SEC sets up inquiry into roles played by directors of defunct firms

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… 101 directors from 34 firms invited

Watchdog for fund managers in the country, the Securities and Exchange Commission (SEC), has extended letters of invitation to 101 directors from 34 defunct firms to aid the Commission in ascertaining the roles played by these persons in the sub-par running of their respective firms, and proffer punitive measures where necessary.

This was disclosed by the Head of Legal and Enforcement at the Commission, Caliis Badoo, who said the move forms an added measure aimed at bringing sanity to the market and is in line with the Securities Industry Act, 2016 (Act 929), which mandates the SEC to sanction directors and officers of licencees who flout the law to protect investors’ interests and integrity of the market.

Mr. Badoo made this known at the maiden edition of the Capital Market Financial Education Forum (CMFEF) – a series of public education programmes organised by the Commission – and under the theme ‘Understanding the Mandate and Regulatory Toolkit of the SEC’, where he said that the range of disciplinary measures open to the SEC includes private warnings, public censure, disqualification from holding a specific office for a specified period of time, and referral for prosecution.

“We have begun proceedings to invite directors and give them a hearing for them to show just cause as to why they should not be disqualified from the market; so far, we have sent 101 letters to directors and they are in 34 companies,” he said.

Continuing, he explained: “These disqualifications can also be issued for past directors or employees. The fact that you see danger coming and you resign from the company does not exculpate you at all; we want to see your role or contribution that led to the state of the company that we have today”.

Speaking subsequently to the B&FT, Mr. Badoo stated that where applicable, particularly in instances of severe infractions, the Commission will communicate its disciplinary measures to the general public. He further expressed optimism that this will serve as a deterrent to other persons who have fiduciary obligations, and reignite investor confidence in the oversight capacity of the regulator and, consequently, the market.

“The SEC hopes that after the hearing we can ring-fence persons who will not play by the rules on the market, preventing them from participating in the capital market.”

Eye on media

At the forum, which had the media’s role in the accurate dissemination of market information as its focus, the SEC’s Head of Legal and Enforcement stated that his outfit will increase sensitisation to and, subsequently, legal actions against non-licencees of the Commission who use their platforms to promote schemes which fall under the remit of the SEC.

Citing the relevant portion of the law which deals with media engagements – Section 144 of Act 929 – he indicated that the law bars non-licencees in traditional and electronic media from publishing and promoting products that are required to be regulated by the SEC without express approval of the Commission.

“There is a long list of requirements for adverts on securities, and these have been largely ignored up until now. We will be engaging with the media, drawing their attention to these; and in the event that they are not heeded, relevant actions will be taken.”

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