AP Share Price Manipulation: NSE, SEC, House of Reps side Dangote

“He should be in prison,” Otedola said.

Not a few investors in the shares of Africa Petroleum Plc and other mainstream investors were scandalised with the sanctions considered appropriate by the Council of the Nigerian Stock Exchange in chastising the individuals and organisations that were involved in Nigeria’s most publicly denounced case of share price manipulations.

Continues here.

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2009 Forbes Profile of Billionaires: Femi Otedola joins Dangote on World’d Richest List

Femi Otedola(l), Aliko Dangote(r)

Femi Otedola(l), Aliko Dangote(r)

Nigeria may have the honour of having two of its citizens listed in the 2009 edition of the annual Forbes list of the world richest. Fortune&Class Weekly can report that Mr. Femi Otedola, Chairman of African Petroleum Plc and Zenon Oil and Gas would join Alhaji Aliko Dangote, the first Nigerian on the list […] Continue reading here.

Whistle Blowers Call SEC’s Attention To Eternal Oil Secret Moves To Acquire Afroil… Shares Manipulation Alleged

An under the table deal to acquire the shares of on suspension Afroil by Eternal Oil at the detriment of other shareholders in the company, has been exposed and reported to the Securities and Exchange Commission.

The SEC had in March 2008 announced the suspension in the trading of the shares of Afroil as a…

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TRANSGLOBE BECOMES MOST SUSPENDED STOCKBROKING FIRM IN THE CAPITAL MARKET

DG, SEC

DG, SEC

Apex capital market regulatory body, Securities and Exchange Commission (SEC) may suspend Transglobe Investment and Finance Company Limited (Transglobe) indefinitely over unethical practices.

According to a report by Proshare NI, a source made this affirmation to one of its reporters last week.

“SEC would suspend Transglobe over unwholesome practices,” the source reportedly said.

The source further affirmed that the suspension maybe indefinite and would take effect from sometimes next week; after an all parties meeting in Abuja, Nigeria.

It has been reviewed that a lot has gone wrong with the dealing firm under the Nigerian Stock Exchange (NSE).

Transglobe has been found to be illegally trading on shares of most of its clients, including a high profile client through the relationship its General Manager and acting MD/CEO had with a director of a multinational cooperative.

A letter signed by E.A Okolo on behalf of Musa Al-Faki, Director General (DG) of the Commission to the Cooperative and made available to Proshare NI; shows that SEC is currently investigating a case of fraud and misappropriation of funds belonging to the Cooperative of the multi national company by Transglobe.

The letter which was dated February 04, 2009 with reference number SEC/M & I/INVGT/MISC277/09 states that the SEC is currently investigating the case and in order to resolve the issues, has invited the Cooperative to an all parties meeting to be held at SEC’s Head Office on Thursday February 12 2009.

This issue has been raging on close to seven months now; which led to the suspension of Joseph Okolie and Sunny Ameh, acting Managing Director/CEO and General Manager (GM) respectively of Transglobe. It will be recalled that a case of Fraudulent conduct was delivered against the former MD/CEO: Mr. Wilberforce Onwuka.

SEC had on behalf of 31 complainants handed over Onwuka to the EFCC at the end of a hearing involving Transglobe because almost all of the 31 complaints against the company originated during his tenure as an officer of the company and occurred with his personal knowledge.

Currently, It has been affirmed that the firm owes billions of Naira; while its former Management in collaboration with some banks and fund managers made billions of Naira as well through share manipulations and financial engineering…especially on their transactions related to Geofluids Nigeria Limited.

This is coming on the heels of the resignation of two management members of the firm on the grounds of integrity concerns and interference by the Board of Transglobe and its former suspended management members of Joseph Okolie and Sunny Ameh. These members, we understand, are supervised by Mr. Sunny Obidiegwu, supervisory director and cousin of the chairman of the board, Nze Madako.

Prior to this time, the NSE had suspended Transglobe mid-2008 over infractions against its clients which include issuing of dud cheques, purchase of shares with clients’ funds in their names and not in the names of the clients; unbundling of shares purchased in the name of client not credited to the Central Securities Clearing System (CSCS) account but sold through contract notes.

The non-crediting of clients’ shares to its CSCS accounts; the use of funds provided for the purchase of shares for the cooperative, which was alleged not bought or/and unalloted, but for which bonus shares have been discovered in a separate CSCS account.

The use of clients’ funds as lien using fake seals and letter heads of the clients to procure facilities and non-verification of shares certificates of clients’ accounts.

As at the time of filing in this report, Proshare NI could not clarify the true status of the matter when it contacted Lanre Oloyi, Head, Media of the Commission. “I cannot confirm this issue at this moment due to an all parties meeting that has been scheduled,” he said.

2009 Outlook: Key Questions for the Director-General of the Nigeria Stock Exchange

If you had an opportunity to ask the Director General of the Nigerian Stock Exchange a question, what would you like to know from her?

Some investors, fund managers and equity analysts have sent in their concerns/questions; some of which were addressed by the DG, NSE at the Annual Review held at the Nigerian Stock Exchange on Monday, January 12, 2009.

However, the following questions, submitted by our board of analysts remain unanswered:

1) Bail-Out: Why has the Federal Government refused to provide a concrete bail out plan for the capital market, not just lip service? Do we think this will change with a change in the Federal Ministry of Finance given that other forward looking economies recognised the need to re-build confidence in its capital markets by taking actions that would bring about the much desired liquidity needed, albeit; with much more emphasis on regulatory control and accountability?

2) Alternative Market Strategies: The NSE (an SRO) along with other regulators has been talking about the introduction of simple options to the capital markets for over two years now. Why has this not been implemented?

At the moment, there are only two strategies investors can use in trading the NSE (that is, buy or sell) and in a free fall or in a downtrend as we have currently, there are usually no buyers for willing sellers.

Even with the introduction of market makers and ‘funding providers’, the makers will not be willing to buy shares that they know are fundamentally weak (given that the incidence of corporate governance and believability of financial reporting in the country is subject to risk discounting risk here relates to poor observance of standards and reporting requirements). If options are available or other strategies, investors can play the market even in a downtrend. The limited options/alternatives for traders at the NSE is keeping sophisticated ‘international’ investors from the NCM. The market appears too one directional.

3) Margin Accounts: With banks not providing margin loans to investors, it appears difficult for the Nigerian Stock Market to maintain any upward momentum or traction.

Has the Director General looked into other alternative source of financing for investors and brokerage firms?

Can the Federal Government provide brokerage firms guaranteed loans which can be loaned to investors based on strict guidelines as an alternative to an outright bail-out?

4) Demutualisation of the NSE: How does the NSE intend to conclude this key 2009 internal goals during a market cycle where most investors are not able to fully participate? The conversion of the NSE into a listed company appears desirable and precedents in Eqypt, J’borg and New York support the viability of such a proposition but to do so in a year where strategic management changes and movements have taken place, and will take place, as well as the governance and process capacity issues/challenges taking place will require a broad range of investor support.

We are interested in knowing more about the conversion of the not-for-profit organisation to a value and profit driven one in such a way as to allow each willing and able investor to participate.

5) New Products: The NSE recently launched five new indexes (including the NSE 30) working with reputable firms that have a history of creating such. We believe it is a welcome development that forward looking firms may create products around.

When will this be introduced in the market and does it not portend a dire signal for firms not included in the index or their sector not considered profitable enough to have a sectoral index?

Is it possible for the criteria or/and weighting of the index be made available for equity analysts?

6) Dealing with Current Challenges: in the last few weeks, there has been a spate of occurrences, not on such a large scale as to pronounce it a major crisis but it is a crisis itself, given that it is occurring in a market with confidence at its lowest ebb. Dud cheques have been issued to investors and fellow fund managers alike. What does the aggrieved receiver of such cheque have to do and what measures are in place to address these challenges given that it goes to the heart of the ‘confidence’ question?

7) Investor Enlightenment: The astounding reality of the market and indeed our larger economy was best summed up by the former president, Olusegun Obasanjo, who in a departure from the less than believable comments of the CBN Governor, declared that the current crisis will visit the poor and rich alike.

If you consider the yearning of the hard working employee, market trader, artisans, aspiring manager, church goer and widower, who in the heat of the capital market boom were plastered all over with offers and media blitz on the viability and security of investments in the NCM, and who now have to worry about the expected income due from the market to meet obligations but cannot access it; you will know that the current meltdown will affect people differently.

Hope is a casualty in this market, so also is the believability of the operators because of their silence. Investors have simply been told to wait and allow ‘nature to take its course’. The caveat emptor that should have been ringing out in the first place now becomes breaking news at this tail end of market downturn.

These are the first death throes. The question is what sort of market will remain?

Yet, one heard not one expression of real remorse or accountability from any of them. They had nothing to offer except the time-worn counsel of confidence men: trust me. Instead of protecting our market or at least preparing the investors and players alike for the possible challenges, we did what we have always done best as a nation…deploy self denial as a shield from the truth.

Maybe not everyone was playing the ostrich game, at least not brazenly. While the CBN Governor embarked on a self effacing trip on being nominated to attend the world deliberations on the crisis, the Ministry of Finance was silent, shooting down everything pushed forward to ameliorate the situation without providing an alternative. The Director General of the NSE, to her credit, continued to show empathy, and spoke consistently about her heavy burden and desire to see that the ordinary citizen/investor is assisted to overcome the current challenge.

The question she has to provide now is: how do we hope to achieve this? What should the investor do from tomorrow?

Source: Proshare Nigeria

HOW TO PROTECT YOUR INVESTMENT IN BEARISH MARKET

By West Africa Capital Market School

After having reflected on the fact that there is now little doubt that the Nigeria Stock Market is in the midst of a bear run and that the bear would dominate the market over a long period, experts at the West African School of Capital Market, have offered to avail capital market operator the appropriate trading strategies for the bearish market.

“Economic fundamentals do not support a swift return to an upward price trend,” the experts noted in a dispatch to operators and investors. “With oil hovering in the low $40s, there is precious little money flowing from the public sector unless of course there are draw downs from dedicated accounts to fund some sort of large scale infra-structural investment and even this will take some time to trickle through based on emergent large bets against the local currency.”

The experts highlighted eight broad approaches to managing clients’ portfolio for stockbrokers.

1. Avoid investment diversification. Diversification is a great idea in good markets as it cuts down market and sector risk. However, in a bear market, the problem is with the broad market. The broader your selling of low performers, and concentrating your investments in fewer stocks that have shown the best performance, is the way to go. Your risk is no longer corporate performance but low confidence in the overall market and so it does not make sense to be broadly represented.

2. Help clients identify and preserve core capital – you will have to trace client investments by contribution/performance to identify core capital. Let clients know that you are focused on ensuring that they remain “in the game” and are positioned for a market rebound when it eventually comes.

3. Review your website and its contents to reflect the new realities and change research recommendations from “buy’ “sell” “hold” to a “preserve”, “growth” and “aspire” type recommendations. Preserve stocks will provide growth and income necessary to preserve core capital and maintain lifestyles. Growth will beat the overall index and Aspire is for long term gains when the market picks up. Conservative clients may choose to start out with 50 per cent Preserve, 40 per cent Growth and 10 per cent Aspire and then mechanistically adjust the portfolio later.

4. Shift emphasis from selling stocks to financial planning and wealth management if you have the skills for these. Financial planning is far more defensive than wealth management which requires the identification of non-financial wealth and the setting up of the right trust structures.

5. Be wary of new investment types that you don’t fully understand. The property market, for instance, will in all probability self correct especially at the high end where oversupply and tighter bank credit is now becoming an issue. If you are just getting into property come in at the middle and low end. Avoid the Lekki-Epe axis by all means.

6. If you choose to bet against the naira, do so in an intelligent way and realize that dollar rates can crash if government so desires. You need to get an inside track on just what government thinking is. A strong dollar will cut imports in the medium term and do long term good to the reserves but this strategy might go horribly wrong. We have to wait and see.

7. Keep your people engaged as much as you can. The obvious reaction is to slash and cut and sometimes this may be necessary but rather stay positive and prepare for the bull market because it will come back and for a fairly sustained period too. This means lighter more qualified and educated personnel and wise investments in scalable technology. If you are going to sell optimism abroad then sell it at home too and stay on message.

8. How do you know when the market is recovering? You will need to get some of your people busy on creating and maintaining the A/D Line of the NSE All share. Each day deduct the number of stocks gaining from stock shedding value and graph the resultant values. This will show clearly when the broad market begins to recover.

Technically, the market is in base formation right now with small gains being matched by exits/loss capping. Traditionally, base formation is followed by a sharp and sustained movement to the up or downside. You can estimate this by looking carefully at the volume on up days and the volume on down days. The whole idea is to cancel out the noise being generated by the overall index to see where recovery is likely to begin from.

The other option to these suggestions is to do nothing and hope for the best. While hope might be a laudable trait it is certainly not an advised business strategy. We believe that the market is transiting from high volatility/high gain frontier market status to a more sustained emerging market growth type of market. Such transitions are always painful but unavoidable,” the experts submitted.

Investors Accuse Stanbic-IBTC, Chapel Hill Of Fraud In Starcom Private Placement

A row is in the brew in the community of investors, especially, among those that bought into the private placement of Starcomms Plc last year. At the centre of the uproar are two issuing houses to the shares of Starcomms Plc, Chapel Hill Denham and Stanbic-IBTC.

Mr. Adebayo, one of the investors that bought the private placement of Starcomms Plc observed in a fit of frustration that it is very evident that “Starcomms Plc Private Placement” has become the epitome of “fraud.”

“The Placement of 4.95 billion shares, which opened and closed on 3rd June 2008 at a price of N13:00 appeared so attractive to investors at that time as it was over-subscribed,” Adebayo recalled.

Apparently angered at the down-turn of the investment, Adebayo explained that: “The projection in the placement memorandum says that the company will declare a loss of N197 million at the end of 2008 financial year end. Unfortunately, the company declared a loss after tax of N1.014 billion in the second quarter and N2.149 billion in the just released third quarter result.”

Starcomms Plc was listed at N13.56 on Monday, 14th July, 2008, between then and now, the price of the share had slid to a low of N3.86.

“In fact, the price dropped consistently to N7.46 less than two months after listing,” Adebayo opined. “The question to ask now is during that period, who was selling since most investors that bought shares during the private placement still had certificates that were unverified. Could it have been the original owners dumping on new investors? Can someone please explain why the variance between the forecast and the actual result declared is so staggering? Was money being laundered? What happened to the proceeds of the placement? How much expansion has the company embarked upon since the placement?” Adebayo queried.

Another investor frontally accused the two issuing houses to Starcomms placement, StanbicIBTC and Chapel Hill Denham, a capital market operator that was recently selected as one of the market makers for the Nigerian Stock Exchange. Concerned investors argued that the two issuing houses lent their brand names to be exploited by Starcomms to defraud them.

“The placement was actually successful because Starcomms Plc leveraged on the good name and credibility of Stanbic IBTC Bank Plc and Chapel Hill Advisory Partners. But looking at the whole situation closely, it seems there is more to what we can see. It’s so obvious that Starcomms’ goal from the word go was to defraud the public,” an investor submitted.

“Another question begging for an answer is the role of the two issuing houses in this? Or did Lababidi/Starcomms Plc (Chief Maan Labadidi is the Chairman of the board of Starcomms Plc) act alone?” Adebayo asked. While trying to establish a connection and possible connivance to defraud investors, Adebayo questioned the appointment of Mr. Wale Edun, Chairman of the board of Chapel Hill as a non-Executive Director of Starcommc Plc.

“I want to question the connection between the sudden appointment of the Chairman of Chapel Hill Advisory (Mr. Wale Edun) as a non-Executive Director of Starcomms Plc? Have the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) been asking any questions? How have the professional parties to the placement been able to comply with post-listing compliance requirements? Why are the regulatory bodies keeping mute about this great injustice to investors?” Adebayo queried.

Giving further revelations of the intentions of the Chairman of Starcomms to approach the capital market to raise funds for another company that he has interest in, Adebayo said:

“We hear that the same Lababidi now wants to bring another company to the market (Supreme Flourmill Ltd); this only shows that this individual thinks we are all fools in Nigeria. Please beware of this offer,” Adebayo warned other investors.

Commenting on what investment in Starcomms had turned to, Mr. Ajisafe, another investor opined:

“This is a serious matter and I have decided to sensitise everyone on my list thereto. This is, no doubt, a huge fraud and I am of the opinion that the SEC and NSE should stand indicted in the whole affair! Also, the two issuing houses, I believe, have an explanation to make to unsuspecting investors because investors relied on the strength of their analyses to buy the Starcomms offer. This is shameful and I submit that the matter be investigated and all those found to be culpable be treated in line with the IST sanctions. They are no better than Madoff! Moreover, investors should be wary of issues by the concerned issuing houses (Chapel Hill and StanbicIBTC),” Ajisafe submitted.

Another investor said of the suspicion of collaboration to rip investors on the Starcomms’ private placement.

“It is amazing what our corporate gurus are doing to stay on top of the ladder, gone were the days when our industrialists gave to charity, now our so called industrialists have board meetings and make strategies on how to use their companies to defraud the masses. We are all talking about Madoff but oblivious to the presence of individuals perpetrating worse atrocities right here in Nigeria. We all know that hedge funds are not regulated, and that probably explains why they are able to get away with all they do. How do we justify or indeed explain the flagrant act of fraud against the public in a regulated market? Starcomms came into the market to raise capital, many unsuspecting investors rushed at it, expecting high returns on their investments; it is a pity that it is now a different story entirely. It is obvious that being a politician is not the only way to “rush” up the ladder of wealth; the capital market is an untapped goldmine to fraudulently enrich people who are influential in the business and financial sectors, thanks to our Indian “friend.”

In a statement made available to Fortune&Class Weekly by officials of Chapel Hill Denham, one of the issuing houses to the Starcomms private placement, the issuing house noted that “several investors never read the PPM or all the documentation made available at the time of the placement and many bought through brokers and friends, who were among those invited and never actually saw any documentation and never understood that it was sold as a growth stock, which would make a loss in 2008 (albeit, a smaller loss than we expect to see for 2008), a profit in 2009 and pay dividend in 2010.”

Chapel Hill Denham further asserted in the statement that, “What essentially has happened is that a completely unforeseen heavy subsidy led competition by Visafone and Telkom Multilinks, has meant Starcomms spending about N2 billion more on subsidies than was projected. Essentially, a line with a handset costs about $45 each and it was being sold at N10 each. Starcomms board and management felt that it did not yet have the scale from a subscriber perspective at 1.2million gross subscribers, to stay out of this battle for subscribers.”

The statement further explained that Starcomms had over the years to over 2.5 million gross subscribers, higher than the business plan but at a hefty cost.

“This subscriber’s base will be beneficial this year and beyond, as you can imagine that over two million subscribers spending about $15 per month should generate revenue of about $350 million in 2009. This is not a business in distress by any circumstances,” the Chapel Hill Denham statement observed.

The management of Chapel Hill Denham also explained that contrary to the rumour being spread, the founders, the Lababidis actually increased their holding during the private placement, spending about $17million directly and indirectly, through their other businesses.

“The only shareholders who sold during the placement were the two private equity firms, Actis and ECP, for whom the funds they invested from had come to the end of their life and had to return the money to their investors and partners. All of these were disclosed to investors in the private placement,” the statement noted.

No official of Stanbic-IBTC was available for comment.