NSE blacklists two for fraud

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Authorities at the Nigerian Stock Exchange (NSE) have blacklisted two persons and entered their names unto the list of persons not fit to engage in capital market activities.

A regulatory document obtained by The Nation indicated that the NSE has blacklisted the duo of Mr Uduma Arunsi, an executive director at Royal Trust Securities Limited and Mr Adewale Ogunbanwo, a former compliance officer at Dominion Trust Limited.

According to the Exchange, the duo were blacklisted in line with the provisions of Rule 1.24: Definitions, Rulebook of The Exchange, 2015, Dealing Members’ Rules as amended, which deal with offences and sanctions relating to market abuses, shares fraud and misconducts.

Arunsi was blacklisted for allegedly engaging in “msconduct and unauthorised sale of clients’ shares” while Ogunbanwo was blacklisted “for misconduct and fraudulent activities”.

“Dealing members are advised not to engage in any activity with the above-mentioned individuals,”NSE warned.

With the blacklist, the indicted persons will not be able to work in any stockbroking and investment firms in Nigeria, according to rule six, subsection 13 of the NSE Rules.

Under the rule known as “Specific Actions Requiring Prior Consent of The Exchange”, a dealing member shall not be allowed to employ some categories of persons without the prior written consent of the Exchange.

These included directors, authorised clerks or other persons including principal officers such as the chief executive officer, chief finance officer, chief compliance officer and chief risk officer, who have been indicted by the NSE or Securities and Exchange Commission (SEC).

Others included any person who was an officer or employee of a dealing member expelled from the Exchange, any person expelled, as an authorised clerk or its equivalent, from any other exchange, any person refused admission as a member of the Chartered Institute of Stockbrokers or any person expelled from its membership, any person expelled as a member of any professional association or institute and any person who is insolvent or has been convicted of theft, fraud, forgery, or any other crime involving dishonesty.

Also, indicted persons may not be able to practice or operate in any country or jurisdiction where Nigeria has a subsisting Memorandum of Understanding (MoU) on capital market cooperation.

The Nation had earlier exclusively reported that the NSE had entered the names of no fewer than 33 persons in its “Blacklist”, an official record of all corrupt persons and indicted officials who are deemed unfit to engage in stock market activities.

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This followed 2018 amended of the NSE rules, which enabled it open a formal record to be known as “blacklist” for the purpose of records of corrupt persons. The amendment was approved by the Securities and Exchange Commission (SEC) in December 2018.

The “blacklist” contained persons who were blacklisted for various crimes ranging from unauthorised sale of client’s shares, diversion of funds, professional misconduct and aiding and abetting criminal activities.

Those on the “blacklist” include stockbrokers, accountants, directors, compliance officers, registrar and information and technology specialists among others.  A breakdown showed that stockbrokers were more than half of the blacklisted persons while compliance officers also featured prominently.

To be included in the “blacklist”, the Exchange must have established a prima facie case and indicted such persons. Any blacklisted person shall no longer be entitled to privileges, services, recognition or access to the Exchange and its facilities. Such a person also shall not be permitted to deal or transact with or be employed by a dealing member or person.

The “blacklist” rule applies to all dealing member, an authorized clerk, an employee or director of a dealing member, a sub-broker, or any other capital market operator.

According to the rules, any person blacklisted by the Exchange may however apply to the Exchange for reinstatement after the expiration of the blacklisting period imposed by the Exchange; or where the blacklisting is not for life, a reasonable period has elapsed where no period is specified by the Exchange.

Any person applying for removal from the blacklisting and reinstatement into the capital market must “provide compelling reasons” in support of his or her application.

The “Blacklist” was meant to strengthen the hands of the Exchange in its fight against unauthorised sales of investors’ shares and diversion of proceeds by capital market operators.

A check had indicated that about 90 per cent of blacklisted persons were due to unauthorised sales of client’s shares. Other ranking crime was manipulation of the market or share prices.

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