Court stops FRC from hindering Stanbic IBTC businesses
JUSTICE Ibrahim Buba of the Federal High Court, Lagos yesterday restrained the Financial Reporting Council of Nigeria (FRCN) from hindering the Stanbic IBTC Holdings (SIBTCH) and it’s subsidiaries in carrying out their lawful businesses.
The judge also made an interlocutory injunction restraining FRCN from inviting the entire board of directors of the plaintiff to any meeting in connection with the defendant’s statutory investigation of the company’s financial statements until the hearing and determination of the proceedings.
The order followed an application by SIBTCH counsel, Prof. Fidelis Oditah (SAN), praying the court to so hold.
After Oditah moved and argued his application, counsel to FRCN, Olusina Sofola (SAN) vehemently opposed it. He argued that granting the application amounts to trying to restrain statutory authority from carrying out its lawful responsibility.
But the judge, after listening to the argument of both parties, delivered a Bench ruling and upheld the reliefs sought by IBTCH, saying the role of the court is to ensure that everything is done according to the law and not otherwise.
“No court will stop a statutory authority from carrying out its duties, but when a statutory power is acting beyond its powers, the court is bound to act where it is alleged that a statutory authority is acting ultra vires. The court has powers to enquire whether it is true or false.
“This application is alive and indeed well alive. Court grants reliefs A and C. The application succeeds and is granted as prayed”, Buba ruled. He adjourned further proceedings to November 6.
Following the recent allegation of material misstatements in its financial accounts by FRCN and National Office for Technology Acquisition and Promotion (NOTAP), culminating in a N1 billion recommended fine, SIBTCH sued the two bodies.
In the suit, the bank is asking the court to determine, among others, whether FRCN has the power to impose a fine of N1 billion on it.
FRCN had recently sanctioned Stanbic IBTC over its audited accounts for 2013 and 2014 and suspended the Financial Reporting Numbers of the bank’s Chairman, Mr. Atedo Peterside, and its Chief Executive, Mrs. Sola David-Borha. The agency barred them from vouching for the integrity of any financial statements in Nigeria.
FRCN also suspended two other directors – Mr. Arthur Oginga and Dr. Daru Owei – for attesting to what it termed “misleading” 2013 and 2014 financial accounts of the bank, while Ayodele Othihiwa of KPMG Professional Services was sanctioned for his firm’s alleged complicity in the infractions highlighted in the financial reports for the two-year period.
The council based its sanctions on issues raised by the bank’s minority shareholders led by the Mahtani Brothers who own the Churchgate conglomerate, and some regulatory agencies such as NOTAP, Securities and Exchange Commission (SEC) and the Central Bank of Nigeria (CBN).
The bank also wants the court to determine whether or not the FRCN has the power to license directors and other office holders in public interest entities, and if it also has the power to suspend the said licence by suspending a director or other office holder in a public interest entity.
Stanbic IBTC wants the court to determine if the council has the power to bar any director or another office holder from signing the entity’s financial statements without informing the affected director or another office holder what he/she has done wrong and giving him/her the opportunity to show cause why disciplinary action should not be taken against him or her.
Earlier, the CBN has said that the FRCN did not follow due process in sanctioning SIBTCH, and so would not accede to the council’s prayers to discipline the company.
The apex bank said it did not see any reason to advise or compel SIBTCH to obey the FRCN’s sanctions. CBN said contrary to the allegation by FRCN that SIBTCH did not obtain approval from NOTAP for payment of affiliate software, its review revealed that the bank actually obtained the necessary approval from NOTAP.
It said the approval was obtained to pay affiliate software licence from the Standard Bank South Africa (SBSA), for a period of three years covering June 1, 2012, to May 30, 2015, adding that the remittance from June 2015 to date is still awaiting approval from NOTAP.
The CBN’s position is contained in a letter to the Executive Secretary of the FRCN, dated November 2, 2015, and endorsed by the CBN Governor, Godwin Emefiele.
“With regard to the allegation of non-disclosure of intangible assets in SIBTCH’s 2013 and 2014 financials, we note that the bank adequately recognized the software as an intangible asset in its 2011 financials and sufficiently disclosed the disposal of the software in the 2012 financials. Consequently, the said software could not have been reported as an intangible asset in the succeeding years 2013 and 2014.
“With respect to the allegation of lumping several expenses items under ‘other’, we are of the view that the items were not material enough to appear as line items in the income statement and that the non-disclosure of the items did not materially affect the true and fair view of the financial statements”, the apex bank declared. It noteds that though SIBTCH erred in the classification of some line items, the identified misclassifications neither understate or overstate its assets and liabilities nor increase or decrease its income or expenditure.
CBN, therefore, expressed concerns over what it called “apparent failure of the FRCN to follow due process as laid down by its own FRC Act and Regulations, in arriving at the Regulatory Decision.”
The bank noted that in conducting an investigation into possible breaches of the FRC Act, the FRCN is required to give the entity concerned 60 days from the service of final notice to restate its accounts where both the panel and entity agree on the need for a restatement.
“In this case, our understanding is that FRCN called a meeting with the board of SIBTCH at 11am on October 26. But rather than holding the meeting, FRCN went ahead to convene a press conference at 8am on the same day to announce its sanctions against SIBTCH. Our review further indicates that both FRCN and SIBTCH did not agree on a need for a restatement of the accounts before the sanctions were announced.
“According to the FRC Act, an entity is only punishable under the Act upon conviction by a court of competent jurisdiction. Yet, in issuing the final notice, the FRCN had already meted out some punishments to the affected entity, without any conviction by a court,” the CBN said.