Review of the SEC Technical Committee Recommendations, Opinion and Final Report


Friday, December 08, 2017  01.29PM / The Nigerian Investor / Research




Further to our Memo to The Market: The Oando Corporate Journey – At the Regulators Gate, we provide herewith a summary of the Securities and Exchange Commission (SEC) Technical Committee Report on Oando Plc and the petitions related thereto for a broader understanding of the core issues affecting the stock/company.


Technical Committee Membership


The membership of the committee set up by SEC comprised of:

·  Tarfa M.C. Makyur - Chairman

·  Hauwa I. Aliyu

·  Rotimi H. Teteye

·  Graham C. Omenka 


Recall the Petitions


In May 2017, the Securities and Exchange Commission (SEC) received two (2) petitions from Ansbury Investments Inc. and Alhaji Barau Mangal (the “Petitioners”) respectively containing certain concerns regarding Oando PLC, a public listed corporation on the Nigerian Stock Exchange (NSE) as well as the Johannesburg Stock


The details of the two petitions against Oando Plc are presented below (See Page 29 of our Memo to the Market on the Oando Plc)


A. The first petition dated 2nd May 2017 was from Ansbury Investments Inc., (no individual name mentioned) a company registered in The Republic of Panama titled Serious Concern to Corporate Governance Existence, Gross Abuse of Corporate Governance and Financial Mismanagement in Oando Plc- Request for Urgent Regulatory Intervention”. (Appendix 1). Ansbury disclosed that:

·  It was the majority shareholder in Ocean and Oil Development (BVI) which held 99% of Ocean and Oil Development Partners Nigeria (OODP).
·  OODP owned 56% equity stake in Oando Plc.

Ansbury Investment Inc. raised the following concerns about Oando Plc:

·  Strong uncertainty regarding the going concern status of the group based on disclosures in the 2015 and 2016 audited financial statements;

·   Posting of consistent losses from continuing operations amounting to N34.9 billion in 2015 and N25.8 billion in 2016;

·  The profit of N3.94 billion reported in 2016 was sorely attributable to the consistent sale of part of the assets of the group;

·    Negative working capital position;

·    Huge debt position that could be further worsened by:

·   Pending legal suits which could lead to loss of N608.2 billion

·   Price adjustment inherent in the sale of downstream business.

·    Corporate governance abuses highlighted by the fact of:

·   Increase in directors remuneration despite poor results and returns.

·  Past sale of assets of the group and proposed sale of stake in OER (the last asset attributable to the Company) were indications of an attempt to liquidate the group.


In view of these concerns, Ansbury disclosed it had taken the following actions:

·    Taken necessary measures to protect its interest in relation to its investment in Ocean and Oil Development BVI Limited and in consideration of the current litigation between the shareholders of Ocean and Oil Development BVI Limited;

·    Given notice to Ocean and Oil BVI to order payment of expired credit amounting to USD 470 million out of which USD 270 million was owed to Ansbury directly and the related interests which were invested in Oando Plc.


Ansbury also disclosed that an ongoing situation between the parties of Ocean and Oil Nig. Plc had stalled intervention in the management of Oando Plc despite being the majority shareholder.


In consideration of the position of the Commission as the apex regulator in the capital market, Ansbury requested the intervention of the Commission to protect the interest of investors by:


·    looking into the issues and convening an Extra-ordinary General Meeting (EGM) of Oando Plc in order to change the management and board as well as allowing shareholders to put in place a new management;

·    Subjecting the current management to appropriate regulatory action;

·    Allowing Ansbury as indirect majority shareholder of Oando Plc to intervene in the management of the Company through its team and consultants or alternatively to carry out an investigation into the activities of Oando Plc without hindrance.



B. The second petition dated 4th May 2017 (two days after) came from Alhaji Dahiru Barau Mangal titled “Gross Corporate Governance Misconduct and Financial Mismanagement in Oando Plc. (Appendix 2). The petitioner disclosed that he held 17.9% of the share capital of Oando Plc.


In his petition, Alhaji Dahiru Barau Mangal raised concerns about the following issues:

·    Risks regarding the going concern of Oando Plc as raised by the external auditors in the 2016 audited financial statement of the Company.

·    Negative working capital position of the Company as highlighted by the external auditors.

·     Increase in directors remuneration despite the poor operating result of the Company.


The Petitioner also requested for clarification in respect of the following issues:

·      Current status of reserve based loans restructuring and other corporate loans.

·      Status of the deals for sale of OER shares and other non-core assets.

·    Dilutive effect arising from the Commission’s authorization of the conversion of N1.98 billion bonds as requested by OODP.

·  Additional information about issues reported in the 2016 audited financial statements (page 65 to 69) in respect of Other payables” of N50 billion, commitments of N13.6 billion, guarantee to third parties of N543.3 billion, pending litigation of N608.3 billion and obligation of N16.8 billion due to Helios-Vitol in respect of sale of downstream business


Alhaji Dahiru Bara’u Mangal requested the Commission to intervene in the interest of minority shareholders and the market in general by convening and EGM of Oando Plc in order to remove the board and management.


The SEC thereafter commenced investigation on Oando PLC by setting up three (3) different committees to look into the issues raised. There was no report subsequently showing that the finding of the committee was referred to the Administrative Proceedings Committee (“APC”) nor the Investment & Securities Tribunal before the shares of Oando was placed on suspension.


In the SEC’s “Notice to the General Public on Oando PLC”, SEC based its reasons for imposing a technical suspension on the shares of Oando and ordering a forensic audit of Oando PLC on certain “weighty” findings it made in the course of a “comprehensive review of the petitions”. Find below the decision as an aide memoire


SEC’s Findings/Decision on Oando Plc


On October 17, 2017 SEC wrote to Oando Plc and communicated its findings to the company (See Page 43 of our Memo to the Market on the Oando Plc):


a.  Capacity of Petitioners

The Commission notes that Alhaji Mangal is a shareholder of Oando Plc. Ansbury is however, not a shareholder of Oando Plc, but a shareholder in OODP BVI. OODP BVI owns 99.9% shares in OODP Nigeria, and is the majority shareholder in Oando Plc. The Commission therefore regards Ansbury as a Whistleblower.


b.  Breach of the SEC Code of Corporate Governance


       i. The Commission finds from the corporate Governance return submitted by the company for the period ended December 31, 2016, that the remunerations of the Group Chief Executive Officer [GCEO] and the Deputy GCEO were approved by the Board, while CCEO was responsible for fixing the remuneration of other Executive Directors which is in violation of part B,14.3 of the SEC Code of Corporate Governance.


       ii. The last Board evaluation of Oando PLC was done by KPMG in 2012. This is a violation of part B, 15. 1 of the SEC Code of Corporate Governance. Oando      is invited to note the violations and henceforth ensure compliance with the SEC Code of Corporate Governance.


c.  Breach of ISA 2007 on Disposal of Oando Exploration & production Limited [OEPL] by Oando Plc  2013

That the disposal of Oando Exploration production Limited [OEPL] to Green park Management Limited was done without the prior approval of the commission.


d.  Breach of ISA 2007: Misstatements in the 2013 and 2014 Audited Finacial statement of Oando Plc arising from the OEPL transaction

Following the structuring of the OEPL transaction in contravention of the ISA 2007, Oando plc recorded a profit of about N6 Billion from the sale of OEPL that erased the operating loss of N4.68 Billion leading to a profit of N1.4 Billion for the year 2013. The company subsequently declared dividends from the profit. Having admitted that the action was in breach of the ISA 2007, Oando Plc restated its 2013 & 2014 Audited financial statements which contained material false and misleading information contrary to section 60[2] of the ISA 2007.


e.  Breach of ISA on Misleading information contained in Oando Plc’s 2014 Rights ISSUE Circular

That the 2014 Rights issue Circular of Oando Plc contained information relating to the profit reported by Oando Plc in 2013 arising from the sale OEPL. Consequently, the said Rights issue circular contained material misleading information. This action amounts to a violation as contained in section 85, [1], 86[1] and 87[1] of the ISA 2007.


f.  Breach of the SEC Rules and Regulations on payments of Dividends that Oando Plc in 2014, remitted dividends to the Registrar in piecemeal in violation of Rule 44[1] of the SEC Rules and Regulations.


g.  Going Concern of Oando Plc

The Commission notes the Report of the independent Auditors of Oando plc, Ernst & Young, which is contained on pages 63-68 of the 2016 Annual Reports & Accounts of Oando plc, more particularly in paragraph I of page 64 where the independent auditors reported the going concern status of the company.


h.  Suspected Insider Dealing

The commission observed that certain persons classified as insiders within the provisions of section 315 of the investment and securities Act  [ISA], 2007 and who were in possession of confidential price sensitive information not generally available to the public, had between of the company’s 2014 financial statement. Where the company reported a loss of N183 Billion.


On the allegation of insider dealing made by Oando Plc against Alhaji Dahiru Mangal, although investigation was initiated by the commission, the attention of the commission was drawn to a letter dated September 21, 2017 from Oando plc, informing it that a suit had been filed in court in that regard, and that the matter was now sub-judice.


i.   Related Party Transactions

The Commission identified certain Related party Transactions and observed that they were not conducted on arm’s length basis.


j.   Declaration Of Dividend

The Committee noted that Oando plc declared dividends in 2013 and 2014 from unrealized profits.


k.  Shareholding structure/Register of Members of Oando plc the commission observed discrepancies in the shareholding structure of Oando plc. While Alhaji Mangal’s status as a shareholder in Oando plc is not in content or dispute, the exact units of shares held by him requires reconciliation.


The commission’s primary role as the Apex Regulator of the Nigerian capital market is to regulate market participants and protect the investing public.

The commission notes that the above findings are weighty and therefore needs to be further investigated to ascertain in their veracity or otherwise.

After due consideration, the commission believes that the engagement of a forensic Auditor to conduct a forensic audit into the affairs of Oando plc has become necessary. This is pursuant to the statutory duty of the Commission enshrined in section 13 [k] and [r] of the ISA 2007.


To ensure the independence and transparency of the exercise, the Forensic Audit shall be conducted by a consortium of experts. The consortium is composed of the following institutions:

1.  Akintola Williams Deloitte [Team Lead]

2. United Securities Limited;

3. SPA Ajibade & Co;

4. TJADAP Consulting &Associates; and

5. Nasiru Muhammed & Co


The cost implication of the exercise is N160,000,000.00 [One Hundred and sixty Million Naira] and shall be borne by Oando plc.


To ensure that the interest of all shareholders, especially the minority shareholders of Oando plc are preserved during the course of the exercise, the commission hereby places the shares of Oando plc on Technical Suspension. The commission expects Oando plc to give all the necessary support and co-operation to ensure the success of the Forensic Audit. 


Review of The Technical Committee Report


A review of the report showed that the Technical Committee was of the opinion that Oando PLC had satisfactorily responded to all the issues raised by the petitioners and had further recommended that the responses provided by Oando PLC and its independent external auditors should be forwarded to the Petitioners for their information and further escalation if they deemed it necessary.


A full review of the committee recommendation did not evidence a requirement for the shares of the Company be suspended or that a forensic audit of the Company be commenced; even as we concede that this falls under the powers of the SEC following the provisions of the ISA.


 The Committee however did recommended that certain unresolved issues regarding related party transactions and the treatment of certain corporate transactions be forwarded to the Securities and Investment Services (SIS) department of the Commission to determine whether there was in fact a breach of the ISA or the SEC Rules.  


Noteworthy must be the minority report of the Chairman which contained a call for a forensic audit on the allegations of related party transactions that were not at arms-length. This would appear also within his professional judgment to call for same in the absence of a satisfactory response to his comfort; having exhausted all processes as laid down in the ISA, rules and dispute resolution mechanisms.


On the issue of Insider Trading, the Committee recommended that given the fact that the Nigerian Stock Exchange (NSE) is in possession of all requisite information for the investigation of insider trading in the market, the NSE should be directed to immediately conclude (if it had not already done so) its investigation into this matter and submit its final report to the Commission, within a specified timeframe, for necessary action.


The committee, it must be observed covered a lot of grounds, unearthed a lot of issues and raised appropriate concerns; the summary of which must have played on the minds of the Chairman in issuing the minority report.


To what extent the technical committee had a hand in the final position of SEC, the decision to expand the conclusions reached to deploy the expertise of forensic auditors and the scope / time frame is not discernible in the report.


Suffice to say, the report on its own merit provides a compelling read.



Comparison of Responses, Recommendations, Opinion & Findings


Find below a table listing the recommendations of the Technical Committee on each of the issues brought up by the Petitioners in their petition, set against the recommendations of the minority opinion of the Chairman of the Technical Committee (where applicable) and the findings of the Director-General of the Securities and Exchange Commission.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.



Issues raised by the Regulator (SEC) as arising outside the scope of the Petitions


With respect to issues raised and investigated by the SEC which were outside the scope of the petitions brought by Ansbury and Alhaji Mangal, find the Technical Committees’ recommendations alongside the minority opinion of the Chairman of the Committee and the SEC’s findings. 


 Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.


To request for the full technical committee report, kindly send an email to



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