SECURITIES AND EXCHANGE COMMISSION v. BIG TREAT PLC & ORS
(2019)LCN/12623(CA)
In The Court of Appeal of Nigeria
On Thursday, the 31st day of January, 2019
CA/L/88/2011
RATIO
EVIDENCE: WHERE AFFIDAVIT EVIDENCE SUPPORTS ORIGINATING SUMMONS
“Affidavit evidence in support of an originating summons, as in this case, represents pleadings in an action on originating summons vide Agbakoba v. I.N.E.C. (2008) 18 NWLR (pt. 1119) 489 at 549, Sea Ports and Ors. v. Migfo Nigeria Ltd. and Anor. (2012) 18 NWLR (pt. 1333) 555 at 609, N.N.P.C. and Ors. v. Famfa Oil Ltd. (2012) 17 NWLR (pt. 1328) 148, Uwazuruonye v. Governor of Imo State and Ors. (2013) 8 NWLR (pt. 1355) 28 at 56.
Section 38(1) of the I.S.A. states in mandatory terms that no person, natural or artificial, shall carry on investments and securities business unless the person is registered under the I.S.A. and its rules and regulations. Section 54 thereof reinforces compulsory registration of securities and investments of public companies and collective investment schemes with the appellant on pain of penalty and/or prosecution for non-registration.” PER JOSEPH SHAGBAOR IKYEGH, J.C.A.
INTERPRETATION: STATUTORY INTERPRETATION
“It is trite that statutory provisions are construed together or harmoniously to give literal or grammatical effect to the scope of the spirit and letter of the statute vide Orubu v. INEC (1988) 5 NWLR (pt.94) 323 to the effect that in seeking to interprete a particular section or a statute or a subsidiary legislation one does not take the section in isolation but one approaches the question of the interpretation on the footing that the section is part of a greater whole warranting every clause of the statute to be construed with reference to the con and other clauses of the statute so as far as possible to make a consistent enactment of the whole statute. See the cases (supra) cited by the appellant. See again Akaighe v. Idama (1964) ALL NLR 317.” PER JOSEPH SHAGBAOR IKYEGH, J.C.A.
JUSTICES
MOHAMMED LAWAL GARBA Justice of The Court of Appeal of Nigeria
JOSEPH SHAGBAOR IKYEGH Justice of The Court of Appeal of Nigeria
JAMILU YAMMAMA TUKUR Justice of The Court of Appeal of Nigeria
Between
SECURITIES AND EXCHANGE COMMISSION Appellant(s)
AND
1. BIG TREAT PLC
2. MS. PAMELA WU
3. MR. STEVE WU
4. HARRIES WU
5. NEW FRONTIER ENG. & COMPANIES LTD
6. SKYONE GROUP OF COMPANIES LTD Respondent(s)
JOSEPH SHAGBAOR IKYEGH, J.C.A.(Delivering the Leading Judgment):
The appeal is from the decision of the Federal High Court sitting in Lagos (the Court below) whereby it set aside an ex parte order of injunction it had issued against the 2nd – 6th respondents which had restrained the 2nd ? 6th respondents from obstructing the appellant in the appointing of an interim management to take charge of the day to day administration of the 1st respondent with a view to preserving its assets and the interest of its stakeholders on the ground that the 1st respondent, not being a capital market operator, the appellant could not intervene in its management and control.
The case of the appellant, in brief, was that at all material times the 1st respondent, a public quoted company, duly registered with the appellant, performed the functions of an issuer of securities which constitutes a specific and important function of the 1st respondent as a capital market operator whose audited accounts were usually submitted to the appellant yearly for scrutiny and for other regulatory actions by the appellant.
That it was as a result of the appellant?s analysis of the 2008 audited accounts of the 1st respondent which it filed with the appellant as issuer of securities showing the 1st respondent was drifting into deplorable financial state that necessitated the appellant?s intervention in the affairs of the 1st respondent to ascertain the true financial position of the 1st respondent and protect further depletion of its assets that the appellant brought the action at the Court below; in the course of which the appellant sought and obtained the ex parte preservatory order of injunction in question which was subsequently vacated by the Court below on the ground that the 1st respondent was not a capital market operator amenable to the control and management of the appellant in times of financial distress.
Not satisfied with the decision of the Court below, the appellant filed a notice of appeal with three (3) grounds of appeal followed with a brief of argument filed on 22.06.11, but deemed as properly filed on 05.12.17, containing the sole issue for determination whether the lower Court was right when it held that the 1st respondent is not a capital market operator because it does not play any specific role in the capital market and as such, not registrable or subject to the control of the appellant.
Relying on Section 315 of the Investments and Securities Act, 2007 and the preamble thereto read with Sections 13, 54(1), (5), 60, 61 and 65 thereof, the appellant contended in the brief that had the Court below drawn the fine line of distinction between Rule 28 of the Securities and Exchange Commission Rules made pursuant to the Investments and Securities Act (I.S.A.) and the cases of Olalomi Ind. Ltd. v. NIDB Ltd. (2009) 16 NWLR (pt. 1167) 266 at 299 – 300, Aqua Ltd. v. Ondo State Sports Council (1988) 4 NWLR (pt. 90) 622 at 624 – 625, Chief Awolowo v. Shehu Shagari (1979) 6-9 SC 37 at 67 – 68, No-Nail Cases Propriety Ltd. v. No-Nail Boxes Ltd. (1944) 1 KB 629 at 637, IGP v. Fawehinmi (2002) 7 NWLR (pt. 767) 606 at 671 enjoining the Court to give effect to clear words of a statute, the Court below having conceded in part of its decision in page 735 of the record of appeal (the record) that the 1st respondent is a user of investors? fund in the capital market it was bound to hold that the 1st respondent being the issuer of securities falls within category 2 of user of funds as it brings securities into the market for sale which is a specific and fundamental role within Section 315 of the I.S.A. and thus a capital market operator performing specific function in the capital market, therefore the Court below erred in holding otherwise; that based on the contention (supra) the decision of the Court below vacating its interim order in question was wrong; and that the appeal ought to be allowed and the said decision of the Court below set aside.
Only the 1st respondent filed brief of argument. It was filed on 21.03.16, but deemed as properly filed on 05.12.17. The 1st respondent argued in the brief that Sections 54 (1) and 315 of the I.S.A. read with Rule 28 thereof envisaged registration of capital market operators to perform specific functions, not the registration of securities per se, therefore the Court below was right in holding that the 1st respondent whose securities were registered with the appellant is not a capital market operator as it was not registered as a capital market operator under Part iv of the I.S.A. read with Section 38 thereof; consequently, it was urged that the Court below was right in construing the relevant provisions of the I.S.A. grammatically together in accordance with their plain meaning and thus arrived at the right conclusion that the 1st respondent having not been registered as a capital market operator with the appellant the latter could not regulate the affairs of the former and thus rightly vacated the interim order of injunction in question citing in support the cases of Egolum v. Obasanjo (1999) 7 NWLR (pt. 611) 355 at 393, C.B.N. v. Ukpong (2006) 13 NWLR (pt. 998) 555 at 571, A. – G., Kwara State v. Abolaji (2009) 7 NWLR (pt. 1137) 199 at 216, Okulate v. Awosanya (2000) 2 NWLR (pt. 640) 530, Kalu v. Odili (1992) 6 NWLR (pt. 240) 1 at 16, Black’s Law Dictionary, 8th Edition 713; upon which the 1st respondent urged that the appeal should be dismissed.
The reply brief filed on 12.02.18, but deemed as properly filed on 28.11.18, reiterated the arguments contained in the appellant?s brief and added that Rule 28 of the I.S.A. being a subsidiary legislation cannot override the substantive provisions of the I.S.A. and that counsel’s address cannot replace evidence citing in support the cases of Chukwuemeka v. F.R.N. (2016) 2 NWLR (pt. 1495) 120 at 143, Omisore v. Aregbesola (2015) 15 NWLR (pt. 1482) 205 at 308, Odeneye v. Efunuga (1990) 7 NWLR (pt. 164) 618 at 635, Ewete v. Gyang (1997) 3 NWLR (pt. 496) 728 at 735; and that the word ?shall? in Section 38(1) (b) of the I.S.A is a word of command vide Black’s Law Dictionary, 6th Edition, page 1375 read with the case of Ibrahim v. Lawal (2015) 17 NWLR (pt. 1489) 490 at 525.
Paragraphs 3 – 8 of the affidavit in support of the originating summons which is contained in pages 9 – 10 of the record of appeal (the record) is to the effect that the 1st respondent as well as the 5th – 6th respondents are companies directed and controlled by the 2nd – 4th respondents who are expatriates or foreigners showing the 1st, 5th – 6th respondents have foreign control and colouration. Paragraph 3 thereof, in particular, deposed thus: ‘The Respondent is a public quoted company and the Issuer of securities to the public and duly registered with the Applicant as such Incorporated under the laws of the Federal Republic of Nigeria having its registered office at Plot CL 2A, Ikosi Road, Oregun Road, Lagos and as such, it has its securities registered with the Applicant who exercise regulatory and enforcement actions over it as part of its statutory functions.
What prompted the intervention of the appellant in the affairs of the 1st respondent and its findings thereon are deposed to in paragraphs 10 – 12 of the affidavit in support of the action on the originating summons in pages 10 ? 15 of the record thus –
Investigation of Big Treat PIc
10.Sequel to the Applicant’s analysis of the 2008 Audit Accounts of the 1st Respondent which it filed with the Applicant and the whistle blowing of concerned individuals, the management of the Applicant approved an inspection of the 1st Respondent. The report of the inspection carried out by the officers of the Applicant culminated in the issuance of some directive to the 1st Respondent by the Applicant.
11.The Applicant also gathered information from the stakeholders of the 1st Respondent that the 1st Respondent was further drifting into deplorable financial state which necessitated the Applicant to carry out a further investigation on the 1st Respondent to ascertain these allegations
Findings
12. A further investigation was carried out on the 1st Respondent by the Officers of the Applicant on 10th – 13th August 2010 and the findings of investigation were as follows, that:-
Wrongful/Fraudulent Transfer of 1st Respondent?s Funds to other Companies owned and run by the 2nd and 3rd Respondents-
i. There have been huge transfers and payments of various sums of monies from the accounts of 1st Respondent to Skyone Co. Limited, New Frontiers Engineering Limited, and Skyone Group of companies. . There were also instances where the 2nd Respondent used single signatory mandate to transfer funds from the 1st Respondent’s account to New Frontiers Engineering, a company owned by the Wu family. Now shown to me and marked as Exhibits 1a, 1b, 1c, 1d, 1e, 1f, 1g, 1h, 1i and 1j are the transfer letters sent to the various banks by the 2nd Respondent and 3rd Respondents which were solely signed by each of them.
ii. Upon inquiry on these transfers, the Applicant was informed that the transfers were in respect of services rendered and goods invoiced by the 1st Respondent. It was however established that the 2nd Respondent is the Managing Director or alter ego of the four mentioned companies.
Diversion of 1st Respondent’s proceeds of Sale
iii. The sales proceeds of some sales outlets and branches of the 1st Respondent were remitted into banks accounts other than the 1st Respondent. These facts were established by the minutes of the 1st Respondent’s management meetings and ledger accounts of the 1st Respondent. The sales reports, minutes and ledger accounts are annexed hereto as Exhibits 2a.b, 3 and 4.
iv. The 2nd Respondent confirmed that sales proceeds from Owerri and Aba outlets of the 1st Respondent were remitted directly into Wema bank Account No. 0851008163219. This account was solely operated and run by the 2nd Respondent’s brother (3rd Respondent) who is an Executive Director Eastern Region of the 1st Respondent. The Wema Bank Account mandate is hereto annexed as Exhibit 5.
v. The 2nd Respondent also confirmed that sales proceeds from the Port Harcourt factory/sales outlet were remitted into Wema Account No. 0851008163227. According to the 2nd Respondent, Account No. 0851008163219 is used for the running of the Eastern Regional operations, while Account No. 0851008163227 serves as collection account only and the balances in the said account are usually transferred to the main company account.
Unilateral Withdrawals of Fund by the 2nd and 3rd Respondents
vi.The present system of control of the 1st Respondent allows a single signatory mandate to the account of the 1st Respondent, a publicly quoted company and also, sales proceeds are spent directly from a branch/region without proper integration into the main revenue base of the company.
Lack of Forgery of Vouchers to facilitate payment of funds to Skyone Group of Companies and others.
vii. The Applicant seeking to verify some questionable transactions, an account officer (Mr. Azeez Kehinde) was caught writing, backdating and forging signatures on two payment vouchers to support the payment of the sum of N12 Million in favour of Skyone Group of Companies.
viii. The 1st Respondent engages in transactions involving huge sums of money without proper documentation and in certain situations the cheques were raised for several millions of Naira without using payment vouchers. At other times, payment vouchers were used without any form of authorisation, checking or approvals. Now shown to me and marked as Exhibits 6a, 6b, 6c, 6d, 6e and 6f are the said payment instruments.
ix. The 2nd Respondent is in the habit of holding signed blank cheques. The officers of the Applicant also noted that the officers of the 1st Respondent signs and accepts blank cheques from each other.
Unilateral Corporate decisions by 2nd Respondent
x. The 2nd Respondent is in the practice of unilaterally taking major decisions such as acceptance of loans from banks and other organisations without observing due process. Most of these commitments were supposed to be by board decisions. An examination of the board minutes of the 1st Respondent presented by the Company Secretary revealed that these decisions were never taking at the 1st Respondent’s board meetings. Now shown to me and marked as Exhibits 7a, 7b, 7c, 7d, 7e, 7f, 7g and 7h are the said minutes of the board of the 1st Respondent.
xi. The decisions/transactions referred to in ix above were in respect of companies wholly ‘owned by the 1st and 2nd Respondents and these companies have no affiliation(s) whatsoever with the 1st Respondent. Now shown to me and marked as Exhibits 8a, 8b, 8c, 8d, 8e, 8f, 8g, and 8h are documents evidencing huge financial transactions involving the four companies wholly owned by the 2nd – 4th Respondents.
Abuse of Internal Control System
xii. The 1st Respondent does not have any form of internal control system and or mechanism in place. The production process, the inventory management and the payment system is subjected to any established form of checks and balances. It was also revealed that financial and other transactions were initiated and concluded without any form of acceptable controls. The head of internal control system left the company in manner that is yet to be properly explained by the management of the 1st Respondent. Presently, a System Audit Officer is saddled with internal control responsibility.
Reckless sacking of Personnel by 2nd Respondent
xiii. The 1st Respondent has in the past six (6) months experienced a staff turnover of more than 300 (Three Hundred) workers (including principal officers and directors) indicative of the fact that the company is facing a going concern problem. Now shown to me and marked as Exhibit 9 is the list of the said staff turnover.
False and unapproved Board of Directors Composition
xiv. A review of some of the Board minutes referred to above and presented by the Company Secretary revealed that the following persons constituted members of the Board of Directors: –
a. Alhaji Rabiu I. Rabiu – Chairman
b. Ms Pamela Wu – Managing Director
c. Mr. Harries Wu – Executive Director
d. Mr. Steve Wu – Executive Director
e. Mr. Clem Baiye – Director
xv. Upon request of the Company’s CAC form C02 to confirm appointment of the directors, the 1st – 4th Respondents failed to make same available. However, in the course of discussion with one Mrs. J. T. Oyetan (Company Secretary), the officers of the Applicant were informed that the Corporate Affairs Commission did not approved the amended form C02 appointing Alhaji Rabiu I Rabiu and Clem Baiye who have been sitting on the board of the 1st Respondent for over one year. This means that the 1st Respondent was operating without an effective board. Fraudulent Manipulation of Board and Breakdown of Corporate Governance.
xvi. The officers of the Applicant also observed as follows: –
a. Mr. Clem Baiye resigned his appointment from the Board with effect from January 2010. Now shown to me and marked as Exhibit 10 is a letter from Clem Baiye (Director) dated 17th May 2010 resigning his appointment.
b. Mr Harries Wu has been out of the country for about a year and has not been attending board meetings even before he travelled.
c. Alhaji Rabiu I. Rabiu, the Chairman of the board who has not being attending the board meetings regularly has also resigned his appointment as the Board Chairman.
d. Arrangements were in place to appoint Ms Pamela Wu as the Executive Chairman.
e. Consequent to the above, Ms Pamela Wu and Steve Wu are the only board members running the 1st Respondent.
f. Recently, a Managing Director (Dr. Nosike Agokei) was engaged and barely 3 weeks, he resigned his purported appointment. This prompted the officer of the Applicant to interview Dr. Agokei and Mr.Clem Baiye who was a former member of the company’s board of directors. Whilst Dr. Agokei described the situation in the 1st Respondent as that of a “monumental fraud’ and lack of corporate governance, Mr. Baiye said he opted out of the board because Ms Pamela Wu still runs the 1st Respondent as a private company.
xvii. Mr. Steve Wu (3rd Respondent) who is purportedly an Executive Director in the 1st Respondent is equally managing the other three companies (mentioned earlier) as Executive Director (i.e. Skyone Company Limited, New Frontiers Engineering Limited and Skyone Group of Companies Limited).
xviii. After departure of Dr. Nosike Agokei, Ms Pamela Wu single handed arranged to being in Mr. Nimish Bhatnagar an Indian, who was a former Cinema Manager as the new Managing Director.
xix. Ms Pamela Wu is perfecting a plan to perpetuate herself as shadow Managing Director of the 1st Respondent.
Now shown to me and marked as Exhibit 12 is the investigation report carried out on the 1st Respondent by the Applicant.
13. I know for a fact that the Nigerian Stock Exchange on Tuesday, 5th October 2010 placed the 1st Respondent on technical suspension following the 1st Respondent’s failure to submit audited account to the Exchange for the year ended 31st December 2009. Now shown to me and marked as Exhibit 13 is the Punch Newspaper publication of 6th October 2009 at page 19 confirming the said suspension.
Moved by the above allegedly deplorable state of affairs the appellant obtained an ex parte order of the Court below to arrest the drift of the 1st respondent into financial doldrums in which the Court below issued among others, an order of interim injunction restraining the 2nd – 6th Respondents, their agents, servants or privies from obstructing the appellant in the exercise of its statutory oversight responsibilities to the 1st Respondent including the appointing of an interim management to take charge of the day to day administration of the 1st Respondent with a view to preserving its assets and the interest of its stakeholders pending the determination of the Motion on Notice already filed in this suit- vide pages 581 – 582 of the record.
The grouse of the appellant is that the Court below should not have vacated the order (supra) on the preliminary objection by the respondents that the 1st respondent is not a registered capital market operator performing specific functions in the capital market.
Affidavit evidence in support of an originating summons, as in this case, represents pleadings in an action on originating summons vide Agbakoba v. I.N.E.C. (2008) 18 NWLR (pt. 1119) 489 at 549, Sea Ports and Ors. v. Migfo Nigeria Ltd. and Anor. (2012) 18 NWLR (pt. 1333) 555 at 609, N.N.P.C. and Ors. v. Famfa Oil Ltd. (2012) 17 NWLR (pt. 1328) 148, Uwazuruonye v. Governor of Imo State and Ors. (2013) 8 NWLR (pt. 1355) 28 at 56.
Section 38(1) of the I.S.A. states in mandatory terms that no person, natural or artificial, shall carry on investments and securities business unless the person is registered under the I.S.A. and its rules and regulations. Section 54 thereof reinforces compulsory registration of securities and investments of public companies and collective investment schemes with the appellant on pain of penalty and/or prosecution for non-registration.
Registration of capital market operators is therefore a key element in the statutory regulatory scheme of the appellant and plays a significant role in protecting investors by promoting baseline level of integrity among capital market operators and their personal dealing with investors and stability of the capital market as a securities market ombudsman with the powers to regulate issuers of securities for the protection of investors and for the sustenance of the capital market. (Company Securities: Law and Practice (second Edition) page 74 by Professor Abugu).
Section 13 of the I.S.A provides thus –
13.The Commission shall be the apex regulatory organization for the Nigerian capital market and shall carry out the functions and exercise all the powers prescribed in this Act and, in particular, shall:
(a) regulate investment and securities business in Nigerian as defined in this Act;
(b) register and regulate securities exchanges, capital trade points, futures options and derivative exchange, commodity exchange and any other recognized investment exchange;
(c) regulate all offers of securities by public companies and entities;
(d) register securities of public companies;
(e) render assistance as may be deemed necessary to promoters and investors wishing to establish securities exchange and capital trade point;
(f) prepare adequate guidelines and organize training programmes and disseminate information necessary for the establishment of securities exchanges and capital trade points;
(g) register and regulate corporate and individual capital market operators as defined in the Act;
(h) register and regulate the workings of venture capital fund and collective investments schemes in whatever form;
(i) facilitate the establishment of a nationwide system for securities trading in the Nigerian capital market in order to protect investors and maintain fair and orderly markets;
(j) facilitate the linking of all markets in securities with information and communication technology facilities;
(k) act in the public interest having regard to the protection of inventors and the maintenance of fair and orderly markets and to this end establish a nationwide trust scheme to compensate investors whose losses are not covered under the investors protection funds administered by securities exchanges and capital trade points;
(l) keep and maintain a register of foreign portfolio investments;
(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 abuses including insider dealing;
(o) promote and register self-regulatory organization 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 the Act;
(q) Authorize and regulate cross-border securities transaction;
(r) Call for information from and inspect, conduct inquiries and audit of securities exchanges, capital market operators, collective investment schemes and all other regulated entities;
(s) Promote investor’s 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 functions;
(u) Levy fees, penalties and administrative costs of proceedings or order charges on any person in relation to investment and securities business in Nigeria accordance with the provisions of the 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 role of protecting the integrity of the securities market, seek judicial order to freeze the assets (including bank accounts) of any person whose assets were derived from the violation of the Act, or 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 co-operative 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 on all matters relating to the securities industry; and
(dd) perform such other functions and exercise such other powers not inconsistent with the Act as are necessary or expedient for giving full effect to the provisions of the Act.? (My emphasis)
The 1st respondent duly registered its securities with the appellant.Section 60 of the I.S.A. required the 1st respondent whose securities are registered with the appellant to submit on periodic or annual basis its audited financial statements and such other returns as may be prescribed by the appellant from time to time. Section 61 thereof require a public company such as the 1st respondent to establish a system of internal controls over its financial reporting and security of its assets to ensure the integrity of the company?s financial controls and reporting by means of policies, procedures and practices to ensure safety of assets, accuracy of financial records and reports, achievement of corporate objectives and compliance with laws and regulations on pain of penalty prescribed in Section 65 of the I.S.A., showing compliance with Sections 38(1), 54, 60 and 61 of the I.S.A. is mandatory or compulsory.
For the avoidance of doubt, Section 315 of the I.S.A. defines ‘capital market operator’ as any person, individual or corporate, duly registered by the appellant to perform specific functions in the capital market.
Rules 28 of the I.S.A. being subsidiary to the substantive provisions of the I.S.A. is subject to or undermined by the substantive provisions of the I.S.A. and the latter would prevail in the event of any inconsistency or conflict between the former to the extent of the inconsistency or conflict, save that the rules thereof may be used only as a guide to the interpretation of the substantive provisions of the I.S.A. where there is ambiguity in the substantive provisions of the I.S.A. on the issue for the purpose of accommodating the object or scheme of the legislation vide A.-G., Bendel State v. Aideyan (1989) 4 NWLR (pt.118) 646 at 668 and 671 and the cases (supra) especially Ewete v. Gyang at 753 to the effect that a subordinate legislation is prima facie ultra vires if it is inconsistent with the substantive provisions of the statute by which the enabling power is conferred or any other statute relying on the English cases ofRe Davis ex parte Davis (1872) 7 Ch. App. 526 at 529, per James L.J; R. V. Bird ex parte Needes (1998) 2 Q. B. 340; Price v. Western London Investment Building Society (1964) 2 ALL ER 318 at 322 and Irving v. Askew (1870) LR 5 Q. B. 208 at 211 per Hannen, J. cited on the issue by the appellant.
It is trite that statutory provisions are construed together or harmoniously to give literal or grammatical effect to the scope of the spirit and letter of the statute vide Orubu v. INEC (1988) 5 NWLR (pt.94) 323 to the effect that in seeking to interprete a particular section or a statute or a subsidiary legislation one does not take the section in isolation but one approaches the question of the interpretation on the footing that the section is part of a greater whole warranting every clause of the statute to be construed with reference to the con and other clauses of the statute so as far as possible to make a consistent enactment of the whole statute. See the cases (supra) cited by the appellant. See again Akaighe v. Idama (1964) ALL NLR 317.
Accordingly,Sections 13, 38(1),54(1) and(5), 60, 61,65 and 315 of the I.S.A. read together with paragraph 3 of the affidavit in support of the action establishes that the 1st respondent, an issuer of securities, having been duly registered with the appellant and was at all material times performing the specific function of issuing securities in the capital market was subject to the intervention of the statutory powers of the appellant as the pinnacle regulatory authority for the Nigerian capital market whose sole purpose is to ensure the protection of investors and to maintain fair, efficient and transparent capital market as well as reduction of systematic risk as stated in the preamble to the I.S.A. – the beacon-light to the powers of the appellant under the I.S.A.
The learned author, Professor Abugu, states aptly in his standard book, Company Securities: Law and Practice (supra) in pages 72 – 73 in that wise as follows?
‘Registration of securities market institutions and participants is one of the most potent instruments of investor protection as it enables the Commission to critically assess the fitness or otherwise of all institutions and persons proposing to operate in the capital market. Ascertaining their suitability is critical to confidence building, given that any unscrupulous action could erode confidence and destroy the fabric of the market. Registration demands that accurate and comprehensive information be sought and obtained from prospective registrants. Information submitted are required to be sworn to before a Commissioner for Oaths. Notwithstanding, the SEC endeavours to verify all information submitted to it. A satisfactory police clearance is required from all prospective individual registrants to ensure that ex-convicts and criminals are not admitted into the securities market. Registration is a continuous process. All major changes or new information concerning the registrant must be promptly communicated to the Commission. Certificates of registration issued are to be renewed periodically.
In addition, the SEC’s function of registering securities in the capital market, affords the Commission the opportunity of ascertaining the value and worthiness of the securities and the credibility of the issuer.
In this way worthless securities are not brought into the market to defraud unwary investors and dampen confidence in the capital market. The maintenance of market ethics as well as transparency are paramount to the sustenance of confidence. As the watchdog of the capital market, the Securities and Exchange Commission constantly monitors market activities to forestall manipulative and other illegal practices. In carrying out this function the SEC requires timely disclosure of information affecting securities, monitors trading activities of key company officials and general trading activities on the floor of the Stock Exchange. It also carries routine checks on the activities and operations of market operators and the review of newspapers and other periodicals to investigate any report suggestive of violation of securities laws. The SEC has a Surveillance and investigation Division to carry out this function and it ensures that the provisions of the Act and of its regulations are strictly adhered to and enforced. It has created an enforcement division whose duty is to ascertain whether or not a violation of the law has occurred and to recommend appropriate sanctions. Sanctions, in proven cases, take various forms depending on the severity of the violation. For minor offences, a warning might be appropriate while severe cases could attract a suspension or withdrawal of license in which case the offender is barred from operating in the capital market. A Court injunction is also sometime sought or litigation instituted. (My emphasis).
The I.S.A. is therefore an effective method of preventing impropriety in the management of capital market by capital market operators through the appellant?s intervention in the decaying or paralyzing affairs of a company registered with the appellant as capital market operator in the capital market performing specific role of issuers of securities, such as the 1st respondent, which intervention is expected to arrest, minimize or forestall the drift to disaster or the dissipation of the assets and/or collapse of the mismanaged company for the protection of investors thus fulfilling one of the most important schemes of the I.S.A.
The Court below rightly acknowledged in its ruling in page 735 of the record that users of funds in the capital market constitute part of the capital market apparatus. Paragraph 3 of the affidavit in support of the originating summons deposed inter alia in page 9 of the record that the 1st respondent has its securities registered with the appellant who exercises regulatory and enforcement actions over the 1st respondent as part of the appellant?s statutory functions. Had the Court below taken into consideration these salient issues it would not have held that the 1st respondent does not perform specific role in the capital market.
Having registered with the appellant as dealer in securities or issuer of securities in the capital market the 1st respondent’s specific role of issuer of securities in the capital market makes the 1st respondent subject to the rules and the authority of the appellant under the I.S.A. which is entitled bySection 13(v) of the I.S.A. (supra), in particular, to intervene in the management and control of capital market operators in distress or which the appellant considers has failed, is failing or in crisis by doing whatsoever the appellant deems necessary to arrest the drift for the protection of investors in the capital market.
It was thus held in the case of Farid Mikhail Faloughi and Ors. v. Alain Abdala Faloughi and Ors. (1995) 3 NWLR (pt. 384) 434 that the appellant’s statutory powers can regulate the affairs of companies engaged in effecting transfer of shares; and that where public companies are run by foreigners as shareholders, for example, the approval of the appellant was a condition precedent to the transfer or intended transfer of any shares in the company concerned.
The powers of control and intervention of the appellant under the I.S.A. also extends to private companies as is illustrated by the case of Societe Generale Bank Nigeria Ltd. v. S.E.C. unreported Court of Appeal judgment in appeal No. CA/L/434/98 (cited without date of delivery of the judgment in ‘Companies Securities: Law and Practice’ Second Edition page 98 by Professor Abugu) to the effect that the regulatory powers of the appellant covers private companies even where there is alien participation in the sale or transfer of shares.
In conclusion, I most respectfully hold that the Court below should not have vacated the interim preservative order made by it to protect the imminent collapse of the 1st respondent by the appellant who at all material times was exercising statutory powers under the I.S.A. to stem the tide of decay in the internal management of the 1st respondent as it affected investors in the securities registered by the 1st respondent with the appellant as a registered issuer of securities in the capital market thus playing the specific role of issuer of securities in the capital market and amenable to the control and regulation of the appellant under the relevant provisions (supra) of the I.S.A. vide Oni v. S.E.C. and Anor. (2013) 3 BFLR 246.
On the whole, I find merit in the appeal and hereby allow it and set aside the decision of the Court below vacating the said interim preservative order and consequentially restore the said interim preservative order for the protection of investors of the securities registered by the 1st respondent with the appellant. Parties to bear their costs.
MOHAMMED LAWAL GARBA, J.C.A.: I have read a draft of the lead judgement by my learned brother Joseph Shagbaor Ikyegh, JCA, and agree with him that by the definition of the term “Capital Market Operator” inSection 315 of the Investment and Securities Act, 2007(ISA), the 1st Respondent, which was duly registered by the Appellant to perform the specific function of issuing securities, in the capital market in Nigeria, is a capital market operator that is subject to the statutory regulatory supervision and control of the Appellant. This is borne out by the unchallenged avernment in paragraph 3 of the Affidavit filed in support of the originating summons filed by the Appellant.Section 54 (1) of the ISA requires that all securities of a public company, such as the 1st Respondent, shall be registered with the Appellant under the terms and conditions set out therein and regulations by it and in Subsection 5, says that no securities shall be issued, transferred, sold or offered for subscription by or sale to the public without prior registration by the Appellant.
If a registered issuer of securities under ISA is not a Capital Market Operator as defined by the Act itself, one would wonder who else is. I join in allowing the appeal in terms of the lead judgement.
JAMILU YAMMAMA TUKUR, J.C.A.: My learned brother JOSEPH SHAGBAOR IKYEGH afforded me the opportunity of reading before today a draft copy of the lead judgment just delivered. I adopt the judgment as mine with nothing further to add.
Appearances:
Mr. F.O. Obiejesi, with him, Mr. J. IbehFor Appellant(s)
Mr. L. C. Okoli, with him, D. T. Ayorinde for the 3rd Respondent
The 2nd, 4th & 6th Respondents were served hearing notice but were unrepresentedFor Respondent(s)
