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Securities and Exchange Commission (SEC) has suspended Ecobank Nigeria from acting as a receiving bank or performing any other activities in the Nigerian capital market for allegedly colluding with Arian Capital Management Limited, to convert the shares of its client, Avil Services Limited.
SEC said Ecobank Nigeria, in connivance with Arian Capital Management, converted 555,555 units of shares of First Bank of Nigeria Plc belonging to a client of Avil Services Limited, a client of Arian Capital Management.
The regulator said when it discovered the violation and asked for information from Ecobank, the bank failed to respond, hence the suspension.
But Ecobank said in statement thursday that it did not collude with Arian Capital to defraud its client and that it had communicated its position to SEC which had given the bank up to April 4, 2013 to comply with its directive.
SEC had said the suspension was as a result of the role played by Ecobank in a complaint by Avil Services relating to a margin loan transaction with Arian Capital Management Limited.
According to SEC, under the said transaction, Arian Capital Management, advanced a margin loan to Avil Services which was secured by 555,555 shares of First Bank of Nigeria Plc shares. At the termination of the margin facility, Avil Services demanded for the lifting of the lien placed on the shares but was informed by Arian Capital Management that the said shares were used as collateral for a “Global Margin Facility” that was granted to Arian Capital Management by Ecobank Nigeria Plc in a tripartite arrangement.
Dissatisfied with the explanation offered by Arian Capital Management, SEC had in May 2012 suspended Arian Capital from all capital market activities for withholding the said shares and accruals thereon.
SEC went further to get more information from Ecobank on the deal. However, it said Ecobank refused to provide information on the global margin facility, hence the suspension.
Meanwhile, Ecobank explained that in 2007, it granted a margin loan facility to Arian Capital Management for on-lending, secured by quoted shares.
The shares were to be in the Central Securities Clearing Systems Limited account in the joint names of Arian and Ecobank.
The margin loan to Arian Capital, the bank said, became delinquent and the debt was sold to Asset Management Corporation of Nigeria (AMCON) together with the collateral.
Part of the collateral used by Arian Capital on the CSCS, the bank added, were shares in the name of Avil Services/Arian Capital, which Arian moved to the joint account in the name of Arian/Ecobank and which Ecobank transferred to AMCON.
Ecobank said: “Avil Services complained to SEC primarily against Arian Capital for the return of its shares. Arian Capital’s position is that Avil Services signed an agreement with Arian Capital that its shares would be used as collateral with Ecobank. Ecobank also provided its position formally to SEC.
“Following SEC’s investigation, Arian Capital could not provide this agreement to the satisfaction of SEC. SEC thereafter suspended Ecobank Nigeria from its role as receiving bank and not in respect of any other capital market activity or in any other capacity. SEC also insisted that the bank should replace the shares valued at N11million.
“The bank has since been in formal communication with SEC and has agreed to replace the shares. This has also been duly communicated to SEC and SEC gave Ecobank till April 3, 2013 to replace the shares. The value of the shares has been issued in favour of Avil Services Limited and handed over to SEC. The bank has therefore fulfilled its obligations under SEC directive. For clarity, Ecobank did not connive with Arian Capital or any other party to convert any shares.”
