IST: Special Report of US, UK Mission
The Investments & Securities Tribunal (IST) recently conducted a two-week mission to the United Kingdom and the United States of America to establish critical links towards realising its objectives. Kenneth Ezea, in this diary, chronicles the concerns of the international investment community about Nigeria and highlights the structural distortions, unfolding policy options and the imperatives for corporate governance in the Nigerian capital market...
The mission was conceived as a proficiency enhancement programme aimed at exposing the members of the tribunal to the operations of advanced adjudicatory systems in resolving financial services disputes. The IST itself was fashioned after the fast-track Financial Services & Markets Tribunal (FSMT) in the United Kingdom and the Securities Appellate Tribunal of India.
Led by the Chairman, Dr. (Mrs.) Nnenna A. Orji, other objectives of the mission were to sharpen Members' understanding of critical developments in the global securities markets and share with the international community the progress of the economic reform efforts of the Obasanjo administration.
The mission also aimed to establish relationships with relevant institutions involved with formulation and implementation of international financial policies, corporate governance issues and foreign direct investments (fdi).
Envisioned as a world-class capital market tribunal, the IST intended also to showcase itself as a significant reform initiative that could enhance the rating of Nigeria as favorite destination for foreign investments.
At Financial Services & Markets Tribunal (FSMT), London
To achieve the stated objectives, the Tribunal visited the FSMT, UK which is an independent judicial body established under the Financial Services and Markets Act 2000 (FSMT Act). The FSMT hears references arising from certain decisions and actions taken by the Financial Services Authority (FSA), London.
The FSMT panel appointed by the Lord Chancellor since 2000 briefed the IST on general procedural mechanisms such as safeguards for judicial independence, rules of practice before it, challenges of judicial bias, time limit for hearing, rules of evidence, conditions for grant of public/private hearings, amongst others. Both tribunals resolved to work together in the areas of sharing ideas, training and exchange programming and attachments.
Over the two weeks period, the Tribunal visited and held discussions with officials and members of the United States Congress, the United States Securities and Exchange Commission; the New York Stock Exchange; the Office of Employee Benefits Security Administration, United States Department of Labor; and the Office of the New York State Attorney-General.
The tour also took the delegation to Corporate Council on Africa, Trans Africa Forum, African Affairs Committee of the Association of the Bar, New York City; International Trade Administration, Office of Africa, US Department of Commerce; the Picker Centre, School for International and Public Affairs and the Centre for Law and Economic Studies, University of Columbia.
They met other leading academicians and attorneys in securities law who provided unique insights into corporate governance issues and offered suggestions on how the year-old Tribunal can be nurtured into a national institution of global consequence. The mission was also received by the Nigerian Consul-General, New York who was briefed on the activities of the Tribunal to enable the Consulate disseminate relevant information to foreigners visiting Nigeria.
New York City is the centre of global securities industry, trading over US$1 trillion of securities transactions on a daily basis. The IST members toured the trading floor to learn the practical operations of the NYSE as the oversight and enforcement procedures of the world's largest stock exchange will help to further equip the Tribunal for its statutory functions.
The Office of the New York State Attorney-General has been on the cutting edge of enforcement and oversight procedures with respect to corporate governance in financial and securities industry in New York State while practitioners and academics in securities law retained an influential turf throughout the United States guiding legislations, chambers of commerce and the investment communities, nationally and internationally.
Washington DC as the US capital hosts the key governmental apparatus responsible for the administration and oversight of financial and securities transactions. In DC, the IST visited the US SEC which regulates and monitors securities transactions and ensures transparency and accountability and the Department of Labor which oversees investment activities of all major pension funds throughout the United States.
The United States Congress is the source of all legislation and enforcement activity pertaining to the securities market. The IST mission engaged key members of Congress in dialogues along with senior staff members of Congress Committees directly involved with the securities market to understand critical oversight and enforcement issues.
To ensure that the corporate world and foreign investors got the message, the Tribunal also held sessions with influential organizations like the Corporate Council on Africa (CCA) and the Trans Africa Forum to enable them better educate their constituencies i.e. the press, private and public multinationals, investors and organizations government officials on issues concerning Nigeria and its improving investment climate, particularly as it concerns the capital market.
From the point of view of the Tribunal, the mission to the United States was hugely successful, far exceeding the initial expectations. Attestation to this fact could be gleaned in the words of Congressman William J. Jefferson (D-Louisiana), Co-Chair of the Africa Trade and Investment Congressional Caucuses and Congressional Caucus on Brazil and Nigeria who described the IST as "an excellent start in redressing Nigeria's negative history in financial matters".
Against the backdrop of the on-going reform of the economy and especially the financial and securities market, all stakeholders in the economy must note the critical concerns of the international community on Nigeria as well as their perspectives for achieving a forward leap.
Nigeria is re-emerging from the wilderness of international political and economic isolation as a result of the dictatorial military rule of General Abacha. This Administration is also battling the Nigerian fraudsters and 419 phenomenon perpetrated by few Nigerians which had forced the US to embark on certain public policy reforms targeting Nigeria. The apparent difficulty in re-kindling the interest of foreign investors could be traced to the cynical position of US policy formulators who demand the institutionalization of transparency and accountability in the Nigerian public and corporate governance systems.
The IST is one such institution with a clear focus to restore law and order in the securities market by ensuring timely, transparent and fair resolution of disputes and thereby stimulate confidence in the market. The equities market, the engine house of long term financing for productivity and growth, more than any other business, requires the highest level of trust to thrive and succeed.
But beyond the establishment of a good institutional infrastructure like the IST, the Nigerian securities market as a whole including regulators, SROs, quoted companies and broker-dealers, must prepare itself for positive change. Positive change means concerted effort to adapt and adopt corporate governance best practices. The end result is time and money saved by minimizing protracted disputes.
The expressed views of US political and business leaders wishing for improved and expanded relationships with Africa's leading economy can demonstrate this necessity.
Meetings at US Congress
At the Capitol Hill, for example, the Tribunal met with Congressman Donald M. Payne (D-New Jersey) with Ms Noelle Lusane, Foreign Affairs Advisor, in attendance. Mr. Payne has been in Congress since 1988, served as Chairman of the Congressional Black Caucus and as member of International Relations Committee and the subcommittee on Africa, amongst others. Having done work for the Congress on Nigeria and Nigerian financial institutions, he complimented the IST's visit, adding that missions of that nature allows Congress and the US agencies to understand the reforms Nigeria has been attempting and what has been accomplished to date.
Mr. Payne spoke frankly of Congress' negative perception of Nigeria and their reluctance to assist unless pushed by the Congressional Black Caucus. He said he and others are working to change the concerns of US companies and financial institutions regarding doing business with Nigeria. He felt strongly that IST use their establishment and decided cases as example of Nigeria's efforts to reform and entertain business and investments with the US.
Congressman Charles Rangel (D-New York) currently serving a 7th term in the House of Representatives spoke of his role in the Africa Growth and Opportunities Act (AGOA) and said he was happy to hear about the IST's work which he confirmed will stimulate investor confidence in Nigeria. He advised the Tribunal to share the reforms in Nigeria's capital market with the private sector in the US and explore possible linkages with designated business organizations such as the Corporate Council on Africa and American Chamber of Commerce.
Congressman John Conyers, Jr. (D-MI) long associated with Nigeria and having made trips to the country cautioned the Tribunal to take note of recent US securities fraud investigations to formulate and build reliable investigative mechanisms. He recommended for the Tribunal to follow through its requests to legislators and stay in contact with the Congressional Black Caucus to keep Nigeria on the front burner for Congressional actions.
General Counsel Keenon Keller - House Committee on the Judiciary referenced for the IST several cases and actions the Committee has reviewed including Enron and WorldCom and detailed how the Committee's members had approached US companies' securities fraud issues. In reaching understanding on continuing dialogue and reconnection with the committee, the Chairman, Dr. Orji, asked the committee to open contact with Nigeria on how to apply legislative authorizations to similar fraud issues in Nigeria.
Trans Africa & Corporate Council on Africa
Bill Fletcher, Jr., President Trans Africa Forum highlighted the role of the forum as an advocacy organization that educates legislators, the press, organizations and government officials on issues facing Africa and the individual countries. He noted the reasons the US continues to question business opportunities and developments in Nigeria, adding that, for example, a website allegedly originating from Nigeria had been advertising phony business opportunities which contribute to much larger perception problem for Nigeria.
Stephen Hayes- President, Corporate Council on Africa with Ambassador Robert C. Perry, Special Advisor to the US President, Isaac K. Sam, CEO, Bluestone Capital Inc. also in attendance. Mr. Hayes defined the Council as a linkage organization for business development between the US and Africa and outlined many investment programmes being championed by the CCA in Kenya, Ghana and the Ivory Coast. He also regretted the inability of the CCA to establish any business linkage or partnership in Nigeria. Describing the establishment of the IST as timely, he said if Nigeria could follow the Code of Conduct on disclosures issued by US SEC, the CCA could move forward in partnering with Nigeria to invest in the securities market.
Ambassador Perry spoke of a planned CCA conference in Lagos for September and wished the Tribunal participated in the planning in order to help alleviate the problem of matching US and Nigerian companies. They requested the Tribunal to help the Council identify companies and businesses for partnering and/or subcontracting with like-US companies. He also advised the Tribunal to contact NESG to include the Tribunal in the programme.
US SEC Welcomes Delegation
Judge Robert G. Mahoney - Administrative Law Judge, US Securities & Exchange Commission with Mr. Z. Scott Birdwell- Senior Counsel, Office of International Affairs, received the IST. There, the tribunal sought to understand the nature of administrative decisions the SEC takes to resolve disputes from complaint, to investigation, policing to review before a case goes to trial. The Judge also .reviewed the Commission's Code of Ethics with rules and procedures used by counsel and judges and gave the tribunal references to the national Association of Securities Directors who hear cases as independent mediation and arbitration body.
At the Department of Securities, Insurance and Banking Regulations, the mission met Commissioner Lawrence Homirel. Also in attendance were Theodore A. Miles, Director, Securities Bureau, Stephen M. Perry, Director, Insurance & Securities Fraud Bureau, Government of the District of Columbia, Gordon Clooney, Public Affairs Officer and William B. Kimme, Assistant Director, Business Strategies, National Association of Securities Dealers. Here extensive reviews of the subsisting Investments and Securities Act 1999 and the US Market Securities Act 1999 were made along with historical overview of the development of securities law, fraud and abuse investigations in the US and corresponding paradigms in mediation and arbitration and settlement of cases. On discussing possibility of cooperation in capacity building and enforcement, the Department agreed to enter into a Memorandum of Understanding (MOU) with the Tribunal for that purpose as soon as agreement was finalized.
Columbia University
Professor Bill Emicke, Director of the Picker Centre, School for International and Public Affairs, Columbia University wants the IST to establish relationships with financial media outlets such as CNBC, Reuters, Bloomberg, Associated Press and CNNfn. to help bolster disclosure and accountability in the Nigerian market. He added that disclosure is the most powerful tool available to help build public trust and confidence in the securities market. The fact supports the wisdom of this Administration's efforts to privatize government owned enterprises as well as encourage more companies to raise funds from the capital market.
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