Tribunal orders BGL Securities to pay senior lawyer N95m over illegal sale of shares

Ogunsakin Mustapha
10 Min Read

The Investment and Securities Tribunal sitting in Lagos has ordered a stock brokerage firm, BGL Securities Limited to pay a senior lawyer, George Etomi, and Helmsworth Investment Limited the sum of N90 million being the proceeds of their shares in National Sports Lottery Plc illegally sold by BGL Securities company.

The tribunal also awarded a N5 million general damages against the brokerage firm. The judgment sum is to run at six percent interest rate per annum until it is liquidated.

The tribunal’s judgment is sequel to suit number IST/LA/OA/01/2014 filed by Helmsworth Investments Limited and Etomi as first and second claimants. The defendants are BGL Securities Ltd, Premier Holdings Limited and Noel C. Okorougo.

The tribunal was presided over by Hon Jude Udini. Other tribunal members include Hon Nosa Osemwengie, Hon Emeka Madubuike, Hon Edward Ajayi, and Hon Mamman Zargana.

The claimants stated in their averments before the tribunal that sometime in 2006, the second claimant, Etomi rendered legal advisory services to the third defendant, Okorougo by representing his interests in National Sports Lottery Plc(NSL). Rather than pay cash for the services, the third defendant offered Etomi five million units of shares out his shares at NSL as full and final settlement of Etomi’s legal fees.

Etomi and his law firm reluctantly accepted the offer having complained that the shares were not commensurate with work done. At the conclusion of the services, the Etomi requested Okorougo to transfer the shares to the first claimant, Helmsworth Investment Ltd. The instruction was carried out by the third defendant and a share certificate was issued to the effect. The defendants subsequently sent account opening forms to the second claimant for the purpose of opening the Central Securities Clearing System(CSCS) in custody of the first defendant.

Things however took another turn sometime in 2008 when one Clara Mshelia, a staff of the fist defendant called the second claimant to come and collect a cheque of N10 million, proceeds from the sale of his N5 million shares in NSL Plc. But Etomi rejected the money, saying he did not give an instruction for such a sale.

“The second claimant in response unequivocally informed Mr Okorougo that since the shares had been duly transferred to the first claimant as agreed, he had no right whatsoever to give instructions to the first defendant for the sale”, and therefore rejected the N10 million.

Etomi forwarded a petition to the Securities and Exchange Commission through his lawyers, Rotimi Williams Chambers to investigate the sale. He equally petitioned the Economic and Financial Crimes Commission (EFCC), seeking the investigation of the unlawful sale of the shares.

It was through these agencies that it was discovered that the first defendant sold the shares to Dangote Sugar Company for N90 million at N18.00 per share.

The claimants therefore wrote another petition to SEC, asking the commission to prevail on the first defendant to pay the sum of N90 million, the amount for which the shares were sold to them. SEC queried the first defendant but in its defence, it claimed that it acted on the instructions of the third defendant(Okorougo) who in its record was the beneficial owner of shares of the first claimant, and that the second claimant was considered to be a third party to the transaction.

SEC after its investigations directed the first defendant to pay the accrued money from the sale to the claimants. In a letter dated July 15, 2011, SEC stated that the first defendant’s conduct constituted a market infraction. The first defendant however refused. Rather, it re-credited the account of the first claimant with five million shares of the same NSL Plc.

Not satisfied, the claimants filed a suit before the tribunal.

In its pleadings filed August 24, 2018,the defendants through its lawyer, P.E Ogiebor, stated that the account it opened for the claimants was on the instructions of the third defendant, and that it was him who informed it that the second claimant (Etomi) would be a signatory to the account in trust for the third defendant.

BGL Securities, the first defendant further claimed that it obtained the true identity of the owner of the shares from NSL Plc and that by a letter dated July 23, 2008, NSL informed it that they belonged to second and third defendants. It further claimed it sold the shares on the instructions of both first claimant and the third defendant.
The securities company further pleaded that prior to the sale of the shares, the third defendant was the coordinator and facilitator of the first claimant’s(Helmsworth) shares in NSL. “It was after misunderstanding amongst the shareholders, particularly Okorougo, and Etomi that the latter started to claim that Okorougo has no authority to sell the shares.

In its judgment, the tribunal presided over by Hon Udunni adopted the lone issue formulated by both parties in the resolution of the case: “Whether, considering the facts and circumstances of this case, the claimants have successfully probed their entitlement to the reliefs sought in the amended originating application”.

Hon Udunni answered the question in the affirmative. He identified the areas where there was a convergence in the positions held by the parties, such as transfer of shares, sale of the shares, transference of the proceeds to the third defendant, re- crediting of five million shares to the claimants account, and the directive of SEC to the first defendants to pay N90 million, being the amount the shares was sold to the claimants.

He said one area of divergence is the ownership of the five million units of NSL shares. He noted that having allowed shares and issued a share certificate, the third defendant cannot turn around to claim ownership. “A share certificate is defined under Section 315 of the Investments and Securities Act 2007 as an instrument of a body corporate certifying that the person named is entitled to a certain number of shares and is prima facie evidence of his ownership whether electronically expressed or otherwise as may be approved by the commission and kept, lodged, or stored with a licensed depository or custodian company in accordance with the provisions of this act”.

Udunni said the position of the first defendant revealed some contradictions. “While in one breath, the writer admitted that the shares were allowed to Helmsworth Investments, in another breadth it is stated that no shares of NSL Plc was subscribed to, or paid for by Helmsworth. The question is, how do you allot shares to a person who did not subscribe to such shares”, he asked.

The tribunal chairman said further that “we could not understand how the first defendant who claimed that at all times material to the sale of the shares, it acted for and on behalf of the first claimant could turn around and remit proceeds of the sale of the first claimant’s shares to the second defendant on the instruction of a third party”.

Hon Udunni stated further: “The argument but the first defendant that it was acting under the instruction of the third defendant when it sold and remitted the proceeds of the first claimant’s shares to the second defendant is surprising because the Tribunal, having examined all the documents tendered by both parties is unable to find anywhere both as a matter of fact and evidence where the first claimant appointee the third defendant as its agent, or where it delegated or donated its power to the third defendant in order to deal with the five million shares. Therefore, it is our view that this contention not being supported by evidence must fail”.

The Tribunal stated that the case of the claimants against the first defendant succeeds. “By the evidence adduced by the claimants at the hearing of this case, the claimants have proved their case and their entitlement to the reliefs sought in their amended originating application”, the chairman concluded.

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