Stakeholders blame N10bn capital market scam on investors’ negligence

Stakeholders in Nigeria’s Capital market have cited negligence and greed on the part of investors in the share scam involving Partnership Securities Limited (PSL).

Recall that last week, the Economic and Financial Crime Commission (EFCC) arrested the CEO of PSL, Victor Ogiemwonyi for misappropriating money of some of his clients.

Particularly, the broker, a former Council member of the NSE, was said to have sold shares of former Chief Executive Officer of Ecobank Transnational Incorporated (ETI), Mr. Arnold Ekpe, worth N1.24 billion and misappropriated the proceeds.

He was also said to have introduced a product called Partnership Securities Deposit Account (PSDA), which involved investors keeping their securities with the company for a return annually. While the investors are battling to get back their money, market operators said they wondered how an investor would receive 80 trade alerts on the sale of his shares, he did not get the proceeds of the shares and yet waited for three months before raising the alarm.

According to one of the stakeholders, Mr. Michael Jegede, it was as a result of pure negligence on the part of the investors. “Why did an investor receive 80 alerts that his shares are being sold and refused to act?”

Jedege said the concerned investor should reported to the Nigerian Stock Exchange, Securities and Exchange Commission or even to the EFCC. “This is either pure negligence or there is something that we do not know,” he noted.

Meanwhile, market regulators and operators have expressed optimism that the risk based supervision(RBS) framework and the framework to identify systemic non-bank financial institutions (NBFI) recently introduced by the SEC will help to check the activities of operators who use holding company structure to perpetuate infractions in the market.

While the SEC and NSE register and licensed capital market operators (CMO) to play in the market, some of the CMOs float subsidiaries that operate outside the purview of SEC and NSE. In the process of operating outside the supervision of the regulators, some of those CMOs have committed market infractions. BGL Group and Partnership Securities Limited are typical examples. Both organisations used subsidiaries not regulated by SEC and NSE to market financial products and services that led to losses by investors.

This development has given a lot of concerns to investors who said it was discouraging for them to patronise the capital market through CMOs and do not get enough protection.

The commission said the systemically important CMOs would be subjected to higher capital requirements that are commensurate to their size, scale of activity and inherent risk. Besides, it shall on a quarterly basis review the capital adequacy status of the identified CMOs with a view to ensuring that the capital requirements are within the regulated level.