Oando restrains SEC from biased action with court order

Oando PLC, Nigeria’s largest indigenous Oil & Gas Company has finally reacted to the Securities & Exchange Commission’s (SEC’s) alleged findings following an investigation into the company which began in May of this year, following a petition filed by Ansbury Inc. and Alhaji Dahiru Mangal.

On Wednesday, 18 October 2017, SEC published a statement on its website detailing alleged infractions committed by Oando PLC and weighty penalties which included a directive to the Nigerian Stock Exchange (NSE) for a 48-hour full suspension followed by a technical suspension, in the trading of Oando shares and for a forensic audit into the affairs of the Company to be conducted.

On the same day, the NSE put a full suspension on the trading of Oando’s shares, and on Monday, 23 October 2017 this was replaced with an indefinite technical suspension.  A technical suspension allows for continued trading of Oando shares without impacting the price.  Since news of the SEC investigation broke, the Company’s shares which had gained 27% this year, has taken consistent hits.  In July when the news initially broke its share price fell by N0.80 (from N8.35 on July 13 to N7.55 on July 14).  The share price continued on a downward spiral and last traded at N5.99, a fall of N2.36.

Oando in a statement issued yesterday said ‘We are of the view that the SEC’s directives are illegal, invalid and calculated to prejudice the business of the Company. The Company being dissatisfied with the most recent actions taken by the SEC and to safeguard the interests of the Company and its shareholders immediately took steps to file an action with the Federal High Court (FHC) against the SEC and the NSE.’

The statement added that on Monday, October 23, 2017 the company obtained an ex-parte order from the FHC granting an interim injunction, via an order restraining the NSE from effecting the directive of the SEC to implement a technical suspension of the shares of the company, and an order restraining the SEC from conducting any forensic audit into the company’s affairs pending the hearing and determination of the matter.

The NSE and SEC were served with the court order on Tuesday, October 24, 2017 and the NSE and the SEC are legally obliged to comply with the interim orders pending the substantive determination of the suit.

An Oando source advised that the company’s reasons for taking this stance against the Commission is the clear bias that has been shown towards the petitioners and the mismanagement of the investigation from inception. Firstly, there is fact that the SEC’s investigation of a public-traded company is public knowledge; a fact that has had a negative impact on the Company’s share and enterprise value, and led to some of the company’s shareholders questioning who the SEC is really protecting.

The source went on to say ‘there have been four media leaks to date, with sources indicating that the leaks have emanated from the SEC.’  A shareholder who spoke anonymously for fear of backlash, raised concerns that if an indirect and foreign shareholder could wield so much power over a public listed company, with the backing of the SEC, with no regard for all the other shareholders, then none of us are safe.

He went so far as to question who the Commission was protecting ‘Contrary to their mission to protect the capital market and Nigerian shareholders, the SEC has folded its arms and watched the investment of hundreds of thousands of Nigerian shareholders go down the drain while the public has had to appallingly watch what should have been a closed door investigation play out in the media.  For those of us who have invested in Oando and seen the drastic nose dive that its share price has taken, we are deeply saddened by the SEC’s management of this investigation.’

Secondly, Oando has raised questions as to why the Commission has investigated a petition brought on by an indirect shareholder (Ansbury Inc.) domiciled outside Nigeria, in a jurisdiction outside the SECs purview and one currently in arbitration court in the UK when the SEC’s Complaints Management Framework says it shall not consider any matter which is currently in arbitration.

Furthermore, in a recent letter to Oando, the SEC re-categorised the petitioner as a “whistle blower”, contrary to its former position as a “shareholder”, which according to Oando shows a clear bias as it suggests the SEC re-categorised the petitioner’s position to ensure it is able to carry on investigating the petitions.

In the Company’s statement, it highlights letters sent by its Chairman HRM Oba M. A. Gbadebo to the Director General of the SEC ‘Mounir H. Gwarzo’ alleging bias and lack of due process in the way and manner in which the SEC has conducted this investigation. It goes on to say that the Chairman asked to be granted an audience to present the Company’s case, a request that the SEC repeatedly denied, whilst the regulator has granted an audience to Ansbury Inc and gone so far as to offer what is tantamount to legal advice to them.

Oando states that the most recent action taken by the regulator confirms that the Commission appears to be working to its own conclusion rather than looking at the facts before it, and acting in the best interests of the Company and the minority shareholders whom it claims it seeks to protect.

To further reinforce the Company’s strong reservations with the SEC’s findings a second statement was issued yesterday.  The statement outlined all of the alleged infractions identified by the SEC and details the Company’s position, for the most part disagreeing with SECs pronouncements and going so far as to highlight the prescribed penalties as set out by the regulators for said infractions none of which singularly or together warrant the institution of a forensic audit, full or technical suspension of trading of the Company’s shares on the NSE.

The Company goes on to say that it does not believe that the SEC has presented a strong enough case to support the engagement of a Forensic Auditor to conduct a forensic audit into their affairs and highlights seven reasons to support this belief.  Reasons include SEC requesting a forensic audit in order to investigate whether its findings are true which is a clear contradiction.

How did the SEC arrive at its findings if it cannot be sure of the veracity of those findings, and more importantly how did it ascribe the appropriate level of weight to be given to those findings, enough to warrant an immediate suspension followed by a technical suspension of the shares of the Company, especially if those findings are still mere allegations at this point, as the Commission has clearly communicated?

In a letter from the SEC, the Commission informed Oando that the N160 million cost of the forensic audit will be borne by the Company, to which Oando responded by saying that this must be an error in light of all its submissions to date, and not the best use of shareholder funds at this time.

Lastly, the Company has highlighted that in the letter sent to Oando by the SEC, both the petitioners were copied, Alhaji Mangal and Ansbury Inc. The company has rightly stated that it is unheard of and prejudicial for petitioners to be copied on correspondence to the investigated party on findings yet to be concluded.

It is unclear how the SEC will respond to the allegations against it on the basis of bias, but one thing is evident from the press statement issued by the Company, Oando has taken a different and bold stance to challenge the Commission.