The inside story: Why SEC ordered a Forensic audit of Oando Plc
Details have emerged as to the exact reasons why the Securities and Exchange Commission (SEC) had to order a forensic audit of Oando Plc, Nigeria’s leading indigenous player in the oil and gas industry, listed on both the Nigerian Stock Exchange (NSE) and Johannesburg Stock Exchange.
Trading on Oando’s shares has already been suspended by both exchanges, following SEC’s notification that it would be conducting a forensic audit of Oando Pl.
A document seen by BusinessDay reveals why SEC took the decision to push through with the audit. SEC accused Oando of breaching its code of corporate governance, as it found out that the Group CEO of Oando Plc “was responsible for fixing the remuneration of other executive directors” who are members of the board which also determines the remuneration of the Group CEO. SEC notes that this is a violation of Part B. 14.3 of the SEC Code of Corporate Governance.
Analysts note that this could lead to a situation where EDs get a salary raise because the GCEO also wants a salary raise.
SEC also found out that the last board evaluation done on Oando was done by KPMG in 2012. This means that a board evaluation of Oando has not been done in four years, a violation of Part B, 15.1 of the SEC code of Corporate Governance.
The management of Oando was also accused of disposing Oando Exploration and Production Limited to Green Park Management Limited, without the prior approval of the Commission.
Oando was also accused by SEC of mis-statements in its 2013 and 2014 Audited Financial Statement.
“Following the structuring of the OEPL transaction in contravention of the ISA 2007, Oando Plc recorded a profit of about N6 billion from the sale of OEPL that erased the operating loss of N4.68 billion, leading to a profit ofN1.4 billion for the year 2013. The company subsequently declared dividends from the profit. Having admitted that the action was a breach of ISA 2007, Oando restated its 2013 and 2014 Audited Financial Statements which contained material false and misleading information contrary to Section 60 (2) of the ISA 2007.”
Because Oando’s 2014 Rights Issue Circular contained information relating to the “false” profit reported by Oando in 2013 arising from the sale of OEPL, SEC ruled that the Rights issue circular, therefore contained “material misleading information,” another violation of capital market regulations.
SEC also accused Oando of remitting 2014 dividends to its Registrar in piecemeal and raised concerns that Oando’s auditors Ernst & Young, questioned the company’s going concern status in the 2016 annual report.
Even more grievous findings by the Commission, are allegations of insider trading in the company. SEC noted that ‘certain persons classified as insiders within “the provisions of Section 315 of the Investment and Securities Act (ISA), 2007 and who were in possession of confidential price sensitive information not generally available to the public, had between January and October 2015 traded on Oando Plc shares prior to the release of the company’s 2014 Financial Statement, where the company reported a loss of N183 Billion.”
But said it could not look into a counter allegation made by Oando Plc against Dahiru Mangal because Oando informed the commission that a case had already been filed in court concerning the allegations.
SEC also raised issues of ‘related party transactions that were not done at arms length and the declaration of dividends in 2013 and 2014 from ‘unrealised profits’.
Discrepancies in the shareholding structure of Onado Plc were also raised by SEC, noting that while Mangal’s ‘status as a Shareholder in Oando Plc is not in contention or dispute, the exact units held by him require reconciliation.’
The forensic audit of Oando to sort out all the issues raised will be carried out by Akintola Williams Deloitte as team lead. Other parties in the audit team include; United Securities Limited, SPA Ajibade & Co, TJADAP Consulting and Associates and Nasiru Muhammad & Co. The total cost of the audit has been fixed at N160 million with the cost to borne by Oando Plc. No time line was given for the completion of the audit.
See PDF of original document here: Oando Scan
Big Read |