Nigeria: Securities And Exchange Commission v Kasunmu: A Capital Market Lesson Half Learnt

Introduction

The case of SECURITIES AND EXCHANGE COMMISSION V PROFESSOR A.B. KASUNMU, SAN¹ was decided by the Lagos Division of the Court of Appeal on 6th November, 2008 and is a that case raised, amongst other issues, two very significant capital market issues arising from the now repealed Investments and Securities Act 1999. The first issue raised in the case concerns the registration of legal practitioners as Capital Market Operators by the Securities and Exchange Commission ("SEC"). The other issue and one that even with the repeal of the Investments and Securities Act 1999 by the Investments and Securities Act 2007 ("ISA") is still significant today, is the jurisdiction of the Investments and Securities Tribunal over certain matters, in relation to that of the Federal High Court.

With the enactment of the ISA the first issue mentioned above has been legislatively addressed and is today not a live issue in capital market practice, except for academic and historical purposes. This is because under Rule 178 of the SEC Rules and Regulations made pursuant to the ISA, legal practitioners are subject to registration with the SEC where their opinions impact directly on capital market transactions. The only issue which may perhaps arise for debate is the interpretation of when a legal practitioner's opinion will "impact directly" on a capital market transaction. That issue is however outside the purview of this paper. On this issue therefore, it is safe to say that one of the two lessons from the two major issues arising from the decision of the court in SECURITIES AND EXCHANGE COMMISSION V PROFESSOR A.B. KASUNMU, SAN has been learnt.

On the other hand, the second issue is one that even though seemingly addressed by the re-enactment of the ISA can still be described as unresolved by the ISA and in a sense, leaves an axe dangling over the jurisdiction of the IST with respect to certain matters under the ISA that have been prescribed to be within the jurisdiction of the IST. It is this second issue of the jurisdiction of the IST that will be considered below in the light of that of the Federal High Court.

FACTS

Before addressing the issues in the case, for a more comprehensive appraisal of the case it will be useful to briefly summarise the facts. The Respondent (Professor AB Kasunmu, SAN), who was the Plaintiff at the Federal High Court, was an external solicitor to Chartered Bank Plc. In 2001 the Bank applied to the SEC for permission to raise funds from the capital market. Before this application, the Bank had informed the Respondent that he would be the Bank's solicitor to the public issue and he was in agreement with this. While the Bank's application before the SEC was pending, the SEC informed the Bank that only legal practitioners that were accredited and registered by the SEC could act as solicitors to the Bank for its public issue. When the Bank informed the Respondent of this development, the Respondent took the view that he did not have to register with the SEC before he could act as a solicitor to the Bank's public issue.

The SEC did not share the Respondent's view and did not compromise its original stance that the Respondent had to be accredited and registered before he could act as a solicitor to the issue and consequently the Bank proceeded with its public issue without the Respondent as solicitor to the issue. Aggrieved at the turn of events, the Respondent proceeded to take out an action against the SEC at the Federal High Court, seeking amongst other things, a declaration that the SEC had no right or power to require him, being a legal practitioner, to be accredited and registered by the SEC before he could validly act as a solicitor to a company in a public issue. An issue, which arose in the case and is the focus of this paper, was the jurisdiction of the IST under section 242 of the now repealed Investments and Securities Act 1999.

THE JURISDICTION OF THE INVESTMENTS AND SECURITIES TRIBUNAL

THE OLD LAW: INVESTMENTS AND SECURITIES ACT 1999

The jurisdiction of the IST was derived from the provisions of section 242 of the Investments and Securities Act 1999. That section provided that:

Reading the above provision, it is clear that the intention of the legislative draftsman was to keep all matters arising from or under the operation of the Investments and Securities Act 1999 within the exclusive jurisdiction of the IST. Such disputes included but were not limited to disputes between capital market participants as well as between capital market operators or participants and the SEC, as in the case being discussed here. The underlying rationale for wanting to vest exclusive jurisdiction to entertain all capital market matters arising out of the operation of the Investments and Securities Act 1999 in the IST is certainly laudable. The idea was to keep capital market disputes, in which time is usually of the essence, out of the normal court system, which is known for delays, that in some cases are commercially crippling and may be worthless to the victor by the time a final decision is made by the court. Also, because of the specialised capital market related qualifications that, by law, the members of the IST must possess, which are not applicable to High Court judges, the IST is more likely, or at least, presumed to be more experienced and better equipped to deal with capital market matters.

However, section 242 of the Investments and Securities Act 1999 being such a wide reaching provision did not seem to consider the provisions of the Constitution of the Federal Republic of Nigeria 1999, in particular, sections 6(6)(b) and 251 thereof. The questions as to the jurisdiction of the IST arose out of the exclusively all-encompassing manner in which section 242 of the Investments and Securities Act 1999 was couched, despite the provisions of sections 6(6)(b) and 251 the Constitution.

Section 6(6)(b) is the general section that gives specified courts in Nigeria, in this case the Federal High Court, the power to adjudicate over and determine the civil rights and obligations of persons and government bodies in matters arising before the court. One thing that is crucial to note about section 6 is that in its provision for the power and jurisdiction of certain courts to adjudicate over matters, it does not include the IST. On its part, section 251 provides for the jurisdiction of the Federal High Court, "to the exclusion of every other court", over certain causes and matters. In particular, section 251(r) provides that, to the exclusion of any other court, the Federal High Court shall have jurisdiction over:

When the provisions of sections 242 of the Investments and Securities Act 1999 and section 251(r) of the Constitution are juxtaposed, it is clear that they both had a singular objective, which was to confer exclusive jurisdiction over matters to which they relate on the IST and Federal High Court respectively. Considering the fact that many capital market disputes arising from the operation of the Investments and Securities Act 1999 usually involve the SEC as the principal Claimant or Defendant, it is clear that section 242 of the Investments and Securities Act 1999 was starkly irreconcilable with section 251(r) of the Constitution with respect to disputes involving the SEC.

This irreconcilability of section 242 of the Investments and Securities Act 1999 and Sections 6(6)(b) and 251(r) of the Constitution led to the Court of Appeal raising the question that, can the jurisdiction of the Federal High court's, which is derived from the constitution, be ousted by an Act of Parliament? The answer to this question was and is still not in dispute. It is in the negative. In resolving this question, the Court of Appeal per Galinje, JCA held as follows:

The implication of the portion of the decision of the Court of Appeal reproduced above is that section 242 of the Investments and Securities Act 1999 was voided by the court to the extent of its inconsistency with sections 6(6)(b) and 251(r) of the Constitution. Consequently, the objective of the Investments and Securities Act 1999 to restrict the adjudication over capital market disputes to the IST was rendered obsolete by the decision of the Court and for good constitutional reason. The Investments and Securities Act 1999 could not possibly have derogated from the provisions of the Constitution in sections 6(6)(b) and 251(r) with respect to the jurisdiction of the Federal High Court to hear matters that that Act sought to bring within the exclusive jurisdiction of the IST.

THE CURRENT LAW: INVESTMENTS AND SECURITIES ACT 2007

To discuss the jurisdiction of the IST as provided under the current regime of the ISA, it will be necessary to reproduce the particular section of the ISA provides for the jurisdiction of the IST. It is section 284 and it provides as follows:

Looking at the provisions of section 284, it is difficult to see, in substance, the difference between the section and the repealed section 242 of the Investments and Securities Act 1999. The substance and underlying objective of the two sections is the same. It is the provision for the jurisdiction of the IST over capital market disputes, to the exclusion of any other court in Nigeria. Section 284 of the ISA only goes one step further than the old section 242 by outlining the categories of disputes which may arise under or from the operation of the ISA. Again, like with section 242 of the Investments and Securities Act 1999, the legislative draftsman, with section 284 of the ISA, has completely ignored the provisions and implications of sections 6(6)(b) and 251(r) of the Constitution on the legality of ousting the jurisdiction of the court to adjudicate over matters to which those sections of the constitution relate.

Without delving into the unpredictable abyss that is the realm of speculation, it is reasonably safe to say that section 284 of the ISA as it stands, has a judicial target on it that if activated by the trigger of a preliminary objection, as is now customary in litigation in Nigeria, will suffer the same fate as its predecessor, section 242 of the Investments and Securities Act 1999. The reason for this contention is not far-fetched. As previously stated, as the substance of the two sections is essentially the same, once sections 6(6)(b) and 251(r) of the Constitution remain in force and the constitutional jurisprudence in Nigeria remains that the Constitution, being the grundnorm of the Nigerian legal system, is superior to all other laws, any law that purports to oust the constitutionally provided jurisdiction of the courts to adjudicate over certain matters will be voidable.

Considering the above, it is clear that in re-enacting the ISA, particularly with regards to the jurisdiction of the IST, especially the exclusivity of it, the consequence of the decision of the Court of Appeal in SECURITIES AND EXCHANGE COMMISSION V PROFESSOR A.B. KASUNMU, SAN, no lesson was learnt by the legislative draftsman on the road to prescribing a specified forum for the adjudication of capital market disputes arising from or under the ISA.

CONCLUSION

In conclusion, the law is clear and has been for a while, that any law that is inconsistent with the provisions of the Constitution is void to the extent of such inconsistency. See ATTORNEY-GENERAL, ABIA STATE V. ATTORNEY-GENERAL, FEDERATION (2006) 16 NWLR (Pt. 1005) 265. With that in mind, a critical question is, without any constitutional amendment to the present Constitution, can any law purport to oust the jurisdiction of the courts to entertain capital

market matters and vest such jurisdiction exclusively in the IST? It is difficult to see how the answer to this is not in the negative. The need for capital market disputes to be resolved by experienced capital market adjudicators in the shortest possible time is certainly appreciable in the light of the significant consequences of unnecessary delays inherent in the court system. However, it seems the golden formula that solves the problem of this need remains elusive.

Footnotes

1 (2009) 10 NWLR (PT 1150) 509

Mofesomo Tayo-Oyetibo is the Managing Partner of Twelve Legal, a Nigerian Commercial Law Firm.

October 2018

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