SEC probes culpability of NSE Consult in insider trading
Category: Frauds & Scandals
FRIDAY, 05 NOVEMBER 2010 00:00 JOHN OMACHONU
•N1.6bn spent on dubious Coral Property Project •N10.4m spent on diesel in one month •More searches on companies used as fronts
The interim report of the forensic audit commissioned by the Securities and Exchange Commission (SEC) on the activities of the Nigerian Stock Exchange (NSE) is expected to unravel the extent to which NSE Consult, a wholly owned subsidiary of the Exchange, was used as a tool for insider trading.
The report confirmed that the Exchange transferred money to the Consult for the purpose of trading and investing.
The interim report, which picked holes in wrong classification of assets in the financial statement of the Exchange, called for the unraveling of the circumstances surrounding the huge expenditure of N1.6 billion on a Coral Properties project which was later abandoned.
It stated: “Despite the fact that the sum N1,615,000,000.00 (One billion, Six hundred and Fifteen Million Only) has been expended on the Coral Properties project, the project has come to a halt”.
The report also unearthed a plethora of questionable spending on the management staff quarters, (MSQ), particularly the purchase of diesel which was all lumped together in the same ledger to conceal the amount spent and the beneficiaries.
For instance, the report showed that in January 2008, diesel expense under the expense classification was N10.4 million to beneficiaries who were either former staff or non-staff of the Exchange.
The report also conducted a search on some of the companies like Progenics Corp Limited and Kingdom Securities, among others, to ascertain the real owners and to authenticate the various payments made to them.
According to the 44-page report: “The NSE Consult is a wholly owned subsidiary of the NSE, and is the investment and private sector arm of the Exchange which takes proprietary trading positions on behalf of the NSE.
It was observed that the NSE transferred money to NSE Consult for the purpose of trading and investing on the Stock Exchange on its behalf. Investigation is on-going as to whether NSE Consult was used as a tool for insider trading in contravention of section 112 of the investment and securities Act.”
On the huge expenditure on MSQ, the forensic audit report said: “We have conducted a detailed review of major expense items under the MSQ ledger for the years 2008 to 2009. We have also conducted an oral interview with an officer of the NSE in respect of this ledger account. Our inquiries to date reveal the following: Contrary to the title of this ledger, expenses recorded in this ledger relate to private residences of the DG, ADG and senior management.
Sometimes, the expenses (especially in respect of diesel supplies) were for houses of persons who were not officers of the NSE. Several supplies were made to house of former staff of NSE. The sums expended and recorded in the ledger were not deducted from the allowances due to the DG or ADG or other staff members on behalf of whom the expenses were incurred. The alleged justification for these purchases is that in the DG’s remuneration package, utility is free. It is however questionable whether the expense incurred can be classified as utility.”
On the findings from the Corporate Affairs Commission, the report said, “as at date, our search of the CAC reveals the following: Progenics Corp Limited: One of the subscribers to the memorandum and Articles of Association of this company and director as at incorporation was the former DG, Ndi-Okereke Onyuike. At the time this company was incorporated in 1996, she owned 250,000 shares of the 4.4million share capital of the company. However, her name does not appear in the Form CAC 2 for 2007 as one of the shareholders of the company and CAC records indicate that she ceased to be director in 1997. We however note that Progenics Enterprises appears as owning 651,000 shares. We intend to conduct a further search to determine the owners of Progenics Enterprises.
That Kingdom Securities Limited and KSL Consultants Limited are owned by Mr. Uzoma Henry Onyekuruhe, former General Manager of the NSE’s Compliance Unit. The said company was responsible for the reactivation of the 2nd tier and creation of the 3rd tier market project between 2006 and 2007 and received the sum of N125, 750,000.00 from the NSE. We are currently reviewing the contract and investigating whether the said services were rendered by the company in question.”