The Economic and Financial Crimes Commission (EFCC) is probing 13 firms and 45 persons for allegedly engaging in fraudulent activities in the capital market. The investigation is part of collaboration between capital market regulators and the anti-graft agency.
A list of cases under investigation obtained at the weekend by The Nation showed that EFCC is investigating 40 cases involving 13 firms and some 45 persons while the anti-corruption agency is already prosecuting another two firms and 12 persons for involvement in capital market fraud.
Under a two-pronged strategy of deterrence and restitution, the capital market regulators and the EFCC had signed on to a working relationship that enables the EFCC to take up criminal investigation and prosecution after preliminary indictment by the adjudicatory organs of the capital market regulators.
Although the full details of the cases and names of the firms and individuals could not be disclosed due to legal confidentiality and ongoing investigations, a review of the cases indicated that they relate to four broad categories of unauthorised sale of clients’ shares, diversion and misappropriation of clients’ funds, impersonation and operating phony or illegal investment schemes and services.
Unauthorised sale of client’s shares and impersonation account for the largest number of cases under investigation. While stockbroking firms and their officials were mostly responsible for unauthorised sale of client’s shares, the review showed that individual syndicates and racketeers, sometimes in connivance with capital market officials, were responsible for the rampant cases of impersonation.
The impersonators usually seek to take advantage of knowledge gap or absence of the owners of the shares. They seek to take advantage of the dormancy of some investors’ account as well as fraudulent conversion of shareholding estates.
Some of the firms under investigation include Lakesworth Securities Limited, Bytofel Trust & Securities Limited, Gosord Securities Limited, Securities Solutions Limited, ITIS Securities Limited, Kingsway Securities Limited, Mact Securities Limited, First Equity Securities Limited, Omas Investment & Trust Limited, Mayfield Investment Limited, Cadington Securities Limited, GMT Securities & Asset Management Limited, Quantum Securities Limited and Giljohn Investment Ltd.
ciplinary Committee and Securities and Exchange Commission (SEC)-through its Administrative Proceedings Committee (APC) run an active investigative mechanism that seeks to uncover malpractices, sanctions indicted operators and restitutes affected investors. However, both NSE and SEC lack prosecutorial powers.
Capital market authorities had bridged the gap between their investigative powers and prosecutorial powers through Memorandum of Understanding (MoU) with the EFCC, which allows the organisations to collaborate on information sharing, investigation, prosecution and enforcement.
SEC and EFCC had earlier in January 2017 signed a Memorandum of Understanding (MoU) that formally established the alliance between the two Commissions. The MoU seeks to promote the efficient investigation and conclusion of all cases reported by either of the institutions to each other and to promote the integrity, efficiency and soundness of the Nigerian capital market and the economy in general.
It also seeks to promote collaboration in the areas of training and secondment of middle cadre officers of the SEC to the EFCC and those of the EFCC to the SEC; or in the alternative, the establishment of a liaison desk in both Institutions as well as promote collaboration in other areas beneficial to both Institutions.
According to the MoU, the institutions shall provide each other with the utmost mutual assistance in any matter falling within their competences, including in particular the following areas: secondment of middle cadre officers, training to enhance the investigative skills and capacity of personnel of the institutions and consequently increase the general output and performance of the institutions and facilitate better understanding of each others’ functions through capacity building programmes and human capital development in the areas of investigation of fraud in the capital market.
The institutions will also collaborate in the areas of exchange of information to assist the performance of the institutions’ respective functions, reporting, investigation and prosecution of fraudulent and manipulative practices in the Nigerian capital market and any other activity as agreed between the institutions from time to time.