AP's Share Price Scam: NSE/SEC Steps in. (Otedola Vs Dangote)

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Here below is an excerpt from the Guardian on some of the shenanigans that brought the Nigerian Stock Market down on its knees. This is a new twist in the Otedola Vs Dangote war. Big shame.

NSE suspends stockbroking firm over AP's share price scam
SEC commences own investigation

By Gbenga Agbana and Femi Adekoya

NIGERIAN Stock Exchange (NSE), yesterday, suspended Nova Finance and Securities Limited (NFSL), a stockbroking firm, over alleged manipulation of African Petroleum (AP) Plc's share price.

Beside, NSE imposed a fine of N500,000 per day on the stockbroking firm, effective from the date of suspension, over the share price manipulation, which has made investors to lose over N240 billion.

Also, the Exchange slammed a fine of N300,000 on AP, for contravening its post listing requirements.

Already, the Securities and Exchange Commission (SEC), the industry's apex regulatory body has commenced its own investigation into the saga.

In a chat with The Guardian on Tuesday, SEC's spokesman, Mr. Lanre Oloyi said the commission has set up a committee to look into the matter, after which appropriate action would be taken.

In a press release made available to The Guardian yesterday, the Council of the Exchange noted that its investigations into the allegation of price manipulation of AP's shares, revealed that the activities of Nova Finance and Securities Limited constitute a breach of Articles 103 and 107 of its rules and regulations.

According to the statement, "the Council of The Nigerian Stock Exchange has carefully examined the recent alleged manipulation of share prices of African Petroleum Plc through incessant buy and sell transactions by Nova Finance & Securities Limited (a dealing member firm).

"Our investigations and findings revealed that activities of Nova Finance & Securities Limited constitute a breach of Articles 103 and 107 of our Rules and Regulations, which preclude our dealing members from creating a false market on a specific security to effect a change in its price".

"Consequently, the council of the Exchange has suspended Nova Finance & Securities Limited from all capital market activities and a fine of N500,000 per day has been imposed on the firm from the effective date of suspension until the fine is paid."

The NSE lamented that AP's "avalanche of advertorials on the alleged manipulation is a breach of the Exchange's post listing requirements on information dissemination by quoted companies. The companies are obliged to inform the Exchange of any matter that affects their operations before going to the press.

"African Petroleum Plc has brought the integrity of information emanating from the Central Securities Clearing System (CSCS) Limited to ridicule by publishing what was purported to be CSCS document and we wish to assure the investing public of the confidentiality of their records at the CSCS.

"The published document by African Petroleum Plc is definitely not a CSCS document. Consequently, the Council of the Exchange has also imposed a fine of N300, 000 flat on African Petroleum Plc for contravening the post listing requirements."

Allaying the fears of the investing public, NSE reiterated its continued commitment to integrity of the market and enforcement of its rules, regulations, conventions and usages.

AP, in an advertorial in some national newspapers, alleged that NFSL, "acting under the instruction of and with active support and connivance of Alhaji Aliko Dangote," has been primarily responsible for the steep decline in the value of the shares of AP Plc, on the floor of the Nigerian Stock Exchange."

In the disclosure, AP stated that its investigations revealed that "in the last eight weeks, there has been a premeditated and orchestrated 'crossing' of AP Plc shares amongst similar entities owned and controlled by either of Alhaji Aliko Dangote or Nova Finance and Securities Limited."

AP, whose share was marked down at N273 from N300 during its public offer last year, has now had it whittled down to N51.48, as at yesterday causing the phenomenal loss of N240 billion to the shareholders.

NSE, in a swift reaction, said that "a scientific and technical investigation has commenced" on the alleged share price manipulation by NFSL.

But the National Co-ordinator of Independent Shareholders Association of Nigeria (ISAN), Mr. Sunny Nwosu, said NSE's action has come too late, saying that "a big chunk of ordinary Nigerians investments have already been sadly compromised through the negligence of regulatory authorities."

Nwosu pointed out that the AP's publication was an exposure of what has been happening to the common man in the nation's capital market.

"The association's concern is mainly for the common people whose contributions to the economy, through the stock market, have been wiped-off through unethical manipulations of their share prices, by a stockbroking firm, in alleged connivance with Alhaji Aliko Dangote.

"We are not happy that somebody who is aspiring to become the President of the Nigeria Stock Exchange should be involved in such unwholesome activity.

"We are equally unhappy that the manipulations were serially carried out right under the nose of the regulatory authorities, without being detected.

"We are however happy that AP management found the courage to make the exposure, without which investors would have continually been given the impression that market fundamentals were behind such phenomenal sharp drop in the share price.

"We are terribly worried that other prices of other shares could have suffered the same fate, moreso as other companies would have not had the courage or capacity to make the thorough investigation by AP management, which exposed the unethical market operators.

"Consequently, we are demanding for a comprehensive investigation into the operations of the capital market, which will go beyond the one which the exchange said it has now initiated," Nwosu added.

Another shareholder, who spoke to The Guardian on condition of anonymity, said he has lost over N38 million to the manipulated share price crash.

"Right now, I am on ground zero. With such colossal loss, which represents my total life savings, I may soon go below ground zero, as capacity to continue living has been totally eclipsed.

"The painful aspect of it all was that the whole thing was planned and executed by those who should have been contended with what they had already been endowed with. To say their action has now brought some other common men to their knees, financially, is most sinful," he said.

An AP official, who also spoke on condition of anonymity, said they did their home work very well to unravel the mystery behind the share price crash.

"What baffled us in the company was that the regulatory authorities were quick in querying us for price manipulation at a time, when the share price was going up. Why did they not observe the factors behind the sharp share price fall?", he asked.

He pointed out that the situation could impact negatively on investors' confidence in the market.

"The fact that the share crossing was undetected by the authorities for that long speaks volume about the sincerity or alertness of those that should regulate activities at the capital market," he said.

AP, in its statement, said the unethical practice of share crossing or round tripping, was perpetrated by NFSL, through transfer "and or purportedly selling a minimum of 50,000 units of AP Plc, which is required as the minimum to drop the price on a daily basis."

The statement added: "Shares from any of Alhaji Aliko Dangote and Nova Finance and Security Limited's owned and controlled company to another of their owned and controlled company are transferred amongst themselves, thus creating a false impression of activity on AP Plc stocks.

"This, having been done on a daily basis in the last eight weeks, has led to a drastic fall in the value of the AP stocks from over N293 to an all time low of N54.

"For the avoidance of doubt, the shares were not traded but merely crossed daily by two principals, working in concert with the sole aim of bringing down the stock. This, they have achieved from N293 to N54 in the last eight weeks."

Officials of Dangote Group declined to comment on the matter. One of the officials confirmed that Dangote had travelled out of the country and could not be reached on phone. "May be he was in a meeting over there. We shall however react to the allegation at the appropriate time," he said.

? 2003 - 2007 @ Guardian Newspapers Limited (All Rights Reserved).