Olubunmi Oladapo Oni V. Administrative Proceedings Committee Of Securities & Exchange Commission & Anor (2013)

LawGlobal-Hub Lead Judgment Report – COURT OF APPEAL

CHINWE EUGENIA IYIZOBA, J.C.A. (Delivering the Leading Judgment)

This appeal is against the judgment of Abdullahi Mustapha CJ of the Federal High Court Lagos Division in suit No. FHC/LOS/CS/418/2008 delivered on 26/9/08 dismissing the Appellant’s application for review of the decision of the 1st Respondent, a Committee of the 2nd Respondent, which decision was communicated to the Appellant by a letter dated 8/4/08. In the judgment, the learned Chief Judge refused the prayers for injunction, certiorari and prohibition sought by the Appellant in respect of the said decision of the 1st Respondent.

The Appellant herein is the former Managing Director of Cadbury Nigeria Plc, a company listed in the Nigerian Stock Exchange. The 2nd Respondent is a Federal Government Agency established by the Investment and Securities Act (ISA) 1999 now repealed and replaced by the 2007 Act as the apex regulatory authority for the Nigerian capital market as well as regulation of the market to ensure the protection of investors, maintenance of fair, efficient and transparent market and the reduction of systemic risk and other related matters.

The 1st Respondent is a Committee of the 2nd Respondent. Sometime in June 2006, the 2nd Respondent received a copy of Cadbury Nigeria Plc’s annual Report and Accounts for 2005. Upon review of the Report, the Commission wrote to Cadbury to express concern on issues arising from the report in the areas of declining profitability, worsening leverage ratio, deteriorating cash flow, inadequate disclosure, non-compliance with Corporate Governance Code and obtaining loans for the payment of dividends to shareholders contrary to SEC regulations.

The Chairman of Cadbury through a letter to the Commission dated 16/11/06 reported the engagement of an independent firm, Price Waterhouse Coopers (PWC) to investigate the allegations of overstatement in the company’s Financial Statements for the period 2003 -30th September 2006. PWC’s report was forwarded to the 2nd Respondent. The Commission then constituted an in-house Committee which carried out a thorough investigation on the matter and confirmed the report of misstatements in the account of Cadbury to the tune of approximately N13 billion.

Cadbury, its directors, persons in charge of the running of the company, the external auditor and the Registrars, about 20 persons in all including the Appellant were invited before the 1st Respondent to explain why sanctions should not be imposed on them for violating the provisions of the Investments and Securities Act, the SEC Rules and Regulations 2000 (as amended), Code of Conduct for Capital Market Operators and their employees and the Code of Corporate Governance in Nigeria. At the end of several sittings, the Committee made various findings and decisions. Sanctions and penalties in varying degrees were imposed. (See Pages 19 – 27 of the Record). In respect of the Appellant, the 1st Respondent inter alia disqualified the Appellant from operating in the Nigerian capital market, being employed in the financial services sector and holding directorship positions in any public company.

These are the orders and sanctions the Appellant and others sought to prohibit in the suit at the Federal High Court. Dissatisfied with the refusal of the trial Judge to grant the orders and prohibitions sought, the appellant on 3/10/08 filed a notice of appeal containing four grounds of appeal. In his brief of argument, the Appellant withdrew the 4th ground of appeal and out of the remaining three grounds formulated the following issues for determination:

1. Whether the power of the Respondents or either of them to regulate the “capital market” and participation of “capital market operators” under the Investment & Securities Act 2007 extends to membership of the boards of directors of all or any companies registered and regulated under the Companies & Allied Matters Act 1990. (GROUND ONE)
2. Whether the Respondents or either of them possesses the judicial or quasi judicial powers exercised by the 1st Respondent on purported delegation from the 2nd Respondent? (GROUND TWO)
3. Whether the decisions of the Respondents were fair and not in fatal contravention of the rules of natural justice? (GROUND THREE)

The Respondents did not file any brief and on the 22nd day of January 2013, this Court granted the Appellant’s application that the appeal be heard on the appellant’s brief alone.

ARGUMENTS OF COUNSEL

ISSUE NO. 1:

Whether the power of the Respondents or either of them to regulate the “capital market” and participation of “capital Market operators” under the Investment & Securities Act 2007 extends to membership of the boards of directors of all companies registered and regulated under the Companies & Allied Matters Act 1990 (GROUND ONE).

Learned senior counsel for the Appellant, C.A. Candide-Johnson S.A.N. on this issue 1 submitted that SEC is a body created by law, the Investment and Securities Act, with limited functions and powers conferred on it by Section 13 thereof. Learned senior Counsel submitted that the learned Chief Judge found no definition of the expression “securities industry” in the statute and concluded that anybody that can issue a security is in the securities industry. Counsel argued that this critical conclusion ignored both the ordinary meaning of the expression as well as the compelling con of the statute itself, which makes the ordinary meaning of the word irresistible. He contended that the ordinary meaning of ‘Securities Industry’ is the “securities market in the aggregate” or the business of securities and dealing therein and that this is the market the 2nd Respondent was created to regulate.

The learned senior counsel further contended that Section 315 of ISA defines “capital market operator” as a person duly registered by the Commission to perform specific functions in the capital market. “Market participant” as any person involved in any aspect of capital market transaction or operation under the act. These various individuals, counsel argued are mentioned specifically in the ISA as persons subject to regulation within the market of securities, or the securities industry. Section 13, counsel submitted defines the role of SEC as regulation of the capital market and the succeeding subsections particularize that role in specific area all of which deal with operations in the capital market. Counsel submitted that the ordinary impression to be taken from the words of Section 13 (bb) and the entire con is that disqualification of a person is from the capital market and the business or industry of dealing in securities and that it cannot be deduced from the words that SEC has received implied power to regulate companies in general.

Learned senior counsel submitted that it is trite that in as much as SEC has powers to regulate matters on securities, it cannot assume the powers of other statutes that adjudicate on specifics, especially on issues properly outlined as to exclusive jurisdiction. Learned senior counsel submitted that it is not the function or power of SEC under ISA or any other law, to regulate the membership of boards of companies. He argued that no law gives SEC civil or criminal jurisdiction over ordinary Nigerian existing outside the scope of its limited power to regulate the “capital market.” Learned counsel further submitted that the power to regulate membership of boards of companies belongs by law to the Corporate Affairs Commission under Part IX, Chapter 1 (Section 244-292) of the Companies & Allied Matters Act Cap C20, Laws of the Federation of Nigeria 2004 and that the law deals with appointment and removal and disqualification of directors. Counsel submitted that contrary to the conclusion of the learned Chief Judge, the power given to SEC under Section 13 (bb) to “disqualify unfit persons from being employed anywhere in the securities industry,” is no cover for the action complained of. This provision, counsel argued, must be construed ejusdem generis with the powers given to regulate activity in the “securities industry” and in the con of the ISA itself, which allows SEC to control the activity of “Capital Market Operators” by registration of such operators under Section 38 of ISA 2007. The individuals over whom that power is exercised are described in Section 38 and further defined in Section 315 which further lends credence to the definition in con to which the Appellant has no connection whatsoever. Counsel submitted that none of these includes individual directors of companies.