S. 306 of ISA 2007 and Whistleblowers in Nigeria


Thursday, January 21, 2014 14.04 PM / Olufemi Awoyemi


When the Securities and Exchange Commission (SEC) issued their January 09, 2014 letter directing that Ecobank Transnational Incorporated (ETI) reverse the recent disengagement of Mrs. Laurence do Rego, the former Executive Director, Finance & Risk, whose appointment was terminated on 8th January 2014 within seven (7) days “failing which the Commission would be compelled to exercise the powers conferred on it by the ISA 2007”.

The seven (7) days time-limit has passed and the market thus eagerly awaits the actions of the SEC on this precedent setting development on a multi-jurisdictional entity. The decision is quite significant, not just because of the firm’s multi-jurisdiction structure and all the attendant implications, including the issue of concordance; but the learning opportunity it offers in terms of actually moving forward the concept of whistle-blowing in Nigeria’s corporate environment. This latter point cannot be over-emphasized.

For one, an outcome here would provide a regulator-based interpretation for an appreciation of section 306 of the ISA 2007 (whose provisions are highlighted below) and secondly, it will help advance whistle-blowing as an effective means of exposing misconduct, alleged dishonesty or illegal activity(ies) occurring in a company. Most importantly; it will aid the regulators in discharging their investor protection obligations.


In a November 2013 article titled “The Whistleblower as a Gatekeeper of Good Governance” Beverley Agbakoba-Onyejianya, Compliance Officer with Renaissance Capital and chairperson of the Compliance Officers Rules and Review Committee of the Nigerian Stock Exchange (NSE) affirmed that “In Nigeria, the regulatory authorities recognise the importance of whistle-blowing as a tool to promote good governance. The Securities Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) respectively announced plans to roll out new whistle-blowing schemes before the end of 2013. These initiatives reinforce the importance of whistle-blowing as an effective means of boosting levels of compliance as well as protecting investor confidence in the capital market.  There are currently whistle-blowing provisions contained in the SEC rules and regulations which puts the burden on the Compliance Officer to report incidents of non-compliance, breaches of procedures within an organisation. 


In 2012, the CBN released its ‘Guidelines for Whistle-blowing in the Nigerian Banking industry’ in an attempt to curtail the growing prevalence of unethical and illegal practices in the industry, establishing whistle-blowing as a mechanism for bringing violations to the fore. The codification of these rules now makes it mandatory for all banks and non-financial institutions to have internal whistle-blowing policies which are made known to employees and stakeholders.” 


Beyond the positives however, commentaries from the market indicate that there exist real and imagined fears which can be better addressed as we deal with more cases as the ETI one. In essence, while what we have may be imperfect, we can only address some of these fears by encouraging more people to come forward, protected by the regulators during the investigations and thereafter (as proven backed by a reward/incentive/compensation).


Some of the fears expressed include:

1.    How does SEC establish credibility and enhance protection for informants?  

2. How can whistle-blowers overcome the fear of not being taken seriously by senior management/board?

3.    What is the essence of whistle-blowing if the identity of the whistle-blower is not protected and shielded from the public and/or media?

4.    When does one become a whistleblower?

5.    Can one be a whistleblower if a change of heart occurs before, during and after the commission of acts deemed against the company or/and shareholders interest?

6.    How is the incentive for whistle-blowing stacked? Is it enough to make people take risk or consider the risk as a get-out reward option?

7.    Can a whistle-blower not misuse this provision to bind the hands of an employer or to use as a ‘get-out-of-jail’ card?

8.    How does SEC handle a case of multiple whistle-blowers in a company, the evidence of which indicts the other?

9.    What happens when a new (and perhaps more senior) whistle-blower steps forward with damning evidence to the SEC?

10. What are the options open to public companies to prevent abuse beyond the requirement that such disclosures are done in good faith and be shared first with the board?

11. What is the natural intendment of s.306 once an investigation is concluded?

12. What if the board is the problem itself?


Has enough been done to promote the culture of whistle-blowing? Beverly says that “In order for any whistle-blowing program to function effectively, a proper legal framework must be developed to ensure full protection is granted to informants.”


S. 306 of ISA 2007

A cursory review of ISA 2007 would suggest that it made no deliberate effort to deal specifically with, or better still, set out provision that makes specific reference to “whistleblowers” or “whistle-blowing”. 


There is however a provision in s. 306 of the ISA 2007 that seeks to provide protection to employees who disclose information connected with the activities of their employer, and imposes restrictions on the powers of a regulated employer - such as a capital market operator or a public company – in dealing with employees who decide to step forward to make such disclosure(s). s. 306 states thus:


“306 (1) An employee of a capital market operator or public company shall have the right to disclose any information connected with the activities of his work place which tends to show one or more of the following:

a)    that a criminal offence has been, is being or is likely to be committed;

b)    that a person has failed, is failing, is likely to fail or otherwise omitted to comply with any legal obligation to which he is subject;

c)    that any disclosure tending to show any matter falling within (a) or (b) above has been, is being or is likely to be deliberately concealed.


(2) For the purpose of subsection (1) of this section, it shall be immaterial whether the relevant failure occurred, occurs or would occur in Nigeria or elsewhere, and whether the law applying to it is that of Nigeria or any other country or territory.


(3) A disclosure is made in accordance with subsection (1) of this section if the employee-

a)    makes the disclosure in good faith

 (i) to his employer;

(ii) where his employer fails, refuses or omits to act, to the Commission; or

(iii) where the relevant failure or omission relates solely or mainly to the conduct of a person other than his employer, or any other matter for which a person other than his employer has legal responsibility, to that other person.

b)    the employee reasonably believes that the information disclosed and any allegation contained in it, are substantially true; and

c)    in all the circumstances of the case, it is reasonable for the employee to make the disclosure.


(4) In determining whether it is reasonable for the employee to make the disclosure, regard shall be had to the following-

a)    the identity of the person to whom the disclosure is made;

b)    the seriousness of the relevant failure, or omission;

c)    whether the relevant failure is continuing or is likely to occur in the future.


(5) No employer shall subject an employee to any detriment by any act or any deliberate failure to act on the ground that the employee has made a disclosure in accordance with the provisions of this Act.


(6) Where an employee has been subjected to any detriment in contravention of subsection (5) of this section, he may present a complaint to the Commission.


(7) Upon receipt by the Commission of such complaint, the Commission shall cause an investigation to be carried out and if satisfied that the provision of this section has been contravened, the Commission shall direct the affected capital market operator or public company to reinstate the affected employee or pay compensation in accordance with subsection (9) of this section within one (1) month of such directive.


(8) Where the detriment suffered is other than dismissal or termination, the Commission shall direct the capital market operator or public company to restore the affected employee to his appropriate position within one (1) month of such directive.


(9) Any employee relieved of his employment without any just cause other than for reason of disclosure made pursuant to the provision of this section shall be entitled to a compensation which shall be calculated as if he had attained the maximum age of retirement or had served the maximum period of service, in accordance with his conditions of service.


(10) Any capital market operator or public company which contravenes the provisions of this section is liable to a penalty not exceeding N5,000,000 in addition to the payment of compensation to the employee in accordance with subsection (9) of this section.


(11) For the purpose of this section, "detriment" includes dismissal, termination, redundancy, withholding of benefits and entitlements, suspension and any other act that has negative impact on the employee.


(12) Apart from the provisions of the Constitution of the Federal Republic of Nigeria, any provision in any other law or agreement that precludes the application of this section shall be void.” 


The SEC should advance its efforts in this regard by using this case to establish a precedence that advances the use of whistle-blowing as a critical component of investor protection in Nigeria

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