Monday, 25th September 2023

Shareholders renew call for recovery of N700 billion trapped in private placements

By Helen Oji
13 April 2023   |   4:30 am
Lingering inflation and other socio-economic challenges have triggered a fresh call from investors whose funds, running into N700 billion, were trapped in private placement scams.

SEC (Securities and Exchange Commission)

•Shareholders demand prosecution of scammers 16 years after
• Seek CAMA amendment to validate mandatory listing of shares on NGX

Lingering inflation and other socio-economic challenges have triggered a fresh call from investors whose funds, running into N700 billion, were trapped in private placement scams.

The investors have urged regulators to clamp down on the firms that reneged on the promises to list their shares on the Nigerian Exchange Limited (NGX) to generate returns on their investments 16 years after private placement issuance.

Besides, they have called for the review of the Companies and Allied Matters Act (CAMA), to makeing it mandatory for companies seeking private placements to list within a stipulated time after issuance. This, they said, increases compliance levels and restores investors’ confidence.

Although the Securities and Exchange Commission (SEC)had stated that it did not regulate private placements by private companies but the investors insisted that the regulators should pay lip service to the issue considering the huge amount trapped in the scam.

According to them, companies that had undertaken private placements during the 1990s stock market boom have tied down their funds and failed to list their shares on the secondary market as promised.

They noted that many investors that have their monies trapped during the period are currently facing severe hardship without any means of income at a time the country is grappling with the rising cost of living.

The financial fortune of many retail investors is connected with the market either directly (through investments) or indirectly (through pension funds). President of Ibadan zone Shareholders Association, Eric Akinduro, said the trapped fun, exacerbated by the 2008-2009 global financial crisis, has caused a lot of apathy among retail investors and reduced their ability to participate in the market.

According to him, with improvement recorded in domestic participation in equities in recent times, this is the right time to clamp down on the companies involved and wield the big stick on them. He noted that many of the firms were successful in their bids and sourced over N700 billion but that a large portion of the money was diverted to other investment outlets.

He urged the regulators to take necessary measures to investigate the issue to alleviate the suffering of investors, noting that information about the concerned investors is with the regulators.

“The investors’ fund trapped in the private placement is a thing of concern to the investing community. When you look at the magnitude of the funds, it is unfair for the regulators to keep quiet if they are protecting investors.

“However, investors have to learn their lessons. Due diligence and proper investigations are needed before one put hard-earned money into private placement. Some of the private placements are scams and the regulators warned investors than to stay clear of such companies.”

President of the New Dimension Shareholders Association, Patrick Ajudua, wondered why none of the operators of the companies has been arrested for operating illegal firms and withholding investors’ proceeds. He said the Investment and Securities Act has given the Securities and Exchange Commission (SEC) the power to prosecute any company involved in such act whether registered or not registered with the commission.

Ajudua also urged the SEC to intensify the campaign against investment in firms and outfits that are not registered with the commission to forestall a repeat.

Also speaking, the National Coordinator of the Independent Shareholders Association, Moses Igbrude, said SEC has the onerous responsibility of protecting investors.

According to him, it is wrong for the regulators to keep mum while promoters of companies that defrauded investors move around freely and enjoy the proceeds of the frauds.

Ajudua said the issue has created a liquidity crisis in the equities segment of the market and depressed the market, as the retail investors do not have the purchasing power to patronise the market.

He noted that if part of the money is recovered and deployed to the stock market, the bourse would have the needed funds to increase activities and attract more investors.

“Why would anyone take money from the public without the knowledge of SEC? We are calling on the regulator again to do their job and bring the perpetrators to book to serve as a deterrent to others,” he said.