Senator Udo Udoma and Securities & Exchange Commission: Matters Arising

Udo UdomaThere’s an ongoing debate on whether the recent appointment of the chairman of the Securities and Exchange Commission (SEC) Senator Udo Udoma, as chairman UACN Plc is a ‘conflict of interest”

As expected, Senator Udoma dismissed the allegation of conflict of interest. He disclosed that the Senate Committee on Capital Markets was aware that he (Udoma) was serving on the boards public quoted companies during his screening by his committee for SEC chairmanship.


Prior to his previous appointment as SEC chairman and subsequent appointment as UACN Plc chairman, Senator Udoma has had personal interests in public-quoted companies. He is the vice-chairman of Linkage Assurance Plc, and Director of Unilever Plc. He has also sat on the board of UACN Plc for several years.

Interestingly, Senator Udoma sees nothing wrong with being chairman of SEC and sitting on the board of public quoted companies. From his point of view, Section 11 of the Investment and Securities Act (ISA) only requires him to declare any perceived conflict of interest. In his words:

“Having carefully examined the provisions of the Investment and Securities Act, it was clear to me that the appointment was not inconsistent with my existing board appointments. What Section 11 of the Act required me to do was to declare them and not participate in any decision involving any of them”

To further justify his position, he noted that it’s not unusual for the chairman of the SEC to sit on the board of public quoted companies, as it was the case with his predecessor (!)

But the question now been asked is, does Senator Udo Udoma’s interest in public quoted companies conflict with his role as the SEC chairman?

Senator Udoma may have done nothing wrong, as section 11 of ISA only requires him to disclose any perceived conflict, which he did. The onus is however on the government to determine if this conflict could hinder him from performing his duty with impartiality.

By definition, a conflict of interest occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other. There’s no doubt that such a situation has the potential to undermine the person’s impartiality because of the possibility of a clash between the person’s self-interest and professional-interest or public-interest.

As we know, the SEC is the government agency mandated to regulate and develop the Nigerian capital market. Overall, the commission is expected to protect investors, market operators and ensure that market integrity is maintained.

Regardless of Senator Udoma’s recent appointment as chairman UACN Plc, it is irresponsible of the government to have appointed him as SEC chairman, in spite of his known business interest. I consider his appointment as SEC chairman as a flagrant disregard of corporate governance principles.

The appointment is also clearly at odds with Section 13 of ISA, which stipulates that the office of the director-general, chairman, the commissioners and staff of SEC ought to be free from any relationship that would tie them to any of the company that SEC regulates. But why has it taken the Senate Committee to discover this discrepancy?

The fact that Senator Udoma’s predecessor was in the same boat doesn’t mean it was the right thing to do. If the legislature had been performing its oversight function effectively, then it wouldn’t have found itself in the current situation. The appointment is also an indictment of the legislature, and it reflects the incompetence of those who we have entrusted with the responsibility of holding the government accountable.

Our political elites disregard for the probity, accountability and transparency cannot be overemphasised. These key democratic principles seem not to exist in their dictionaries. I recall Ex-President Obasanjo been accused of having vested interest in a company that was a major beneficiary of government privatisation programme. He even had the audacity to trade in company shares while in office.

It was the same former president that chaired the meeting of the Federal Executive Council and granted a university licence to himself and his deputy. And if we think that is bad, what about the NSE Director-General who is also the Director of a public quoted company (!)

The nation’s financial regulators don’t seem to have learnt from the role played by former Cadbury Nigeria Plc CEO, Bunmi Oni. In 2006, Cadbury Nigeria Plc dismissed Bunmi Oni on allegations of false accounting/book cooking, stocks buy back, trade loading, tax default, false stock certificate and undisclosed interest in the company. The SEC also banned Mr Oni for life from corporate service and from serving as a director in any public quoted company.

Can we imagine what would have happened if Mr Oni was sitting on the board of the SEC. How will the SEC have carried out its investigation effectively without been undermined?

There’s no doubt that the best way of dealing with conflict of interest is to avoid them entirely. And one will assume that’s the intent of Section 13 of ISA. A simple disclosure of interest or non-participation in decision making process is not good enough. Senator Udoma’s involvement in public listed companies and the SEC, gives these companies an unfair advantage over other market operators. And it’s not just about non-participation in decision making, What about inside knowledge of the activities of the SEC that he could pass to his companies.

The current situation where the chairman of the apex financial market regulator is also a chairman and director of public quoted companies cannot be right. The government needs to resolve this issue as a matter of urgency, so that public confidence will not be eroded from an already fragile market.

Seyi Osiyemi