.79 20,894

39. Lotus Halal Fund

572,858,336.73

- - 572,853,336.73

38,160,832.41

2,558,709,421.70 19,470

40. Anchor Fund

27,139,960.18

83,158,135.79

1,000,000.00 111,298,095.97

296,734.80

119,996,878.30 1,106

41. Bedrock Fund

63,418,956.05

44,491,792.67

1,000,000.00 104,062,272.90

293,304.17

104,062,272.90 1,530

42. MBA Mutual Fund

64,535,076.76

- - 70,345,526.02

- 68,927,016.02

11,824

TOTAL 26,428,228,007.50

22,453,344,740.06

8,207,277,998.03

175,649,478,975.82

5,079,415,058.04

56,166,934,438.65 191,218

MONITORING AND INVESTIGATION

1.0 MONITORING

Within the period under review, data obtained from statutory returns

filed by 219 registered Capital Market Operators (Broker Dealers,

Issuing Houses, Portfolio Managers, and Investment Advisers)

revealed the following:

o Aggregate Net Worth (Shareholders Fund) of 219 firms -N2,403,042,045

41

o Aggregate value of investment in shares of quoted Companies -N184,752,671291

o Aggregate value/volume of loans to clients of Brokerage firms / market Operators - N53,880,179,602

o Aggregate indebtedness to Banks/Fund providers -N218,655,695,578

o Overall debt to Equity ratio - N91.72:1

This implied a ratio of 91 portion of debt financing (from margin

facilities) to 1 portion of equity financing reflecting the high debt over

hang on stock broking firms (in percentage terms, a ratio of 9,100%).

Of the 219 firms reviewed, 29 firms (i.e 13%) with threshold of

indebtedness from N1b to N82b accounts for an aggregate

indebtedness of N198,937,415,067, which approximately is 91% of

the aggregate industry indebtedness of N218,655,695,578.

Accordingly, 9% of the total firms accounts for the balance of bank

indebtedness of N20,218,280,511.

Unclaimed Dividend: Aggregate figure of unclaimed dividend as at

December 31, 2009 = N41,258, 771,475,.98

Fig 1. Pie Chart Analysis of S/B Firms Indebtedness

42

*S/B – means stock brokers

3.0 MONEY LAUNDERING ACTIVITIES

Ninety – Two (92) operators were penalised for violating AML/CFT

requirements and they were required to rectify observed deficiencies.

Meanwhile, Nigeria was among other African Countries referred to the face-

to-face plenary meeting (key review group) of the Financial Action Task Force

(FATF). SEC was among the Nigerian delegation that represented Nigeria at

the meeting held in the first quarter of 2010.

4.0 INVESTIGATION

In the first quarter, the Commission received a total of 1188 correspondences

from various Capital Market Operators and Investors; The breakdown of the

1188 correspondences received were as follows:-

Activities Stockbrokers January – March 2010

Registrars January – March 2010

Total

New complaints 202 142 344 Correspondences on existing complaints

529 315 844

Total Correspondences Received 731 457 1,188

5.0 Breakdown of Total Complaints as at March 31, 2010

Remaining 190 firms (91%)

N198,437,415,067.00

29 Most indebted Firms (9%)

N20,218,280,511.00

43

S/N NATURE OF COMPLAINTS NUMBER OF COMPLAINTS

Outstanding as at Dec. 31, 2009 B/F

January 2010

February 2010

March 2010

TOTAL

1. Unauthorized/ fraudulent sale and purchase of shares

229 7 4 8 248

2. Non remittance of share sale proceeds 120 6 47 51 224 3. Refusal/

Illegal transfer of shares

110 8 6 - 124

4. Falsification of clients’ accounts 60 4 8 6 78 5. Non purchase of shares/ undue delay

in the purchase of stocks 208 4 8 2 222

6. Miscellaneous (complaints against Capital Market Operators other than Stockbrokers and Registrars)

136 15 5 13 169

7. Non-receipt of dividends warrants/ bonuses

230 16 14 7 267

8. Returned monies for un-allotted shares

350 12 8 15 385

9. Non verification of share certificates

213 8 5 6 232

10. Non issuance of share certificates 150 11 12 28 201 11. Total 1,806 91 117 136 2,150

6.0 Breakdown of total complaints Resolved and Outstanding as at March

31, 2010

S/N Nature of Complaint Total complaint

Complaints transferred for enforcement action

Resolved and confirmed by the complainants

Resolved but unconfirmed by the complainants

Outstanding complaints as at 31st March 2010

1. Unauthorized/ fraudulent sale and purchase of shares

248 12 4 26 206

2. Non remittance of share sale proceeds

224 120 4 46 54

3. Refusal/ 124 - - 21 103

44

Illegal transfer of shares

4. Falsification of clients’ accounts

78 2 - 6 70

5. Non purchase of shares/ undue delay in the purchase of stocks

222 2 3 171 46

6. Miscellaneous (complaints against Capital Market Operators other than Stockbrokers and Registrars)

169 7 1 - 161

7. Non-receipt of dividends warrants/ bonuses

267 34 48 126 59

8. Returned monies for un-allotted shares

385 101 280 4

9. Non verification of share certificates

232 26 90 116

10. Non issuance of share certificates

201 39 87 75

Total 2,150 177 226 853 894

Fig 2. Pie Chart showing various stages of

complaints

SECURITIES AND INVESTMENTS SERVICES

45

MERGERS AND ACQUISITIONS During the quarter under review, the Commission received two (2) new applications each for mergers and acquisition. New applications for Mergers

1. Proposed Merger between Obajana Cement Plc and Benue Cement Company Plc

2. Proposed Merger between Africa Oilfield Services Limited and Orwell

International Oil and Gas Limited New applications for Acquisitions

o Restructuring involving Obajana Cement Plc, Dangote Bail Limited and DCW Limited

o Restructuring involving Wema Asset Management Limited,

Independent Securities Limited and Wema Capital Limited However, three (3) transactions involving two mergers and an acquisition were approved. Approved Merger Transactions

O Merger between First Alliance Pension & Benefits Ltd and ARM Pension Managers (PFA)

o Merger of Rubber Estates Nig. Ltd, Araromi Rubber Estates Ltd,

Osse River Rubber Estates Ltd, Utagbo-Uno Rubber Estates Ltd and Water side Rubber Estates Ltd.

Approved Acquisition Transactions

46

Ratification of the Acquisition of 100% equity holdings of Lombard Insurance Company Ltd by NEM Insurance Plc.

Applications under processed for Mergers and Acquisitions The following ten (10) applications are under processing.

1. Proposed Merger involving Intercontinental Capital Markets Ltd, Intercontinental Finance and Investment Ltd and Intercontinental Securities Ltd

2. Merger between Technology Support Centre Ltd and Brian Integrated Systems Ltd

3. Merger between Stokvis Nig Plc and Naturelle Extracts Ltd

4. Merger between A & G Insurance Ltd and A & G Life Plc (formerly

BAICO)

5. Acquisition of 51% Equity Holdings of Nigeria Eagle Flour Mills Limited by Flour Mills of Nigeria Plc

6. Ratification of the Acquisition of 100% equity holdings of Gold Standard Insurers Ltd and First Chartered Insurance Company Ltd by Investment And Allied Assurance Company Plc

7. Ratification of the Acquisition of 100% equity holdings of Piccadilly Insurance Company Ltd by Zenith General Insurance Company Ltd

8. Ratification of the Acquisition of 100% equity holdings of Corporate Ideals Insurers Ltd by Oceanic Bank International Plc

9. Transfer of Diamond Bank Plc’s Shareholding in Diamond Securities Limited to Diamond Capital And Financial Markets Limited

10. Restructuring involving ADIC Insurance Ltd and ADIC Life Assurance Ltd

ACQUISITIONS

47

NEW APPLICATIONS Eight (8) new applications were processed during the period under review

1. Restructuring involving Obajana Cement Plc,

Dangote Bail Limited and DCW Limited

2. Restructuring involving Wema Asset Management

Limited, Independent Securities Limited and Wema Capital Limited

3. Acquisition of 51% Equity Holdings of Nigeria

Eagle Flour Mills Limited by Flour Mills of Nigeria Plc

4. Ratification of the Acquisition of 100% equity holdings of Gold Standard

Insurers Ltd and First Chartered Insurance Company Ltd by Investment

And Allied Assurance Company Plc

5. Ratification of the Acquisition of 100% equity holdings of Piccadilly

Insurance Company Ltd by Zenith General Insurance Company Ltd

6. Ratification of the Acquisition of 100% equity holdings of Corporate

Ideals Insurers Ltd by Oceanic Bank International Plc

7. Transfer of Diamond Bank Plc’s Shareholding in Diamond Securities

Limited to Diamond Capital And Financial Markets Limited

8. Restructuring involving ADIC Insurance Ltd and ADIC Life Assurance

Ltd

TAKEOVER

There were no takeover transactions in the period under review

APPROVED TRANSACTIONS

There were four (4) approved transactions during the review period, they

were:

1. Merger between First Alliance Pension & Benefits Ltd and ARM Pension

Managers (PFA)

2. Merger of Rubber Estates Nig. Ltd, Araromi Rubber Estates Ltd, Osse

River Rubber Estates Ltd, Utagbo-Uno Rubber Estates Ltd and Water

side Rubber Estates Ltd.

3. Ratification of the Acquisition of 100% equity holdings of Lombard

Insurance Company Ltd by NEM Insurance Plc.

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4. Restructuring involving CFAO Nigeria Plc and CFAO Motors Limited

FINANCIAL STANDARD AND CORPORATE GOVERNANCE

49

FINANCIAL ANALYSIS

The Commission continued with the analysis of Annual and Quarterly

Financial Reports (including Earning Forecasts) of public companies to assess

their financial health, ensure compliance with regulatory requirements and

adherence with the provisions of Nigerian Accounting Standard Board

(NASB).It also examined companies’ observance of the provisions of the

Investments and Securities Act ISA) 2007,Companies And Allied Matters Act

(CAMA) 1984 and the Rules of the Commission with respect to administration

of Public companies. The Commission also rendered other technical

accounting services.

COMPANIES REVEIWED

During the quarter, the Commission received the Annual Accounts of thirty-one (31) public listed companies. These are:

1. Capital Hotels plc

2. ABC Transport

3. Fidelity Bank

4. Capital Oil Plc

5. Chevron Nigeria Plc

6. May & Baker Plc

7. Niger Delta Exploration Plc

8. BCC Plc

9. UTC Nigeria Plc

10. CAP Plc

11. Vita Foam Plc

12. Deap Capital Management Trust Plc

13. Neimeth Pharmaceuticals Plc

14. Mobil Oil Plc

15. Cutix Nig Plc

16. United Nigeria Textiles Plc

17. National Salt Company Of Nigeria

18. Cappa D. Alberto

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19. Oasis Insurance Plc

20. May & Baker Nigeria Plc

21. Ekocorp Plc

22. Nestle Nigeria Plc

23. Sovereign Trust Insur. Plc

24. Costain WA Plc

25. Nampak Nigeria Plc

26. UBA Plc

27. Sterling Bank

28. IHS Nigeria Plc

29. PZ Cussons Plc

30. Stanbic IBTC Bank

31. Fidelity Bank Plc

Observed lapses were communicated to concerned companies.

REVIEW OF FINANCIAL REPORTS

The Commission reviewed the following audited accounts for second opinion

as requested:

Bedrock Funds

Anchor Funds

Light House Jubilee Funds

FILING OF QUARTERLY RETURN BY PUBLIC COMPANIES AS A FORM OF

MARKET INFORMATION

In compliance with statement of accounting standards (SAS) 30 on interim

financial reporting, the commission had sensitized public companies on the

need to file quarterly financial statements. This market information was

necessary for the commission and the investing public to assess the current

performance of quoted companies in the capital market .This had drawn an

encouraging response from the affected companies in the past 12 months.

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ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

(IFRS) IN NIGERIA.

The Commission participated in the National Accounting Standards Board

(NASB) road map Committee for the adoption of IFRS in Nigeria. The final

report stipulating the timelines was being awaited from the NASB.

The commission also partnered with the World Bank on capacity building of

supervisors, analysts and inspectors who would analyze accounts of public

companies using IFRS with effect from January 2012.

ATTESTATION BY EXTERNAL AUDITORS ON AUDITED ACCOUNTS OF

PUBLIC COMPANIES

To ensure effective internal governance of public companies with emphasis on

the commissions internal controls, the Commission requested external

auditors of public companies to comply with section 63 of the ISA 2007.This

section requires external auditors to certify the existence and adequacy of

internal control system of public companies.

INVESTIGATIONS

The Commission carried out an investigation into the activities and the books

of Big Treat Plc during the quarter. In addition the Commission met with:

1. DAAR Communications Plc – On the company’s failure to file statutory

returns.

2. IHS Nigeria Plc - On the complaint filed by J. K. Randle Professional

Services.

DISCLOSURE AND COMPLIANCE

HALF YEARLY RETURNS

During the period under review, the Commission reviewed the half yearly

returns of 73 (Seventy Three) quoted companies. The review was to

determine Companies compliance with the following:

52

- Code of Corporate Governance

- Provisions of CAMA

- Provisions of the Investment and Securities Act 2007.

The observed lapses were communicated to the companies, out of which fifty

six (56) Companies were invited for a meeting with the Commission on how to

resolve the issues.

The Commission also organized an interactive meeting with the Director-

General and leaders of Shareholders Associations in Nigeria at the

Commission’s Zonal office in Lagos on 23rd March 2010. The decision taken is

being considered by SEC management.

UNCLAIMED DIVIDEND

The Commission through the Lagos Zonal office undertook the inspection of

Companies that had submitted their half yearly returns on Unclaimed

Dividend. The report was forwarded to the Commission’s head office and is

being reviewed.

TRAINING ON INTERNATIONAL FINANCIAL REPORTING

STANDARDS (IFRS).

The Commission held a meeting with officials of the World Bank on training

its staff on the implementation of IFRS in Nigeria.

The Commission also organized an interactive meeting with leaders of

Shareholders Associations in Nigeria at the Commission’s Zonal office in Lagos

on 23rd March 2010. The decision taken is being considered by the

commission.

53

ENFORCEMENT AND COMPLIANCE

ENFORCEMENT 1. Illegal Capital Market Operators in Onitsha, Asaba, and Nnewi The Commission conducted surveillance on nine (9) illegal capital market operators carrying out capital market activities without SEC’s registration in Asaba, Nnewi, and Onitsha. It was observed that the two illegal operators at Nnewi had closed and relocated to an unknown location. 2. Fraudulent sale of 692,505 units of Unilever shares belonging to

Erasmus Obiechina Mbakwe

The Commission on the receipt of the above complaint investigated the

matter and found Sikon Securities Ltd., Gorsord Securities Ltd., Union

Registrars, and CSCS Ltd. liable for roles played by the operators.

The Commission therefore suspended Sikon Securities Limited and

Gorsord Securities Limited from all capital market activities and directed

them to repurchase complainant’s shares along with the accrued bonus

while Union Registrars and the CSCS Limited were directed by the

Commission to pay the dividend accrued on the above stated shares. The

CSCS Limited and Union Registrars Limited had paid and the complainant

had acknowledged receipt.

The Commission received letters from Gorsord Securities Limited and

Sikon Securities Limited proposing the buy-back of the complainant’s

shares in instalments within a period of six months and appealed for the

lifting of their suspension by the Commission.

The commission reviewed the proposal by Sikon Securities and Gorsord

Securities Ltd and resolved not to lift the suspension on the two companies

until the complainant is fully resituated.

54

3. Complaint on non receipt of share certificate for Transcorp Plc IPO ifo

Mr Nwoye Okafor Christopher

The matter was forwarded for enforcement action for non receipt of

Transcorp Plc shares which the complainant claims deprivation to transact

on the shares.

The Enforcement Division of the Commission on receipt of the complaint

wrote to Afribank Registrars Limited requesting it to forward evidence of

dispatch of the complainant’s share certificate within the time frame

stipulated by the SEC Rules and Regulations as the complainant is

contesting non receipt of his share certificate. A meeting was held with

the parties which necessitated that Afribank Registrars should mitigate

the complainant’s loss.

4. Complaint against Capital Oil Plc by Valueline Securities &

Investments Limited

This was a case of alleged filling of false information to the Commission on

the special placement of Capital Oil Plc.

An all-parties meeting was held between the complainant (Valueline

Securities & Investment Ltd.), Capital Oil Plc, and the two core investors of

the special placement.

The parties urged the Commission to give them time to resolve all the

issues raised.

5. Re: African Petroleum Plc 2008 public offer of 199,070 ordinary

shares of 50 kobo each at N250.00 per share:

Underwriting commitment by Greenwich Trust Limited

The Commission accepted the request of Greenwich Trust Limited to pay the

underwriting commitment over time as agreed with the Issuer.

6. Dangote Flour Mills Share Certificate ifo Enugwu – Adazi Community Bank – case against Oceanic Registrars An all parties meeting was held on February 18, 2010 with Oceanic Registrars Limited to discuss the penalty imposed on them by the Commission via Onitsha Zonal Office of the Commission.

55

7. Mainland Trust Limited- N1,000,000.00 (one million naira) deposited for purchase of shares The Commission was planning to take an enforcement action against the operator for failing to comply with the SEC directive and reply to the various letters requesting for the resolution of the above matter. 8. Interagency Committee on Illegal Fund Managers/”Wonder Banks” At the meeting of the above stated Committee held on February 10, 2010, at the CBN Head office, Abuja, the following issues were deliberated on;

The status of cases filed by some of the illegal fund managers/wonder

Banks (Nospetco Oil & Gas Limited and Wealth Creation Limited); The need to liquidate the illegal fund managers/”wonder banks”; The suggestion by the CBN for adoption of an approach in restitution of

investors/depositors different from the order of the IST which directed SEC and CBN to restitute the investors /depositors;

The status of prosecution of illegal fund managers/wonder banks by the EFCC;

Media campaign strategies to counter the activities of wonder banks; The threat posed by the phenomenon of on-line forex trading; and Constitution of a standing committee on monitoring of illegal fund

managers.

The Commission in March 3,2010, participated at the meeting of the Inter

Agency Committee with the Inspector General of Police, Monitoring team

and some depositors of Wealth Solutions Ltd., an illegal fund manager.

The depositors alleged that they had obtained a judgment of N518 million

against Wealth Solution Ltd. and that the CBN and the Commission had

about N600 million belonging to the company.

9. Suspension of Finbank Plc and its subsidiaries from capital market activities The Commission received a letter from Fin Capital Limited stating that all the outstanding cases against the Companies had been resolved and appealed for the lifting of their suspension. Meanwhile, the company was to pay penalty for

56

not complying with the directive within the deadline given by the Commission.

10. Criminal Diversion of Fund belonging to Mr. Chima Osuji by Shalom

Investment & Securities Ltd.

The Commission wrote to Shalom Investment & Securities Ltd. requesting for

evidence of resolution of the complaint, failing which enforcement action

would be taken against the company. On receipt of the company’s response,

an all parties meeting was scheduled for April 22, 2010.

11. Fraudulent Disposal of shares belonging to Adesoye Holdings Ltd. by

First Alstate Securities Limited

This was a complaint of fraudulent/unauthorized disposal of 21, 666, 667

units of IPWA Plc shares by the Operator. The Operator was written to

confirm the resolution of the matter and no reasonable response was

obtained, to this, the Commission suspended the Operator from

participating in all capital market activities. The CSCS was written to place

caution on the account of the company and its Managing Director, Mr.

Tajudeen Folaji. The matter was also referred to the EFCC for further

investigation and prosecution.

12. Ademu Daniel vs. Maclaize Trust Limited This was a complaint on non purchase of 760,000 units of Standard

Alliance Insurance Plc shares paid for by Dr. Daniel Ademu against

Maclaize Trust and Securities Company Ltd. A letter communicating

penalty of N201,000 for unethical conduct was being finalized.

13. Morphac Pharmacy Ltd. vs Mutual Alliance Investment & Securities Limited This was a case of unauthorized sale of 83,688 units of Bank PHB Plc’s

shares belonging to Morphac Ltd. by Mutual Alliance Investment &

Securities Ltd. A letter communicating penalty of N97,000 to the operator

was being finalized.

57

14. Complaint by Transglobe Investment & Finance Company Limited against NSE for not allowing it to trade in respect of complaint from SPDC COOP WEST

The Commission received a letter from Transglobe Ltd. stating that the NSE

refused it to resume trading on the floors of the Exchange despite the

Commission’s letter lifting its suspension to the NSE.

In view of the above, the Commission directed the NSE to permit the

Operator to resume trading in the absence of any adverse issue pending

against the company.

15. Arrest of Illegal Fund Managers - Mercor Investment Limited The Commission sought the assistance of the Nigeria Police, Kaduna

Command to effect an arrest of some illegal capital market operators in

Kaduna.

Meanwhile, a formal letter was written to Kaduna State Police Command

informing it of the alarming increase in the activities of illegal fund

managers in the state and requested the assistance of the police.

16. Re: Complaint against Supra Commercial Trust Limited Complaints against Supra Commercial Trust Ltd. on non purchase of shares

paid for review of the files, a letter was written to the Operator to respond

on the complaints.

17. Meeting with Davandy Securities & Finance Limited to reconcile records on Complaints received by the Commission The Division held meeting with the representative of the operator as

directed by the Executive Commissioner (L&E), where reconciliation of the

outstanding indebtedness of the 61 complaints received by Commission

were addressed. The Operator appealed for its suspension to be lifted to

enable it commence business and repay the complainants as agreed with

them.

A recommendation was made to Management on the Operator’s appeal.

58

ADMINISTRATIVE PROCEEDINGS

18. APC/3-4/2009: In The Matter Of Alleged Securities Market

Manipulations And Other Violations Of The Isa 2007, Sec Rules And

Regulations 2000 As Amended, Code Of Conduct For Capital Market

Operators And Their Employees And Code Of Corporate Governance,

Made Pursuant Thereto, Against Union Bank Plc & 26 Ors And Oceanic

Bank International Plc & 37 Ors

The Administrative Proceedings Committee (APC) sat on January 25 and

26, 2010 to hear the matters between the Commission and Union Bank Plc

& 26 Ors and Oceanic Bank International Plc & 37 Ors.

19. Confirmation Of Adverse Report/Status On Operators

The Commission responded to a request for confirmation of adverse

reports of sixty nine (69) operators/consultants during the period under

review. This is with a view to rid the market of persons with fraudulent

distortion.

20. APC/2-150/2008: SEC V Alliance Capital Management Company Ltd &

ors

During and after the hearing of the matter between SEC and Alliance

Capital Management Co. Ltd (ACML) on November 3rd – 6th 2009, the

Commission received share certificates and copies of CSCS statements from

the 1st Respondent in respect of some of the complainants. However, some

of the CSCS statements after analysis did not reflect settlement of some of

these complainants claims.

In compliance with the Committee’s directive at the hearing, the Managing

Director of ACML forwarded a report on the status of complaints against

the company in January 15, 2010. The analysis of the report revealed that

the 1st Respondent contrary to its admission at the hearing, claimed that 42

complainants were indebted to ACML to the tune of N13,659,745.63.

Consequently, the complainants were written to confirm whether or not

they were indebted to ACML and to confirm if their CSCS statements

59

reflected a settlement of their claims. ACML was also written requesting

that they forward evidence of the said complainants’ indebtedness to

company.

21. APC/150-228/2008: Complaints against Alliance Capital

Management Company Ltd. & ors

Further more, 78 additional complaints against Alliance Capital

Management Company Ltd were recovered. Hearing Notices were sent to

the Respondents and complainants. The APC sat on March 2, 2010 to hear

these additional complaints (APC/150-228/2008: Complaints against

Alliance Capital Management Company Ltd. & ors).

22. SEC vs Finbank Plc and SEC vs Intercontinental Bank Plc

The Commission received additional submissions by Respondents in

respect of the matter between SEC and Finbank Plc and Intercontinental

Bank Plc, which were being analyzed to enable the division incorporate

same in the draft summary of evidence and Findings.

23. APC/01/2009: SEC V Finbank Plc & 44 ors

The APC sat on March 3, 2010 to review the minutes, submissions, and

findings in respect of this matter (APC/01/2009: SEC V Finbank Plc & 44

ors).

24. APC/2-227/2008: SEC V Alliance Capital Mgt Plc & 15 ors

The additional 72 complaints were presented at the APC Hearing. The

operator was asked to come up with a definite settlement plan.

25. APC/05/2009: SEC V Afribank Plc & 32 ors

The APC sat on 4th March, 2010 to hear the matter. The matter was

adjourned indefinitely.

COMPLIANCE

26. National Sports Lottery The above company came to the market in May 2008 to raise 800,000,000 ordinary shares of 50k each at N15.50k per share through an IPO. Strand

60

Capital Partners Ltd, one of the six underwriters, undertook in the prospectus on a firm basis to underwrite N5, 313,333,335 representing almost 45% of the total expected issue proceeds, which amounted to N12, 400,000,000.

The 5 other underwriters paid a total of N6.1 billion out of which N152,864,385.80 was deducted as underwriting commissions. The allotment was subsequently cleared since the subscription level was above 50% of the total anticipated.

Strand Capital Partners remained the only party that failed to honour its underwriting commitment despite several letters from the Commission to do so. Consequently the company would be penalized if it fails to comply with the underwriting commitment. The Enforcement and Compliance (E&C) department recently invited the company’s MD and other Directors to the Commission for a meeting on March 9, 2010 in order to extract a payment commitment.

27. NON-RENDITION OF HALF-YEARLY RETURNS

The Commission received a list of 59 (Fifty nine) companies who failed

to render their half-yearly returns for the period ended December 31, 2008.

Meanwhile letters of penalties to the companies were sought out of which only 6 (six) responses were received, giving various reasons for the non-rendition.

However, some of the companies had pleaded with the Commission to review their cases and reduce or waive the penalties imposed.

28. RE: NON-RENDITION OF QUARTERLY RETURNS BY CAPITAL MARKET

OPERATORS The Monitoring and Investigation (M&I) Department forwarded a list of twenty five (25) operators that had failed to render their quarterly

61

returns. Appropriate penalty would be mated out to concerned companies in line with SEC zero tolerance positions on market infrastructure.

29. RE: AFROIL PLC

Unity Registrars Ltd, the Registrars to Afroil Plc forwarded to the

Commission a court order (Form 48) directing them to transfer 15,960,000 units of Afroil Plc shares held in the name of Farm Estate Ltd to K. S. Funds Ltd. The form 48 was issued following an application by Mr. I. O. Sanni the former MD of Afroil Plc. following a decision of the Federal High Court Lagos in Suit No.FHC/L/LS/279/99. Management had directed that the matter be sent to the Legal Department to take steps in order to vacate the judgment.

The newly appointed Directors of Afroil Plc in March 2010, however, requested the Commission to file on its behalf the Form Co7 at the Corporate Affairs Commission.

The Commission is making arrangement from form CO7 at CAC which is the only way to finally authenticate the appointment of the new Directors at the Company’s Registry (CAC).

Meanwhile, the new board of Directors also forwarded a letter

requesting for the Commission to come to their aid by approving a “Take off Grant” in the sum of N26,879,735 (Twenty six million, eight hundred and seventy nine thousand, seven hundred and thirty five Naira only) as well as lifting suspension from trading on Afroil shares. The request is being adhered by SEC.

30. RE: VICTOR INYANG Vs. FUTUREVIEW FINANCIAL SERVICES LTD The Commission was in receipt of the complain from Victor Inyang, a former staff of Futureview Financial services company who resigned his appointment on September 15, 2008 and requested the termination of his investment of N15, 000,000.00. The company refused and went ahead to suspend him for three months (without pay) alleging that he committed fraud on some of the Accounts he was managing.

62

The complainant engaged the services of Messrs Taiwo Kopolati & Co. and proceeded to report the matter to the Commission. The amount outstanding and due to the complainant was currently over N19 million representing his investment and terminal benefits.

The Commission after review of the matter decided that the company Futureview Financial Services Ltd should pay the complainant his return on investment which amounts to N14,726,791.60 and his terminal benefits of N4,209,919 failing which the company should be suspended from all capital market activities.

31. RE: ASSET PLUS SECURITIES LTD

The Commission received a letter from the stockbrokers (Union Capital Markets Ltd) appointed to distribute the recovered stocks where in they forwarded the transfers that had been completed and also requested for the payment of their transfer fees of N4,464,040.41 (Four million four hundred and sixty four thousand, forty naira, forty one kobo only).

The Commission directed that the fees be paid to the stockbrokers as it was not feasible to request regulatory bodies to waive their statutory fees.

The Commission carried out a thorough review of the distribution process and requested for payment of brokerage commission presented by Union Capital Market Ltd. The stockbrokers were invited for a meeting to enable them make a presentation and reconcile the details of the distribution accordingly. Union Capital markets Ltd had been advised to stick to the distribution schedule.

32. RE: LAFARGE CEMENT WAPCO NIG. LTD

The company failed to render its 1st half account year ended June 30, 2009, which is breach of Section 60 (1) of the ISA. The company was therefore directed to pay the sum of N1,425,000 (One million four hundred and twenty five thousand naira only) failing which the penalty will continue to run for everyday of default till they comply.

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REGISTRATION AND RECOGNISED INVESTMENT EXCHANGES

A. Fresh Applications

1. A total of forty-four (44) new applications were received from Potential

Capital Market Operators to register for the following functions during

the review period as follows:

S/N APPLIED FUNCTION NO OF

APPLICANTS

% OF TOTAL

1 Reporting Accountants 3 6.8

2 Broker Dealers 8 18.2

3 Fund/Portfolio Managers 7 15.9

4 Corporate Investment

Adviser

5 11.3

5 Receiving Banker 1 2.3

6 Registerar 1 2.3

7 Solicitors 7 15.9

8 Custodian 1 2.3

9 Individual Investment

Adviser

3 6.8

10 Issuing Houses 4 9.1

11 Auditor 1 2.3

12 Over the Counter Market 1 2.3

13 Capital Market

Consultants

2 4.5

Total 44 100

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2. Broker/Dealers constituted the majority with eight (8) applications,

representing (18.2%) of the application, followed by Fund/Portfolio

Managers and solicitors with seven (7) applications each (15.9%).

3. Registered Operators

There were no Fresh Registrations for new Capital Market Operators

between January and March 2010.

B. Commodity Exchange Division

1. Price information on Major Commodities

Below is the market price list of major commodities.

PRICE LIST AS AT MARCH 2010

Market Commodity Type Price\Ton Date

Kumo Millet Gero N46,900.00 29032010

Kumo Soyabeans Variety White N54,200.00 29032010

Kumo Sorghum Red N39,400.00 29032010

Kumo Sorghum White N39,400.00 29032010

Kumo Maize Yellow N43,600.00 29032010

Kumo Maize White N44,700.00 29032010

Kumo Cowpea Brown (Big

Seed) N83,000.00 29032010

Kumo Cowpea White (Big

Seed) N88,500.00 29032010

Buruku Soyabeans White Variety N45,000.00 29032010

Mangu Groundnut Shelled (Mai

Bargo) N155,000.00 29032010

Mangu Millet Maiwa N85,000.00 29032010

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Mangu Millet Gero N80,000.00 29032010

Mangu Sesame seed Cleaned N140,000.00 29032010

Mangu Soyabeans Variety White N60,000.00 29032010

Mangu Sorghum Red N75,000.00 29032010

Mangu Sorghum White N67,690.00 29032010

Mangu Maize Yellow N47,000.00 29032010

Mangu Maize White N41,000.00 29032010

Mangu Cowpea Brown (Big

Seed) N110,000.00 29032010

Mangu Cowpea White (Big

Seed) N110,000.00 29032010

Source: ASCE

2. Trading activities at Abuja Securities and Commodity Exchange

(ASCE):

The ASCE recorded no trading activities during the review period.

DEVELOPMENT IN THE INTERNATIONAL COMMODITIES MARKET

Ethiopia Commodity Exchange Knowledge Forum

A Knowledge Forum titled “The Making of a Market: Global Learning from Commodity Exchange Experiences”, jointly organized by the Ethiopian Commodity Exchange (ECX) and the United Nations Development Programme (UNDP)opened on (24th February 2010) in Addis Ababa, this gathered nearly 400 participants drawn from the international diplomatic and donor community, federal and regional government officials, private traders, and various exchanges from around the African continent and India.

Others are chief executives from India’s National Commodity and Derivatives Exchange (NCDEX) and the Agricultural Markets (SAFEX) under the Johannesburg Stock Exchange, other represented exchanges include Uganda Commodity Exchange, Zambia Agricultural Commodity Exchange, Khartoum

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Stock Exchange, Kenya Agricultural Commodity Exchange, Malawi Agricultural Commodity Exchange, and the Abuja Commodities and Securities Exchange. Alongside these, projects to establish exchanges are also representatives from Tanzania, Ghana, and Zimbabwe. A total of 12 African countries were represented at the event.

The ECX-UNDP Knowledge Forum was organized in response to the numerous expressions of interest in the recent Ethiopian experience. The central themes raised in the Forum were: how can markets be appropriately developed to transform the agricultural sector? What are the prospects for commodity exchanges in Africa? How can commodity exchanges be regionalized or contribute to regional trade? The objectives of the Knowledge Forum were to highlight lessons from comparative global experiences in establishing commodity exchanges and to engage in learning on the actual process of implementation and the challenges faced.

One of the envisaged outcomes of the Knowledge Forum was a Consultative

Meeting among the gathered exchanges to be held on February 25, with the

aim of establishing the African Commodity Exchanges Association, expected to

be hosted by ECX in Addis Ababa.

United Nations Development Programme (UNDP) Ethiopia Support to

the Ethiopia Commodity Exchange (ECX)

The major objectives of Ethiopian Commodity Exchange (ECX) is to implement national agricultural marketing information system that connects all regions and provide relevant and timely market information to various market actors. It also attempts to establish and strengthen vertical and horizontal linkages among producers, cooperatives, wholesalers, processors and exporters through organized trading platform.

In view of strengthening this innovative undertaking, UNDP had been supporting ECX since 2006 in the following areas.

A tripartite Memorandum of Understanding (MOU) signed between Ethiopian Ministry of Agriculture and Rural Development (MOARD), International Food Policy Research Institute (IFPRI) and UNDP for the implementation of UNDP support to ECX for two phases mainly for professional training, sensitization

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workshop, market information and office set up and equipment and Experience sharing visits to help set up ECX. This was followed by:

Assignment of 6 International senior advisors for a period of 3 years. This is an ongoing support.

Organization of the Knowledge Forum in collaboration with ECX is also part of the UNDP support.

In general, UNDP support in this innovative intervention of ECX operations along with other donors contributed to improving service delivery for the broad base clients in:

Providing warehouse operations facilities Quality assurance by establishing a system of industry-accepted product

grades and standards Rapid and reliable dissemination of market information to all actors Clearing all payments from buyers to sellers Information technology development and support and Risk Management

DEVELOPMENT IN THE LOCAL COMMODITIES MARKET

Implementation of 2009/2010 Guaranteed Minimum Price (GMP)

The National Food Reserve Agency (NFRA) under the supervision of the

Federal Ministry of Agriculture and Water Resources had notified the general

public on the implementation of Guaranteed Minimum Price (GMP) scheme

for 2009/2010 farming season to improve farmer’s income and boost

agricultural production, thereby ensuring food security. In addition, a

mechanism had been put in place to ensure farmers obtain fair prices for their

produce. It was a predetermined price the farmer will get for a given unit

measured of his produce. An effective GMP therefore would keep the farmer

in business.

For 2009/2010 agricultural season, contracts were awarded to 23 licensed

buying agents to procure produce from farmers.

The approved GMP for the various food commodities were as follows:

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Maize - =N=45,000/mt Sorghum - =N=41,000/mt Millet - =N=41,000/mt Soya beans - =N=56,000/mt Paddy rice - =N=60,000/mt Garri - =N=75,000/mt While the approved silo locations of deliveries are: Minna, Ilorin, Akure,

Makurdi, Irua and Ogoja.

C. Renewal of Registration

S/N COMPANY/FIRM FUNCTION DATE

REGULARISED

1 First Securities Discount

House

Corporate Inv. Adv.

Fund/Portfolio Mgr. and

Issuing House

25/1/2010

2 Rainbow Securities Broker Dealer 8/2/2010

3 CSCS Clearing settlement and

Depositary Agency

17//2010

4 Cashville Investment and

Securities Ltd

Broker Dealer 19/12/2010

5 Ajumogobia and Okeke Solicitor 4/3/2010

6 Adeniji Kazeem & Co Solicitor 18/3/2010

2. Fidelity Bond

A total number of fifty-eight (58) companies/firms filed their Fidelity Bond

3. Change of Name/Address

A total number of eight (8) companies/firms changed their addresses while

three (3) companies/firms changed their names.

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LEGAL DEPARTMENT

Legal Opinions

The following legal opinions were given during the period under review.

1. Resuscitation of Consortium Resource Investment Notefund The Collective Investment Schemes (CIS) had by a memo dated

January 5, 2010 sought legal advice on the proposal by ARM

Investment Managers Ltd for the resuscitation of the Consortium

Resource Investment Note (CRIN) fund which they intend to

convert to an Islamic fund.

The Legal Department reviewed the proposal and was of the

opinion that it was reasonable and should be approved.

2. Stanbic IBTC Money Market Fund – IPO of N10,000,000 units of N100 Each at Par and Supplementary Offer of 2,211,800 Units of N100 Each Issued at Par The Collective Investment Schemes Department requested for

legal opinion on the regulation for the management of the

arrangement referred to by Stanbic IBTC as “Fund of Funds”.

The Stanbic IBTC Asset Management Ltd (SIAML) floated the

above titled fund and it was observed that 5 other funds managed

by SIAML and which were not registered with the Commission,

were major subscribers to the fund.

The Legal Department was of the opinion that the structure of the

IBTC Money Market Fund, being a fund of funds, was not contrary

to the provisions of the ISA. A collective investment scheme by

whatever name called and regardless of the structure was

required to be regulated, provided it was a collective investment

fund as defined by the ISA.

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The Legal Department therefore advised that since the fund was a

fund of funds for all purposes, same regulations that applied to

other Unit Trust Schemes should also apply.

3. Proposed Dissolution of FSDH Coral Ethical Fund

A memo was received from the Collective Investment Schemes

(CIS) Department seeking for legal opinion on the above subject

matter.

The Legal Department reviewed the request and opined that in

the light of the fact that FSDH Asset Management Ltd had

complied with the Commission’s directives on the dissolution of

the fund, the process should be finalized.

5. Absenteeism of Chairman of Conoil Plc from Annual General

Meetings

The Department received a memo from FS&CG Dept. requesting to

know what sanctions could be imposed on the Chairman and

some Executive Directors of Conoil Plc who had consistently been

absent from the AGMs of the company.

The Legal Department was of the opinion that the provisions of

CAMA did not prescribe sanctions against a Chairman or

Managing Director who absents himself from AGM. The Code of

Corporate Governance also had no sanctions for its violators.

The Department therefore advised that FS&CG Dept. should

closely monitor the activities of the company and draw the

attention of its Board to any lapses observed and where there

were clear violations of securities law, the company should be

sanctioned accordingly.

6. Request for Market Data on Registered Mutual Funds Collective Investment Scheme (CIS) Department sought for legal

opinion regarding a letter from BGL Plc requesting for the most

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updated information regarding all funds registered by the

Commission.

Rules 308 & 309 of the Commission’s Rules and Regulations

provided that all documents filed with the Commission shall be

open to inspection on the payment of a prescribed fee.

BGL Plc did not request for inspection but wanted some

information on the funds.

Rule 309(b) (ii) stated that a letter requesting for inspection

should state the purpose for inspection.

The Legal advise was that BGL Plc be asked to state or disclose

the purpose for requesting such information, and the provisions

of Rule 308 & 309 brought to their attention.

7. Oando Plc – Proposed Dual International Offering of Global Depository Receipts and Convertible Instruments Vetiva Capital Management Ltd, the financial advisers to Oando

Plc sought clarification on Rule 226 of the Commission’s Rules &

Regulations as regards a dual international offering of GDRs and

Convertible instruments solely to international investors.

They requested to know if they were to comply with the full

disclosure requirements of the Commission.

The Legal opinion was that though the offer was targeted solely at

foreign investors and the primary filing would be at the UK, the

Issuer in accordance with Rule 226(2) must comply with the

disclosure requirements of the Commission.

8. Whether a Quoted Company Can Buy Back its Own Shares Directly During an Initial Public Offer/Offer for Subscription/Rights Issue De-canon Investment Ltd, a registered capital market operator

requested to know if a quoted company could buy back its own

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shares directly during an initial public offer, offer for subscription

or rights issue.

The Legal opinion was that a public company was not authorised

to buy back its own shares in the primary market and the

Commission had never authorised any public company to do so.

The Legal Department however advised that Rule 109B of the

Commission’s Rules and Regulations contemplated such share

buy back but only through the secondary market.

9. Afroil Nig. Plc – Notice of Consequence of Disobedience to order of Court Unity Registrars Ltd, registrars to Afroil Plc, in its letter dated

February 5, 2010, requested for urgent advice with regards to

Notice of Consequences of disobedience to Court order sent to it

by the Federal High Court, Lagos.

The Commission was also affected by the order of Court because

Order No. 4 stated that all statutory regulatory authorities should

give effect to the orders.

The Department noted that neither Unity Registrars nor the

Commission were parties to the suit where these orders were

made, and therefore advised that the Commission should

immediately apply to be joined in the matter as an interested

party.

Initial Public Offering of 50,000,000 units of N103.50 in the SIM Capital Alliance Value Fund (The Offer) The Collective Investment Scheme Department sought for the

Legal Department’s opinion on whether a close-ended fund which

tends to be listed and traded on the floor of the Exchange, could

be allowed to absorb the over subscribed portion of its offer.

The Legal Department opined that a closed or open-ended fund

was set up for investment purposes and for the benefit of the unit

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holders and the over subscribed portion, if absorbed would also

be invested for benefits of unit holders.

The Legal opinion was that the company could be allowed to

absorb the excess if the request was disclosed in their Prospectus.

10. IBTC Ethical Fund – Request for Interpretation of the Trustees Investments Act and 3RD Supplemental Trust Deed The Legal Department reviewed the Trust Deed of IBTC Ethical

Fund and observed that the provisions of the Supplemental Trust

Deed stated that the manager shall not make any investment that

would result in more than 10% being invested in the “securities”

of a single company or one group of companies.

Shares and debentures were regarded as securities and this fell

within Section 3(b) of Trustee Investment Act (TIA).

The Legal opinion was that the clause was not in violation of the

TIA but that the Commission should monitor the fund to ensure

that not more than 5% was invested in a particular company.

11. Suspension of Platinum Capital Ltd from carrying out Capital Market Activities The Commission received a letter dated February 10, 2010 from

Bank PHB Plc which requested that the Commission should

exercise restraint and wait for the outcome of the matter in court

before it took a decision on the complaint against Platinum Capital

Ltd which was pending with the Commission.

The Legal Department advised that the Commission should not

take any step that might affect the status of the parties,

particularly suspension of Platinum Capital Ltd from the capital

market, pending the determination of the matter in court or any

out of court settlement.

12. Invitation to Attend a Public Hearing on a Bill for an Act to Amend the Economic and Financial Crimes Commission (Establishment) Act 2004

74

The Legal Department reviewed the EFCC Amendment Bill and

forwarded its comments and observations as follows:

(a) The discipline or field of experience of the Chairman was not stated under the new Section 2(1) (a)(iii).

(b) It was observed that the Director-General of SEC was removed as a member of the Commission. The Legal Department opined that as the apex capital market regulator which is an important part of the Nigerian financial system, SEC should be a member of the Commission.

(c) The Bill sought to amend Section 40 of the Act by making it unlawful for any court in Nigeria to make orders of injunction to restrain or interfere with the performance of duties by the EFCC.

The Legal Department therefore opined that excluding the

rights of persons to apply for injunction or stay of

proceedings was undemocratic and a violation of the

fundamental human rights of citizens and further advised

that these provisions be expunged or further amended.

The observations were transmitted to National Assembly .

13. Appeal No. IST/LA/APP/01/08 – Akintola Williams Deloitte (AWD) Vs SEC Akintola Williams Deloitte (AWD) was one of the respondents

who appeared before the Administrative Proceedings Committee

(APC) in connection with overstatement in the financial statement

of Cadbury Nig. Plc between 2003 and 2006.

AWD appealed against the decision of the APC at the Investments

and Securities Tribunal. The IST nullified the APC decision and

75

ordered a retrial and a refund of the N20 million penalty paid to

AWD.

AWD appealed against the order of retrial while the Commission

cross-appealed on the entire decision of the Tribunal.

AWD, by letters dated August 15, 2008 and July 28, 2009 as well

as at a meeting held on August 31, 2009 with the Commission,

requested that the appeal and cross appeal be dropped and that

the matter be amicably settled out of court in the best interest of

the Nigerian capital market.

The Legal Department noted that from the minutes of the meeting

held between SEC and AWD, it appeared that Management of the

Commission was willing to accept the request of AWD but subject

to the approval of the rules on consent process by the

Commission’s Board as well as the Minister and that it did not

categorically state that it would withdraw its cross-appeal in the

matter.

14. Amendment of the Investments and Securities Act 2007 The Investments and Securities Act (Amendment) Bill was

received and reviewed by the Legal Department forwarded its

observations in the following areas:

(i) Amendment of Section 20 – Application of the funds of the

Commission.

(ii) Further clarification be sought on Section 26(4).

(iii) New Section 26(6) – The Legal Department advised that this section be amended to enable the Commission withdraw from the funds in succeeding year if the appropriation bill was not yet passed.

(iv) Section 23 of the Principal Act - The Department opined that the Commission should be allowed to utilize proceeds of

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penalties charged and fees paid to it after necessary approvals.

It was also the view of the Legal Department that the

Commission should dialogue with the National Assembly on

the need for the Commission to retain its funds and to

continue with its present arrangement whereby the budget

is only laid before the National Assembly without going

through the appropriation process.

15. Review of Proposed Bill to Amend the Land Use Act The Legal Department reviewed the proposed amendment to the

Land Use Act 1978 and recommended as follows:

(a) that the requirement of Governor’s consent to assign

interest in properties be removed from the Act;

(b) that the Act be removed from the Constitution in order to

facilitate amendment whenever the need arose.

16. Registration of Venture Capital Fund/Venture Capital Company The Law firm of Aluko & Oyebode vide a letter dated March 16,

2010 sought for clarification on the following issues:

1. Whether venture capital fund/company must be a shareholder in companies to which it intends to grant loan.

2. Whether its client, as a registered venture capital fund/company might grant loans to eligible companies without taking up equity in such companies.

The Legal Department advised that Rule 282 of the Commission’s

Rules provided that the partnership agreement between a venture

capital and the company it is investing in might grant it limited

partnership.

77

Therefore the terms of the agreement would determine whether

the venture capital fund/company must be a shareholder or take

up equities in the company it intends to grant loan.

17. Failure/Rejection by Company Registrars of Bank Confirmation Issued by Primary Mortgage Institutions (PMIs) in Respect of Shares/Stocks The Institute of Capital market Registrars vide a letter dated

March 9, 2010, addressed the issue of members of the Capital

Market Registrars of Nigeria’s refusal to accept bank letters of

confirmation issued by Primary Mortgage Institutions (PMI) in

respect of shares.

The letter made reference to an earlier letter dated February 16,

2010 from the Central bank of Nigeria (CBN) which confirmed

that PMIs were bonafide financial institutions duly licensed by the

CBN to take deposits which were insured by NDIC.

The Legal Department advised that members of the Institute

should be directed to accept bankers’ confirmation issued by PMIs

being bonafide institutions licensed by CBN.

The Department also advised that the Commission in conjunction

with CBN should issue a directive that banks should accept

payment of dividend warrants into savings account.

18. Request for Information – Opening of Liaison Office by Security Companies Registration & Recognised Investment Exchanges (RRIE)

Department sought for legal opinion on whether Dependable

Securities Ltd, a company registered as a broker dealer with the

Commission, may be granted permission to open a liaison office to

enable them relate with and serve their clients more effectively.

The memo also stated that the Commission had no policy on the

issue.

78

The Legal Department opined that the company might be allowed

to open a liaison office as long as it was duly registered with the

Commission.

However, the office should be managed by a senior officer who is

registered by the Commission as a sponsored officer

Suit No. IST/LA/11/08 – Brentonwoods Ltd Vs Genesis

Securities & Investments Ltd & 2 Ors

The Commission was the 2nd Respondent in this case.

The Law firm of Falana & Falana forwarded a copy of the IST

judgment in the above case and called the Commission’s attention

to the portion of the judgment which compelled the Commission

to comply with the Tribunal’s order by ensuring that the 1st and

3rd Respondents i.e. Genesis Securities & Invest. Ltd and the

Nigerian Stock Exchange respectively, paid the Applicant the sum

of N22,469,189.20 which was the judgment debt.

The Legal Department advised that the Commission had a duty to

ensure compliance with the law by carrying out the Tribunal’s

order to ensure that the 1st Respondent paid the judgment debt to

the Applicant.

LITIGATIONS

1. Suit No. FHC/CA/CS/112/09 – Pastor Monday Akpan & Anor Vs Securities & Exchange Commission – Review of Court Process Commandclem Nig. Ltd filed a Motion on Notice dated December

23, 2009. In the Motion, the Company sought for an order of the

Court restraining the Commission from issuing any threat, arrest,

impounding or sealing the business premises of the applicant.

The Commission was served with a pre-action notice on

November 23, 2009 and the motion was slated for hearing on

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January 19, 2010. The Dept. advised that one of the Commission’s

External Solicitors resident in Calabar should defend the matter.

2. Suit No. IST/EN/OA/02/10 – Engr. Mbakwe Christopher Nwachukwu Vs SEC & 2 Ors Engr. Nwachukwu filed a suit at the IST Enugu, claiming from the

Commission, Nova Finance and Mr. Oparawaukwe, the sum of N35

million as special and general damages for the misconduct of the

Respondents.

The claim against the Commission was that the Commission

refused to take any action with regard to the compensation

claimed by the Applicant against the 2nd and 3rd Respondents.

This was after the Commission had settled the dispute between

the Applicant and the 2nd and 3rd Respondents, and the Applicant

was fully restored.

The Legal Department opined that the Commission should defend

the matter and one of the Commission’s External Solicitors has

been appointed to represent the Commission in the suit.

3. Status of Judgment Taken in Sec Vs Allgreen Invest. Ltd & 36 Ors – Suit No. IST/OA/17/07 The Investments and Securities Tribunal (IST) delivered judgment

in this matter on July 3, 2008 and directed the Commission to

work together with the Central Bank of Nigeria (CBN) to ascertain

the funds left in the account of illegal fund managers and pay back

the affected investors.

The Enforcement & Compliance (E &C) Department informed the

Legal Department that an Inter-agency Committee on Illegal Fund

Managers/Wonder Bank headed by CBN was in the process of

implementing the judgment.

The Legal Department reviewed the update and opined that the

instruction given by CBN to unfreeze the accounts of the wonder

banks undermined the directive of the Tribunal.

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4. Appeal No. CA/L/13/2010 – Suit No. FHC/L/CS/789/09 – Alh. Aliko Dangote Vs African Petroleum Plc & 27 Ors – Review of Court Processes The Commission received a Motion on Notice and a Record of

Appeal filed at the Court of Appeal, Lagos by Alh. Aliko Dangote.

The Appellant prayed the Court for an order to stay proceedings

in the matter at the Federal High Court or alternatively grant an

interlocutory injunction restraining the Plaintiffs from further

prosecution of the suit.

The Legal Department advised that the Commission should not

participate in the appeal since the decision of the Court of Appeal

would not adversely affect the position of the Commission in the

matter.

5. Suit No. FHC/L/CS/667/08 – Chief Raymond Ihyembe Vs SEC & Anor The Plaintiff, Chief Ihyembe, was challenging the powers of the

Commission to disqualify him from holding directorship position

in any public company for a period of one year.

The Legal Department advised that the case should be defended.

One of the Commission’s Solicitors was briefed to defend the

Commission in the matter.

6. SUIT NO. FHC/MKD/CS/16/10 – Chief John Akperaeshi Vs Benue State Government & 8 Others The Commission was the 8th Defendant in this case. The Plaintiff

in this case claimed as follows:

1. A declaration that the transfer of the 443,104,491 units of

the rights owed by the 1st and 4th Defendant to the 5th

Defendant was null and void.

2. An order rescinding same, the said illegal transfer of the

said units and reversing same to the status quo ante bellum.

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3. An order of perpetual injunction restraining all the defendants the Court may find culpable in the transaction.

4. Such other orders as the Court may deem fit to make in the circumstance.

The Legal Department was of the view that although no specific

claim was made against the Commission, the Plaintiffs showed

serious lack of understanding of operations in the market as well

as the functions of the Commission.

The Department therefore advised that one of the Commission’s

external Solicitors be instructed to defend the Commission in

Court to protect the interest of the Commission considering the

ignorance of the Plaintiff and his Solicitor in capital market

operations.

NEW RULES / AMENDMENTS TO SEC RULES / REGULATION

During the period under review, Legal Department circulated the

following New Rules/amendments to the Rules and Regulations which

came into effect on March 24, 2010:

1. Approval of Appointment of Directors of Market Operators (New Rule 15A)

2. Rules on Bonus issue (New Rule 40D) 3. Validity period of accounts (New Rule 40B)(i)(iv)(h) 4. Rule 40(3) - Reduction in documentation filed with SEC by

operators. 5. Conditions for approval of IPO and listing by introduction(New

Rule 50) 6. Filing of Registration Statement (Rule 50(1) & (2) 7. Declaration by the issuer on full disclosure (New Rule 50 (3) 8. Condition for approval of subsequent Public Offer (New Rule

50A) 9. Incorporating forecast and oversubscription in the Offer

documents (New Rule 56(XV) 10. All Parties Meeting (New Rule 59B) 11. Pre-Offer waiting period (Fixed price Offers)(New Rule 59C)

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12. Extension of Offer Period (New Rule 60(d) 13. Opening of Interest yielding accounts for offer proceeds

(Rule 64(1)). 14. Absorption of over-subscription (Rule 64(4)(a)(iii) 15. Interest on Return Monies (new Rule 64(7) 16. Basis of allotment ( Rule 69(2) 17. Subscription level for Issue not underwritten (Rule 70(6)(ii) 18. Listing of securities after allotment clearance (New Rule

71(ii) 19. Cost of issue (Rule 73) 20. Amount to be underwritten (Rule 75) 21. Underwriting of Rights issues (New Rule 75A) 22. Underwriting capacity/commitment (Rule 76) 23. Conditions for Approval of Offer(Private Placement)(Rule

90) 24. Advertisement of Private Placement (New Rule 90(2) 25. Know your Customer (Rule 100) 26. Issue and handling of certificates (Rule 200) 27. Depository receipts of Nigerian entities (New Rule 226(3)) 28. Harmonization of Rule 109B(vi) with Section 161(a) of

CAMA 1990 29. Issuance of Corporate bonds (New Rule 307A) 30. Reduction of SEC fees for the registration of bond Issuance 31. Rule on Money Market fund (Rule 249A) 32. Amendments to Schedule 1, Part C, Item 5,6& 7(Empowers

SEC to charge 0.25% of gross income of CIS schemes) 33. Regulations of Mergers, Takeovers and Acquisitions (Rule

227) 34. Clearance of scheme Documents(New Rule 232(c) 35. Power to order the Break up of Company(New Rule 234(C) 36. Method of Calculations of Annual Turnover or Assets to be

applied in relation to Merger thresholds (New schedule X) 37. Rules on Procedure of APC of SEC (Schedule VII) 38. Vending agreement (Amendment to Rule 78B) 39. Regulations of Public Companies (Part B4) 40. Guidelines for the monitoring of unclaimed dividends by

public companies

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The Rules were subsequently forwarded to all Capital Market

Trade Associations, CMC Sub-Committees, Operational

departments of the Commission, Information & Technology

Department for uploading in the Commission’s website, Media

Division for publication in National daily newspapers, Executive

Management of the Commission, Transformation Committee and

other relevant stakeholders for their information and compliance.

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ACTIVITIES OF ZONAL OFFICES

IBADAN ZONAL OFFICE

The following complaints were received during the period under review

Complaints by Investors and actions taken:

Eight (8) new complaints were received from Investors.

The zone was able to resolve/settle nine (9) cases between the

Investors and Operators while investigation was on going in respect of

14 files.

One (1) case file was sent to the Head Office for enforcement action.

Two (2) All party meetings were held. They were:

i. Mrs. Racheal Ajayi (W.A. Aladedutire & Co) VS First Alstate Sec.

Ltd

ii. Mr. Popoola Emmanuel Ayodele (M.O. Oladeji & Co) VS First

Alstate Sec. Ltd

Inspection was conducted on HEBN Publishers Plc, in respect of

registration of existing Securities.

TRADING ACTIVITIES

The Zone had commenced monitoring/surveillance activities on the floor of

Nigerian Stock Exchange, Ibadan.

MARKET DEVELOPMENT ACTIVITIES

The Zone held a meeting with shareholders association to intimate them on

the need to help mobilize their members towards 2010 public enlightenment

programme.

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KADUNA ZONAL OFFICE

OPERATIONAL ACTIVITES

The Zone received a total of forty five (45) complaints during the period under

review. Thirty five (35) were Registrars related while ten (10) were

stockbroker related complaints.

The Zone also resolved thirty two (32) cases out of which twenty nine (29)

were Registrar related while three (3) were Stockbroker related.

The total number of complaints received by the Zonal Office amounted to 391

out of which 155 had been completely resolved while others were in various

stages of being resolved. 53 of these complaints were referred to the Head

Office for enforcement action.

APPLICATION FOR REGISTRATIONS

There were no applications for Fresh Registration during the reviewed period.

INSPECTIONS

The Zone in conjunction with some staff from Enforcement and Compliance

Department of the Head Office, conducted some target inspections on the

activities of some Forex Trading Companies residing within Kaduna

metropolis. An official letter was written to the Kaduna State Commissioner of

Police to make available a standby committee that would quickly go into

action to arrest illegal operators when confirmed. The Commissioner had

obliged.

MARKET DEVELOPMENT ACTIVITIES

COURTESY CALLS/STUDENTS VISITS

The Zone paid a “Thank You Visit” to the Management of Kaduna State Media

Corporation (KSMC) on 10th February, 2010. The visit was to express

gratitude to the KSMC for hosting the SEC, Kaduna Zonal Office on a Capital

Market enlightenment programme free of charge, for one year four months at

its Television station.

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The Zone also hosted a delegation of Evangelical Churches of West Africa,

Kaduna Central District Church Council on a Courtesy Visit on 16th February,

2010. The purpose of the visit was to acquaint themselves with the activities

of SEC.

The Zone also hosted a delegation of Federal Character Commission, Kaduna

Zonal Office. The purpose of the visit was to be enlightened on the activities of

the Commission.

Students of Higher Institutions continued to access the Zonal Library during

the period for research purposes.

KANO ZONAL OFFICE

During the period under review, the Kano Zonal Office conducted the

following:

OPERATIONAL ACTIVITIES

The zone received complains on:

A. REGISTRARS RELATED CASES: S/N NATURE OF COMPLAINT NO. OF CASES

1 Non-receipt of share certificate 105

2 Non-receipt of dividend 26

3 Non-receipt of Bonus 13

4 Non-receipt of return money 10

5 Revalidation of dividend warrant 8

TOTAL 162

B. STOCKBROKERS RELATED CASES:

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C. RESOLVED CASES: S/N NATURE OF COMPLAINT NO. OF CASES

1 Non-receipt of share certificate 36

2 Non-receipt of dividend 8

3 Non-receipt of Bonus 4

4 Non-receipt of return money 11

5 Unauthorized sale of shares 1

6 Non execution of Investors

mandate

2

7 No verification of share certificate 4

8 Revalidation of dividend warrant 3

9 Wrong crediting of CSCS Account 3

TOTAL 72

MARKET DEVELOMENT ACTIVITIES

Excursion by Students/Trading Associations

a. On the 25th Feb, 2010 a total of seventy eight (78) students from Economics Department of Isa Kaita College of Education Dutsinma, Katsina State came for excursion.

S/N NATURE OF COMPLAINT NO. OF CASES

1 Unauthorized sale of shares 5

2 Non execution of Investors mandate 14

3 No verification of share certificate 9

TOTAL 28

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b. On the 11th March, 2010 Twenty Three (23) Members of the capital Market Club (Government Secondary School Rano Chapter) paid a courtesy call.

Enlightenment Programmes

a. Enlightenment workshop programme for Principals, Management Staff and the Board of Senior Secondary School Management Board (SSMB) was held on 8th Feb, 2010 at Rumfa College Hall.

b. Enlightenment workshop programme for the Officers and Men of

the Nigerian Custom Service Training School was held on 16th Feb, 2010 at Custom Trainning School Kano.

c. Enlightenment workshop programme for the Officers and Men of

the Nigerian Immigration Service Training School was held on 09th Feb, 2010 at Immigration Trainning School Kano.

Establishment of Capital Market Club

a. Thirty four (34) Capital Market Clubs were lunched in Thirty four (34) secondary schools in Kano State on 1st March, 2010 at Rumfa College

b. Preparation for the launching of thirty one (31) Capital Market Clubs in Sokoto State is in progress.

LAGOS ZONAL OFFICE

The Lagos Zonal Office during the period under review conducted the

following:

OPERATIONAL ACTIVITIES

Annual General Meetings A total of twelve (12) Annual General Meetings were attended as follows:

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Lucky Fibres Plc - 29/01/2010 Wema Bank Plc - 05/02/2010 Ihs Nigeria Plc - 05/02/2010 Fidson Nigeria Plc - 11/02/2010 Costain (West Africa) Plc - 23/02/2010 UACN Property Plc - 23/02/2010 Nampak Nigeria Plc - 24/02/2010 Intercontinental Integrity Fund - 26/02/2010 Afromedia Plc - 03/03/2010 DVCF Oil & Gas Plc - 03/03/2010 Vitafoam Plc - 04/03/2010 Lagos State Debt Issuance Programme - 16/03/2010

Extra-Ordinary General Meeting

Two (2) Extra-Ordinary General Meetings were attended during the

period under review.

C & I Leasing Plc - 15/02/2010

Tantalizers Plc - 24/03/2010

Completion Board Meeting

One (1) Completion Board Meeting was attended for the period

Oando Plc - 08/01/2010

Pre-Registration Inspection Five (5) pre-registration inspections were conducted: CBO Capital Partners - 24/02/2010 Doyin Rhodes-Vivour & Co. - 02/03/2010 Treasure Capital Trust Ltd - 02/03/2010 Abox-Ossa Professional Chartered Accountant -

02/03/2010 Venerate Capital Ltd - 11/03/2010

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Target inspection in respect of unclaimed dividend were carried out on

the following companies:

Standard Alliance Insurance Plc

Intercontinental Energy Insurance Plc

Bank PHB Plc

Fidelity Bank Plc

GT Bank Plc

Nigerian Bag Manufacturing Bag Company

Prestige Assurance Plc

Oasis Insurance Plc

Continental Reinsurance Plc

NCR (Nigeria) Plc

Fresh Registration and Renewals

A total of 20 fresh registrations were carried out for the period. A total of 13 Additional Sponsored Individuals were registered. A total of 3 Renewal was carried out A total of Sixty-one (61) Police Clearance forms for market operators

were administered.

NSE Exchange Observations There were no newly listed companies on the NSE during the review

period.

DELISTING Afprint Nigeria Plc was delisted from Daily Official List of the

Exchange on 8th March, 2010.

Technical Suspension Placed The NSE announced the full suspension of Investments and Allied

Assurance Plc. This was as a result of a letter from the Commission indicating that the company’s activities were being investigated.

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Afprint Nigeria Plc was placed on full suspension on 12th January, 2010 in preparation for delisting following the request from the board of directors.

Technical Suspension Lifted The technical suspension placed on Oando Plc was lifted, following

the expiration of the two-weeks period after the closure of the offer.

The technical suspension on Mutual Benefits Assurance Plc was lifted following the placing of shares.

LEGAL AND ENFORCEMENT

Complaint Received: a total of Seventy-five (75) complaints were received.

Treated Files:

a) Three hundred and four thousand (304) files were treated out of which eight-six (86) were successfully resolved.

b) Five (5) files were sent for enforcement action, but

feedback is yet to be received.

c) Forty-four (44) meetings were held.

Review of one of the core matters resolved: 1. Name of File: Dayo Akinyemi & Co (On behalf of Miss Bimbola Coker) Vs. Lead Securities & Investment Limited

Subject Matter: Alleged fraudulent/unprofessional conduct by

Lead Securities and Investment Limited. Action Taken: An all parties meeting was convened, and it was

revealed that all the allegations made against the operator by the complainant were baseless

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and unfounded, as monies which the complainant claimed was not remitted to her was actually signed for and received by her - hence the file was closed.

2. Name of File: Dr. Julie Ajieh Vs. Kakawa Discount House

Limited Subject Matter: Alleged breach of margin facility agreement. Action Taken: At the meeting held in the Commission, it was

established that the Nigerian Stockbrokers had failed/refused to dispose of the stocks placed as collateral for the facility promptly, which culminated in the inability of the complainant to liquidate the loan and increase in the interest on same. However, investigation was still on-going.

MAIDUGURI ZONAL OFFICE

OPERATIONAL ACTIVITIES

The Maiduguri zonal office received seventeen (17) complaints in addition to

the twenty two complaints (22) under investigation during the period under

review. The complaints were for non receipt of share certificates and returned

money in respect of shares purchased during various public offers. Complaints

on stolen/interception of share certificates were also received during the

period under consideration.

MARKET DEVELOPMENT ACTIVITIES

The Zone hosted students from Federal Government College Billiri Capital

Market Club on January 19th, 2010.

The Zone also implemented Investor’s Education enlightenment programme

for Youth Corps members at the Orientation Camps within the North East

Zone in the following States:

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Borno State on March 17, 2010

Yobe State on March 23, 2010

Gombe State on March 25, 2010

Bauchi State on March 26, 2010

INSPECTION

Spot Check inspectors were carried out by the Zonal Office at the following

Operators’ offices in Gombe on March 25, 2010:

Tiddo Securities Ltd

APT Securities Ltd

Sigma Securities Ltd

ONITSHA ZONAL OFFICE

OPERATIONAL ACTIVITIES

COMPLAINTS

During the period under review, the Onitsha zonal office received a total of

forty eight (48) complaints from investors out of which twenty nine (29) were

Registrar-related, while nineteen (19) were Stockbroker-related complaints.

SUMMARY OF COMPLAINTS AGAINST MARKET OPERATORS S/N MARKET OPERATORS FREQUENCY

1 FIRST REGISTRARS LTD 9

2 UBA REGISTRARS LTD 2

3 CITY SECURITIES (REGISTRARS) LTD 4

4 UNITED SECURITIES LTD 3

5 DIAMOND SECURITIES LTD 1

6 OCEANIC REGISTRARS LTD 3

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7 STERLING REGISTRARS LTD 2

8 INTERCONTINENTAL REGISTRARS LTD 1

9 AFRIBANK REGISTRARS LTD 1

10 UAC REGISTRARS LTD 1

11 UNION REGISTRARS LTD 2

12 AMYN INVESTMENT LTD 5

13 GOSORD SECURITIES LTD 3

14 DYNAMIC TRUST LTD 2

15 AIMS ASSEST MGT. LTD 1

16 FORTE ASSET MGT. LTD 1

17 EDC SECURITIES LTD 1

18 SOLID ROCK INVESTMENTS LTD 1

19 MIDLAND CAPITAL LTD 1

20 UIDC SECURITIES LTD 1

21 QUANTUM SECURITIES LTD 1

22 STANWAL SECURITIES LTD 1

23 GMT SECURITIES LTD 1

TOTAL 48

ENFORCEMENT

During the quarter, the Zonal Office referred eight (8) case files to the Head

Office for enforcement action against market operators.

ROUTINE MONITORING OF THE NIGERIAN STOCK EXCHANGE, ONITSHA

BRANCH

Trading activities on the floor of the Onitsha branch of the Nigerian Stock

Exchange was low. This was because most stock broking firms traded from

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Lagos branch of the Exchange. Records of trading activities recorded are

stated below:

Frequency of trading activities was as follows:

S/N STOCKBROKING FIRM DATES TRADED 1 Gidauniya Investment & Securities Ltd 28-1-10 2 Gidauniya Investment & Securities Ltd 02-2-10 3 Yobe Investment & Securities Ltd 04-3-10 4 Gidauniya Investment & Securities Ltd 11-3-10 5 Networth Securities & Finance Co. Ltd 16-3-10 6 Prudential Securities Ltd 18-3-10 7 Prudential Securities Ltd 22-3-10

MARKET DEVELOPMENT

EXCURSION VISIT:

The Zone received members of the Association of Business and Accounting

Students from the University of Nigeria, Nsugbe Campus, Onitsha, Anambra

State on Wednesday, 17th March, 2010 and they were lectured on “Functions

of the Securities and Exchange Commission”.

OTHER OPERATIONAL ACTIVITIES

ALL PARTIES MEETINGS:

During the period under review, the Zonal Office convened the following all

parties meetings:

The Parties Included: Orji Jude Amachi VS Amyn Investment Ltd.

Subject: Failure of Amyn Investment Ltd to submit share application

for 3,100 units of Access Bank Plc shares during its initial public offer in

2007 and non lodgment of 26,932 units of Access Bank Plc shares

purchased from the secondary market since 2006.The meeting was held

on March 16, 2010 at the Onitsha Zonal Office.

The meeting resolved that Amyn Investment Ltd should pay the Complainant

the sum of N2, 268.04 being difference of the Underpayment of the

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complainant’s accrued dividends for Access Bank 2007/2008 financial years.

The Minister was advised to Approach BGL Securities Ltd on the outcome of

the form he filled for the transfer of his shares from Amyn Investments Ltd to

BGL Securities Ltd.

The Parties Included: Ezenwosu Ngozi azuka VS Monument

Securities Ltd.

Subject: Unlawful And Fraudulent sale of shares belonging to

Ezenwosu Ngozi Azuka, Osita Uchenna and Chukwudi Daniel by

Monument Securities Ltd on March 22, 2010 at Onitsha Zonal Office.

Monument Securities & Finance Co. Ltd promised to restitute 40% of the solid

shares because It was discovered that money for the purchase was paid into

the private account of Monument Securities branch manager by jobber, while

the jobber was to Contract the director of the defunct illegal operator in

respect of the 60%.

PORTHARCOURT ZONAL OFFICE.

OPERATIONAL ACTIVITIES:

INVESTIGATION AND ENFORCEMENT The Zone received sixty-eight (68) complaints from

shareholders/investors during the period. It resolved 34 of the cases

vide All-Parties Meetings, phone calls and directives to the affected

operators. However, four (4) complaints against Alliance Capital

Management Limited were referred to the Head Office for further action.

Breakdown of the resolved cases were:

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ON-SITE/SPOT CHECK: The Zone conducted On-Site inspection on Lead Capital Asset Management Limited, Port Harcourt Branch on Monday, March 15, 2010, which on Site Inspection was also carried on Euro Comm. Securities Limited, Port Harcourt Branch on Monday, March 29, 2010. Spot check on Integrated Capital Services Limited, Port Harcourt, Rivers State was conducted on Wednesday, March 17, 2010. The office was however found to have been closed and had relocated from Port Harcourt.

MONITORING OF TRADING ON THE FLOOR OF THE NIGERIAN STOCK EXCHANGE Trading activities on the floors of the NSE in Uyo, Owerri and Port

Harcourt were closely monitored by the PHZO within the review period.

REGISTRATION/RECOGNIZED INVESTMENT EXCHANGES

FRESH REGISTRATION The following firms applied for registration with the

Commission.

S/NO NAME OF FIRM CATEGORY OF

APPLICATION

APPLICATION

DATE

STATUS OF

APPLICATION

1. Neighbourhood Thrift

and Corporative

Society

Community

Savings Scheme

14/01/2010 Still being

processed

MARKET DEVELOPMENT ACTIVITIES (a) Trinitate International School, Eneka Road Igwuruta, Rivers State

was on an excursion visit to the Zonal office on Friday, 12th

February, 2010. A Paper on Introduction to the Nigerian

Capital Market was presented. The students were also taken on a

tour of The Nigerian Stock Exchange to have a practical view and

activities on the trading floor.

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(b) The Zone also carried out enlightenment programmes to NYSC

members at Akwa Ibom and Rivers States respectively during

their orientation camp.

INTERNATIONAL DEVELOPMENTS

REPORT OF THE 24TH AMERC MEETING/CONFERENCE HELD IN ACCRA, GHANA, FEBRUARY 15 – 16, 2010 The Africa/Middle East Regional Committee (AMERC) of the International Organisation of Securities Commissions (IOSCO) rose from its 24th Annual Meeting/conference in Ghana with the resolution to adopt Risk Based Supervision in their various capital markets. This constituted part of the Committee’s renewed drive to strengthen regulation and reinvigorate the sub-region’s capital markets, most of which had dropped to their lowest performance levels. Following the recent global financial and economic down turns, reports from members, however, indicated that most of the markets were already showing signs of recovery as activities had gradually picked up. Other strategies being adopted to uplift the markets in line with global best practices include, the migration to International Financial Reporting Standards (IFRS), intensifying and broadening the scope of investor education, regulatory and operators capacity building. The 24th AMERC meeting/conference was a successful one. The meeting/conference which was hosted by the Ghana Securities and Exchange Commission at the Alisa Hotels, Ridge, Accra – Ghana from February 15 – 16, 2010 brought together regulators and key stakeholders in the capital market to deliberate on “Information and Capital Market Development in Emerging Economies”. The first day of the two – days event was devoted exclusively for the meeting of regulators of the Capital market in the African and Middle East region. In his welcome remarks, Dr. Nii Sowa, Director-General of Ghana Securities and Exchange Commission noted that AMERC was an interesting group

99

comprising “more of learners than experts”. He stated that by this nature of AMERC, members had a lot to learn from each other, this would help strengthen the group and promote growth in their various markets. While delivering her welcome address, the new Chairman of AMERC and Director General, SEC Nigeria, Ms. Arunma Oteh, thanked members for the support given to her predecessor, Ms Daisy Ekineh, Executive Commissioner, Operations. She expressed her joy of becoming a member of the prestigious and distinguished AMERC/IOSCO family of regulators. She said that the role of IOSCO was very important in its bid to continue to raise the standards of securities market regulation, particularly at this time of global financial crisis. She observed that the financial crisis made it more imperative for all regulators to migrate to the International Financial Reporting Standards (IFRS) and ensure full implementation of all IOSCO recommendations which were geared towards market development and sound regulation. She urged the region to step up its capacity building activities as a way of equipping regulators to be on top of developments in the market. She further informed the delegates that the region recorded nearly hundred percent (100%) in signing the IOSCO MMoU as 10 members of the region were now Appendix A signatories, while 10 more countries were in the Signatory B category.Bahrain, Israel, Jordan, Kenya, Morocco, Nigeria, South Africa, Tunisia, West African Monetary Union were all Signatory ‘A’ countries, while Algeria, Egypt, Ghana, Malawi, Mauritius, Oman, Tanzania, Uganda, United Arab Emirates and Zambia are in Appendix B category. During the meeting which had thirty (30) representatives of capital market regulators from thirteen countries in attendance, deliberations were made on issues that include report on the Technical Committee, Emerging Market Committee and the Executive Committee meetings. The presentation on the state of play of the review of the IOSCO Strategic Direction 2010 – 2015, individual country reports and the report on the modifications to the IOSCO objectives and principles of securities regulation were also looked at. At the end of the meeting, participants were treated to a special dinner and cultural performances at the prestigeous La Palm Royal Beach Hotel.

100

Day two of the meeting /conference was not a Regulators affair, as about forty Stakeholders in the capital market and financial institutions joined the Regulators to partake in the conference.

While delivering the opening remarks at the Conference, Chairman of the Securities and Exchange Commission, Ghana, Dr. E.V.O Dankwa drew a parallel bewteen the open markets and the capital markets. He said that the key characteristics of all good markets was “a strong flow of information” from sellers to buyers and vice versa. He called on regulators and participants to encourage the culture of seamless flow of information in the capital markets. He also suggested that the markets should be develoveped in such a way that it would provide a dynamic price discovery mechanism that would enable buyers buy with assurance that they were not buying over-valued stocks and to assure sellers that their equities were not being under-valued. The Special Adviser to the Minister of Finance, Ghana, who was the special guest of honour at the conference urged Regulators to find a way of breaking down financial market terminologies into what the ordinary people would understand so that they could better appreciate the market and invest in it. This is because most of the terminologies in the market were too complex. In the keynote paper titled “Information and Capital Market Development in Emerging Markets”, Professor Victor Murinde of the University of Birmingham, United Kingdom, said that information was critical for capital market development. “An informative efficient capital market”, he said, “plays very important roles in efficient resource allocation, it eases the problem of raising finance, enhances the cost of capital and serves as ‘invisible watchman’. To maximise the benefit of information and capital market development in emerging economies, he made the following recommendations: Given the global financial crisis and its impact on key African capital

markets, a new regulatory regime for gathering and disseminating financial market information was required

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Regulators needed a new infrastructure to collect and analyze adequate information from large financial institutions, particularly of the ‘too big to fail’ category and foreign multinational banks.

The purpose of the new information framework was to bolster the government’s ability to foresee, contain and, most importantly prevent disruptions to the fragile financial services industry in African economies.

The lesson from the global financial crisis was that a new information architecture for ECMs was needed.

Monitor information signals from macro policy changes – monetary policy, fiscal policy and exchange rate policy which directly and indirectly influence capital market behaviour.

When public utterances were required, it was important that managers devise a corporate ‘communications’ policy and speak truthfully in order to minimise the likelihood of investors’ misinterpretation.

The communications strategy should encompass the following principles:

Assume that your words and actions have consequences on asset prices and stability of financial markets.

Bear in mind that loose lips sink corporate ships Consider honesty to be the best policy

The Keynote paper was followed by panel discussions with Dr. Japheth Katto, CEO, Uganda Capital Markets Authority chairing the session. During the session, Mr. Jeff Van Rooyen, a Chartered Accountant and Former CEO of the South African Financial Services Board presented a brief on “Information and Capital Market Development: A South African Perspective.” Michael Wells, Director, IFRS Education Initiative, presented a talk on “International Financial Reporting Standards for Small and Medium Scale Enterprises”; Mr. Reginald Prince of Boulders Advisors made a presentation on “Information and Development of Capital Market in Emerging Markets”; Dr. Rose Ngugi of the School of Economics, University of Nairobi, Kenya made a presentation on “Information Flow and Well Functioning Capital Markets, while Mr. Joe Aboagye Debra, a Commissioner at the Ghana Securities and Exchange Commission presented a perspective on “Information and Capital Market Development”.

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The Commission also continued the Self Assessment project of IOSCO’s 30 Objectives and Priniciples of Securities Regulation. Questionnaires are being collated from market intermediaries. The Commission also participated in IOSCO’s Technical Committee and Executive Committee meetings in Spain. It also concluded arrangements for the publication of the AMERC QUARTERLY REVIEW.

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INTERNATIONAL SCENE

MARKET ABUSE: REGULATORS TURNED THE HEAT ON PERPETRATORS

According to Thisday newspaper March 31, 2010.

Stung by the venom of the now easing global financial crisis, Securities Market

Regulators are turning the heat on perpetrators of sharp practices in the

capital market to prevent manipulations of the system and forestall re-

occurrence of the market abuse that led to the financial crisis. In the United

Kingdom, eight people suspected of being involved in an insider dealing ring

were arrested in a dawn raid across London, by the Financial Services

Authority (FSA).

The arrest was part of an effort by the FSA to get tougher on insider dealing,

the illegal trading on price sensitive information not available to the wider

market. The operation was the biggest of its kind in the United Kingdom

which had involved 40 FSA staff, with back-up from officers of city of London

police. Search warrants had been executed in what the financial watchdog

described as a “major ongoing investigation into insider dealing rings”

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DEVELOPMENTS IN THE DOMESTIC SCENE

NO PLANS TO LIMIT SHAREHOLDERS’ INTEREST IN BANKS CBN

Although there had been speculations over plans by the apex bank to limit the

shareholding percentage of the Nigerian investors in order to allow foreign

partners take over, Daily Trust of February 3, 2010 reported that, the CBN of

Nigeria said it does not intend to limit the percentage of shareholding of

investors in the Nigerian banks.

The CBN said action would not only negate the provisions of the Banks and

other financial institutions of the Act of 1991 as amended, but also the

Nigerian enterprises promotion Act which also encouraged unfettered

participation of both local and foreign investors in all the Nigerian enterprises,

including the banking secto

Senate Begins Consideration of AMC Bill

The Senate had begun the consideration of the Asset Management Bill.

According to the Punch of March 5, 2010, the bill when passed will become an

Act, and will see to the establishment of Management Company to efficiently

resolve issues surrounding non-performing loan assets of banks estimated at

about N1trn in Nigeria.

The Senate Leader, Senator Mr Teslim Folarin, who led the debate on the bill,

said this was aimed at providing a legislative framework to strengthen Asset

Management in order to forestall chaos in the financial sector.

.

The Director of enforcement at the FSA, Margaret Cole said the regulator

intends “to be bolder and more resolute about proceeding with market abuse

and insider dealing cases so that, they can actually bring about a change in the

culture of the city”.

105

She admitted that the threat of civil fines had not been strong enough

deterrent and signalled a shift to more criminal prosecutions, in her words ,

she affirmed that “If people have to go to prison for us to achieve that aim,

then that is what we are prepared to do.”

In a similar development, the United States SEC has commenced probe on the

Lehman Brothers alleged accounting trick and market abuse.

As both the US SEC and the FSA of United Kingdom were not leaving any stone

unturned by taking stringent actions in dealing with perpetrators of sharp

practices in their capital markets, Nigeria SEC should also draw inspirations

from these two institutions in dealing with market abuse , insider trading

and other forms of sharp practices in its market. Happily, the SEC DG, Ms

Arunma Oteh had said “ I am determined to eliminate sharp practices, deter

any form of malpractice and change behaviours by ensuring that both the

institutional and personal costs of any wrong doing is extremely high.’’

Ms Oteh’s undertaking is in agreement with the position of the UK’s Financial

Services Authority director of Enforcement, Margaret Cole that “the threat of

civil fines had not been a strong enough deterrent and signalled a shift to

more criminal prosecutions.”