Investigations reveal that SEC Nigeria may have rushed to Judgment on ETI


Friday, January 10, 2014 04.27 / Proshare


On January 09, 2014, the Securities and Exchange Commission (SEC) released its “Investigation Report of ETI's Corporate Governance Practices” and made a number of recommendations and advice for ETI to ‘consider’ and act upon.


On the surface, a discerning professional would have reached the conclusion that this was always going to be a challenge for the regulator in the absence of a pan-African regulator for entities like ETI. Given the way the story had developed and the intervention from the Nigerian regulator (who had to step into the matter), it was anticipated that the accused officers and others covered by the extensive investigations would be completely exonerated, or found culpable, and ousted.


The actions taken in the published documents would indicate that whilst a decision has been reached, the details appeared hazy and placed analysts on enquiry.


A cursory enquiry had revealed that there were two (2) draft volumes submitted by KPMG to the SEC – Vol. 1 containing general issues arising from the exercise and a Vol. 2 dealing with the specific findings related to and arising from disclosures and allegations/petitions received. Whilst the first part was presented to the board, it was understood that Vol. 2 was unavailable.


This information naturally raises concerns as to the rationale behind the call for an EGM based on an incomplete set of information, as it would appear; raising concerns as to the process, practice and precedence being established in this case that is ordinarily expected to provide the market with a teachable moment.


From an investor perspective, the SEC approach would appear hazy in the least and incongruent at best; considering the severity and impact of the decision(s) reached. In the main, the best practice rules for discharging such a task would appear to be lost in the communication sent out which presents the outcome released as a rush to judgment and the question must remain why and to what purpose?


The submissions by SEC in its release yesterday stated that:

1.    “Sequel to the findings of the audit, SEC held a meeting with members of the Board of ETI on Monday, 16th December, 2013 during which the results of the exercise were presented in order to elicit feedback from them. It was agreed at the meeting that such feedback should be made available to the regulator on or before Friday, 3rd January, 2014 ahead of the audit results being forwarded to ETI for dissemination to the bank’s shareholders.”

2.    “The SEC has now advised ETI that the findings constitute an important basis for convening an Extra - Ordinary General Meeting (EGM) of shareholders to deliberate and pass resolutions on the critical findings and recommendations of the corporate governance audit.  The SEC further advises that the EGM should be held before the end of February 2014.”

3.    “The SEC expects ETI to develop a one year remedial plan with specific measures to address the specific governance gaps observed.  In the public interest, it will also expect a quarterly report from ETI on progress being made.”

4.    “The Commission believes that ETI will need to appoint a substantive Board Chairman who will lead the effort to attain an improved governance climate.  It will be important that such an appointment is the result of a credible selection process. Such a Chairman also needs to have the relevant experience and skills to guide this remedial plan.  The Chairman should have integrity, independence and should not have the potential for conflict of interest in the discharge of the role.” 

5.    “Steps should also commence to ensure that ETI has Board members and a Management team that have (has) the requisite skills and experience to oversee or manage the affairs of ETI at this time.”

6.    “The SEC is certain that the implementation of the recommended remedial plan will eliminate the governance lapses and will further strengthen ETI. The Commission also reiterates its commitment to ensuring the integrity of the market and the protection of the investing public”.

7.    "It is important to emphasize that the Corporate Governance Audit is being done at the level of the ETI Holding Company and does not reflect governance at any of ETI's banking subsidiaries that are responsible to the banking and market regulators in the countries in which they operate."

It must be assumed therefore that there are more information exchanged between the SEC and the company that would address the concerns the public communication elicited.


Suffice to say, the concerns led to further enquiries which revealed the following:

1.    On Monday, December 16, 2013 – the SEC met with members of the board of directors of ETI and presented a 156-page document to each member - an executive summary tagged as Vol. 1;

2.    At the end of the presentation, SEC had requested that the Board of ETI submits a response to it not later than January 02, 2014;

3.    SEC Nigeria informed the directors that the Vol. 2 of the governance audit report by KPMG covered the specific issues raised in both the local and international media as well as specific allegations from the former Finance Director;

4.    The Board of ETI at that session responded with a request for the Vol. 2 and more time to respond to the general and specific issues raised  - specifically, January 31, 2014 submission date to which the SEC declined on the grounds that the board should consider this a matter requiring their urgent attention;

5.    On Monday, December 30, 2013, the ETI board wrote a letter signed by André Siaka (Ag. Chairman) formally asking for a January 31, 2014 date citing the non-receipt of the volume 2 of the report for which the entire board remained in the dark about;

6.    On Monday, December 31, 2013, SEC declined the request from ETI and insisted on the initial deadline;

7.    On Thursday, January 02, 2014 the Ag. Chairman of the Board of ETI, André Siaka wrote back to SEC asking for more time to properly review the documents, seek consensus of response and in the absence of a Vol. 2 report which had not been received were handicapped to provide a wholesome response on the audit report;

8.    On Tuesday, January 07, 2014 the ETI board sent a holding response (awaiting the Vol. 2 of the SEC/KPMG report) to the SEC office;

9.    On the same date, SEC sent out a directive to ETI for an EGM be held by February 2014;

10. On Wednesday, January 08, 2014, the management of ETI issued a statement announcing that Laurence Do Rego was no longer an employee of the institution;

11. On Thursday, January 09, 2014, the SEC issued a public statement on its decision on the ETI Investigations as a summary report on its findings.

12. On the same date, the SEC issued a letter to the GCEO of ETI directing a reversal of the action taken against Mrs. Do Rego.


With no continental African or regional African financial services authority or supervisory banking and securities authority to guide a pan African bank like ETI, unlike their European or North American counterparts; it would appear that we may be set for a major learning curve in managing cross border political, regulatory and operational risks and issues.


More discerning analysts indeed ask the question that at what stage does this development begin to impact the business of what  is arguably the best positioned entity to provide that gateway into Africa?


Stay with us for our continuing coverage of this fast developing story.


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3.    Ecobank clears air on allegation of financial probity against ETI's chairman

4.    Reports of board wrangling at ETI Inc prompts reassessment  

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