Investigations… SEC suspension of Heritage Capital Markets and the untold story

The Securities and Exchange Commission (SEC) had recently informed Nigerians that it had suspended Heritage Capital Markets Limited indefinitely from all capital market activities.

The regulator, however, did not tell industry stakeholders and Nigerians in general of the circumstances that led to the action, or how its own internal communications gaps led to what could be described as an avoidable error.

An investigation by Ripples Nigeria revealed that the suspension order on Heritage from all capital market activities came over a family crisis on the control of the estate of a late business tycoon, Prince Cyril Ukachukwu.

SEC had on December 21, 2016 slammed the indefinite suspension on Heritage Capital Markets, a stockbroking and dealing firm, its directors and sponsored individuals “in connection with the unauthorized sale of shares belonging to an investor and its refusal to comply with the Commission’s directives in that regard”.

Inquiries by Ripples Nigeria showed that the matter involved the estate of late Prince Cyril N. Ukachukwu of Abia Omuma in Oru East LGA, Imo State, the deceased owner of CN Ukachukwu & Sons. Three siblings had written petitions against two others. The transactions involved more than N100 million.

Investigations indicated that Heritage Capital Markets was in the process of complying with the directives of the Commission and there had been several communications between the operator, SEC and the other parties.

Contrary to the claim of unauthorised or fraudulent sale of shares, investigations showed that the contention within the family was the appropriateness of the representation which Heritage Capital Markets relied on for the transactions.

Read also: SEC slams suspension on Heritage, ex-ICAN presidents over shares fraud

Sources said Heritage Capital Markets had fully bought back the shares and restituted the client as directed by SEC and was only awaiting SEC’s instruction on the movement of the stock account to another stockbroking firm given the complexity of the case.

Late Prince Cyril Ukachukwu had four wives and 13 children. Heritage Capital Markets had all along acted on the family and board resolution as well as power of attorney which appointed a daughter of the deceased as the sole representative for his shares and related matters. The crisis of control among siblings later snowballed into the emergence of two other signatories claiming to represent the family.

Inside sources privy to the matter revealed to Ripples Nigeria that the regulator, whether due to a mix up, or communication gap within, ignored correspondents from Heritage informing it of steps being taken by it and members of the family in compliance with SEC’s earlier directives.

The source said, “yes it is true that SEC called them (Heritage Capital Markets Limited) for an all parties meeting to be held on December 8, but I’m also aware that they wrote back that their Managing Director, (Ajaegbu) who is pivotal to the issues, was to perform an important function at the induction ceremony of new members of ICAN which was to hold on the same date.

“They asked for another date for the meeting, but there was no reply from SEC.

“I think they also wrote to the commission twice again after that, asking for appointments to meet over the issue, and for SEC to give interpretations to an earlier directive. But for whatever reason, those letters went unattended to. What followed was the suspension notice”.

The source also revealed that the EFCC was earlier called into the matter by some of the family members, and that the anti-graft commission cleared Heritage of any wrongdoing, but suggested that the company assist in transferring the stocks to another house as requested by the family.

According to him, Heritage was in the process of doing this, and informed SEC of it, but again SEC seemed set on a course of action, as it seemingly disregarded every communication from Heritage and came down with the suspension hammer.

A document sighted by Ripples Nigeria showed that Heritage Capital Markets had on December 7, 2016 wrote to SEC notifying the apex capital market regulator that it had reached the final stage of resolving the issue and requesting for an appointment at earliest convenience to meet with SEC for guidance. In the same letter, Heritage had restated its commitment to resolving the matter on or before December 31, 2016.

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On the same day, Heritage Capital Markets had reportedly written letters to Fidelity Bank and Access Bank to confirm signatures of the signatories to CN Ukachukwu & Sons, which had requested for the transfer of the company’s shares account from Heritage Capital Markets to another stockbroking firm.

It was gathered, that the company had followed up its December 7, 2016 letter to SEC with a reminder, seeking for audience with the Commission on the final resolution of the matter.

Sources in the know of the matter said it was surprising how SEC arrived at its December 21, 2016 decision when Heritage Capital Markets was waiting for the guidance of the Commission in finally resolving the issue.

It was further gathered, that with the decision against the sole representative of the family by SEC, which was later adopted by the EFCC, Heritage Capital Markets was said to have seen the need to undertake careful Know Your Client (KYC) procedures and involve SEC directly in the transfer of the account to avoid any future liability given the nature of the family.

This is even as investigations by SEC and EFCC had shown that Heritage Capital Markets did not benefit in any inappropriate way, beyond its commissions, in all the transactions carried out under the instruction of the hitherto sole representative and daughter of the deceased.

Sources within the apex capital market regulator however hinted, that it was reviewing its suspension order after Heritage Capital Markets provided the Commission with shares statement and other documents showing compliance with the buy-back order by SEC. The sources said they expected SEC to lift suspension on the Heritage Capital Markets soon.

Further probe showed that while Heritage Capital Markets had sufficient ground to contest the decisions of the apex capital market regulator, it may have chosen the path of amicable resolution of the matter, even as it tries to erase the undue negative impression the commission has erroneously created on it.
By Etaghene Edirin….

 

 

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