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SEC: Tackling Ponzi Scheme challenge, the Kano example

Ms. Mary Uduk

By Anthony Isaac

 

In the last five years, Nigeria has made progress in capital market development. The menu of available asset classes has been expanded to include Exchange Traded Funds and the market infrastructure has been modernised and strengthened with the platforms for over-the-counter now established.

The Securities and Exchange Commission (SEC) has undertaken a number of initiatives to boost investors’ confidence including the establishment of the National Investors’ Protection Fund meant to cushion the adverse effect of losses suffered in the capital market and the e-dividend policy designed to minimise cases of unclaimed dividend.

Other initiatives are the Direct Cash Settlement scheme, which ensures that investors receive their money directly whenever securities are sold; the corporate governance scorecard for companies listed on the Nigerian Stock Exchange and the recapitalisation of capital market operators.

While these are encouraging developments, the country’s investment climate is beginning to witness a rise in illegal fund managers. According to the annual report of the Nigeria Electronic Fraud Forum which was unveiled in 2017, the Nigerian investing public lost N11.9bn to the Mavrodi Mundial Moneybox Ponzi scheme.

Within the last few months, more illegal fund managers had adopted various strategies to collect money from would-be investors.

Some of them engage in free seminars at their offices for people to learn more about their products and the money-making business. The SEC however, has not relented in its efforts at sealing up their premises and going further to educate and enlighten Nigerians on the dangers of such activities.

Efforts of Kano SEC office and EFCC

The activities of the SEC Kano zonal office have been impressive in the last few months. Staff of the Commission alongside officials of the Economic and Financial Crimes Commission, EFCC have visited virtually all major newspapers and radio stations in the metropolis warning innocent Nigerians of the dangers of investing in Ponzi schemes.

 

Their efforts seem to have paid off as out of the six notable companies that engaged in Ponzi scheme in Kano at the beginning of the year, only one remains open. They are however not open because customers are investing money, but are being besieged by people who want to divest as a result of sustained publicity on the dangers of such patronage.

 

It could also be recalled that one other prominent company MGB Global had around July this year, been sealed by the EFCC due to mounting petitions by depositors whose demands for refunds could not be met by the company. The other four too, (Bitcoin company, Money Rite, No Failure Development and X-World, have closed shop due to mounting request by the populace to withdraw what was collected from them in the name of investments.

 

This position is a consequence of sustained enlightenment efforts by the Securities and Exchange Commission in partnership with the Kano office of the Economic and Financial Crimes Commission who have been jointly carrying out media appearances and outreaches.

 

The management of SEC said that the closure was to end unlawful activities of the companies against unsuspecting investors and, therefore, urged investors to ensure that they only dealt with fund managers that were registered with the commission.

It said: “The accounts of the company have been frozen; the promoters have been arrested by the Nigeria Police Force and are undergoing interrogation.

“The commission wishes to notify the investing public that the company is not licensed to carry out investments business of any type and as such its operations are illegal.

“The SEC, therefore, advises the public to exercise due diligence and caution in the course of making investment decisions. The valid licences of lawful operators could be obtained on the commission’s website by members of the public to confirm the licences of firms with which they intend to carry out investment activities.”

Speaking on the activities of illegal fund managers, the acting Director-General, SEC, Ms Mary Uduk, urged Nigerians to stay away from fake financial experts who would promise to double their money within a short time.

She said that the commission was committed to sensitising investors and protecting them from the antics of fraudsters, especially promoters of Ponzi schemes.

Uduk said: “We want to ensure that people do not fall victim to the antics of fraudsters who purport to be able to double any amount of money you make available to them as investment value.

“These fraudsters or promoters of Ponzi schemes are the false prophets of the investment environment; they are the ill wind that blows no good and at whose sight you must flee. They are to be avoided. This is one message you must take home to family, friends, relations and acquaintances in order to save them from the agony of loss of their hard-earned money.”

Also commenting on the trend, the acting Executive Commissioner, Legal and Enforcement, SEC, Mr Reginald Karawusa, said that the operations of illegal schemes in the last five years had swindled Nigerians of their hard-earned savings with promises of unrealistic returns on deposits.

This, he said, still went on despite a series of warnings by the commission to the general public against investing in such schemes.

Karawusa added that the SEC management was determined to address head-on the menace and further proliferation of Ponzi schemes in Nigeria.

Shut down of Dantata Success

According to a statement from the Commission, the company was shut down for carrying out investment operations that falls within fund management without registration with the apex regulator.

According to SEC, “They do not have registration with the SEC and the Commission has powers according to Section 13 of ISA 2007, to shut down any company carrying out capital market activities without due registration. Nigerian laws provide that business activities in the country have to be regulated, in this case SEC is supposed to regulate them”.

The strategy of the company is to solicit for funds from unsuspecting members of the public by enticing them with returns of monthly interest on investment of between 25 percent and 50 percent depending on the nature and investment type.

They also indicated a registration period of 5th February to 15th February in one of their numerous notices directing all prospective customers to make deposits into their bank accounts.

The company sells its forms to prospective investors according to their investment plans ranging from N1,000 to N3,000. The minimum amount investable is N50,000 while the maximum is N5,000,000

The investment period of the scheme is pegged at a minimum of 30 working days to a maximum period of 12 months with offer of interest rates on short and medium term basis.

It claims to be involved in trading, general merchandise supply, oil and gas, transportation, import, export and general contract.

The commission had established that the company’s activities also constituted an infraction of the Investments and Securities Act (ISA), 2007.

The SEC management said the closure was to end unlawful activities of the company against unsuspecting investors and therefore urged investors to ensure they only deal with fund managers that are registered with the Commission.

“The account of the company has been frozen, the promoters have been arrested by the Nigeria Police Force and are undergoing interrogation.

“The Commission wishes to notify the investing public that the company is not licensed to carry out investments business of any type and as such its operations are illegal.

“The SEC therefore advises the public to exercise due diligence and caution in the course of making investment decisions adding that valid licence of lawful operators could be obtained on the commission’s website by members of the public to confirm the licences of firms with which they intend to carry out investment activities”.

The Securities and Exchange Commission has continued verifying claims of 4,160 unpaid investors of the illegal investment scheme organised by Dantata Success and Profitable Company.

The verification exercise commenced on Monday July 15th and is expected to last till Tuesday July 30, 2019, with 4,160 investors undergoing verification.

The investors are required to go along with the original receipts evidencing their payments or bank tellers for deposit into the company’s account, valid means of identification and bank account details.

The commencement of the verification exercise is sequel to the appointment of joint administrators/trustees for Dantata Success and Profitable Company and in pursuant to section 13 and 173 of the Investment and Securities Act, and consequent to an Ex parte Order granted by the Federal High Court, Kano.

The verification exercise will hold in Kano from 9:00am to 4:00pm daily. All unpaid investors are necessarily advised to attend in person as attendance by proxy is not acceptable.

Written by ExpressDay

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