SEC v. BIG TREAT PLC & ORS

CITATION: (2019) LPELR-46520(CA)

In the Court of AppealIn the Lagos Judicial Division

Holden at Lagos

ON THURSDAY, 31ST JANUARY, 2019Suit No: CA/L/88/2011

Before Their Lordships:

MOHAMMED LAWAL GARBA Justice, Court of AppealJOSEPH SHAGBAOR IKYEGH Justice, Court of AppealJAMILU YAMMAMA TUKUR Justice, Court of Appeal

BetweenSECURITIES AND EXCHANGE COMMISSION - Appellant(s)

And1. BIG TREAT PLC2. MS. PAMELA WU3. MR. STEVE WU4. HARRIES WU5. NEW FRONTIER ENG. & COMPANIES LTD6. SKYONE GROUP OF COMPANIES LTD

- Respondent(s)

RATIO DECIDENDI

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1. COMPANY LAW - SECURITIES AND EXCHANGE COMMISSION: Persons who are capital market operators under the Investment and Securities Act and subject to the regulatory supervision ofthe Securities and Exchange Commission"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 capitalmarket 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 originatingsummons 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 OilLtd. (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 itsrules and regulations. Section 54 thereof reinforces compulsory registration of securities and investments of public companies and collective investment schemes with the appellant on pain ofpenalty 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 rolein 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 marketombudsman 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 compensateinvestors 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 andintermediaries;(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 theAct;(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 theCommission 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 theviolation 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 orannual 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 1strespondent 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 ofpolicies, 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 ofpenalty 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 thecapital 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 ofany 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 substantiveprovisions 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., BendelState 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 isinconsistent 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. 208at 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 theinterpretation 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 context and other clauses of the statute so asfar 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 issuerof 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 interventionof 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 learnedauthor, 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 otherwiseof 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 confidenceand destroy the fabric of the market. Registration demands that accurate and comprehensive information be sought and obtained from prospective registrants. Information submitted are requiredto 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 prospectiveindividual 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 concerningthe 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 ofthe 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 astransparency are paramount to the sustenance of confidence. As the watchdog of the capital market, the Securities and Exchange Commission constantly monitors market activities to forestallmanipulative 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 andgeneral 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 periodicalsto 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 andof 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 recommendappropriate 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 couldattract 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." (Myemphasis). 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 thedecaying 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 1strespondent, 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 ofinvestors 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 insupport 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 enforcementactions 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 doesnot 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 1strespondent subject to the rules and the authority of the appellant under the I.S.A. which is entitled by Section 13(v) of the I.S.A. (supra), in particular, to intervene in the management and controlof 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 ofinvestors 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 ofcompanies 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 tothe 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. unreportedCourt 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 theeffect 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 theappellant 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 thesecurities 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 andamenable 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."Per IKYEGH, J.C.A. (Pp. 16-31, Paras. F-C) -read in context

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2. COMPANY LAW - SECURITIES AND EXCHANGE COMMISSION: Persons who are capital market operators under the Investment and Securities Act and subject to the regulatory supervision ofthe Securities and Exchange Commission"by the definition of the term "Capital Market Operator" in Section 315 of the Investment and Securities Act, 2007 (ISA), the 1st Respondent, which was duly registered by the Appellant to performthe 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 isborne out by the unchallenged averment 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 apublic 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 securitiesshall 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 MarketOperator as defined by the Act itself, one would wonder who else is."Per GARBA, J.C.A. (Pp. 31-32, Paras. F-E) - read in context

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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.

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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

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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

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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,

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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

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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

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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

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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

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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

w e r e r e m i t t e d i n t o W e m a A c c o u n t N o .

0851008163227. According to the 2nd Respondent,

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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

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were raised for several millions of Naira without

using payment vouchers. At other times, payment

vouchers were used wi thout any form o f

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

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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

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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.

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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

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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

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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

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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

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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;

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(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

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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;

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(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;

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(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

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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

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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 context 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

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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

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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

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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

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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

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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.

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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

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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

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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

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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.

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Appearances:

Mr. F.O. Obiejesi, with him, Mr. J. Ibeh ForAppellant(s)

Mr. L. C. Okoli, with him, D. T. Ayorinde for the3rd Respondent

The 2nd, 4th – 6th Respondents were servedhearing notice but were unrepresented ForRespondent(s)

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