In Nigeria’s thriving capital market arena, it is not uncommon for disputes to arise between the various players in the space. In recognition of the need for specialized and speedy resolution of disputes arising from capital market operations, the Investment and Securities Tribunal (IST) was established under the Investment and Securities Act of 2007 (the Act) for the purpose of resolving disputes arising from activities in the capital markets.

The extent of the jurisdiction of the IST was considered by the Supreme Court in its recent decision in EZE OKOROCHA V. UNITED BANK FOR AFRICA PLC & ORS (2018) LPELR-45122(SC).

In that case, Okorocha had purchased shares in the public offer of the United Bank for Africa (UBA). He complained that his shares were not allotted to him within the period stipulated by the relevant rules and that his share certificate was delivered late. He consequently sued UBA, UBA Global Markets Plc, BGL Securities Ltd and UBA Registrars Ltd (Offer Parties) as well as the SEC in the IST and sought, among others, an order compelling the SEC to sanction the Offer Parties.

The IST by itself raised the question as to whether it had jurisdiction to entertain Okorocha’s claims. After hearing the parties on the point, the IST decided that it lacked jurisdiction to entertain the claims against the offer parties on the basis that there had been no determination by the SEC of the dispute between Okorocha and the Offer parties and it could only assume jurisdiction after the SEC must have failed to act on Okorocha’s complaint. The IST further held that upon the striking out of the Offer Parties, the action against SEC which emanated from the default of the Offer Parties could not be sustained. The entire suit was therefore struck out.

Okorocha appealed to the Court of Appeal but that court affirmed the decision of the IST and dismissed the Appeal. Okorocha further appealed to the Supreme Court.

The Supreme Court, in deciding the appeal, considered the jurisdiction of the IST as set out in Section 284(1) of the Act as well as the fair hearing provision contained in section 36(1) of the Constitution of the Federal Republic of Nigeria 1999, as Amended (the Constitution).

By virtue of Section 284(1) of the Act, the IST has jurisdiction to entertain disputes involving a decision or determination by SEC of a dispute between capital market operators, capital market operators and their clients, an investor and a securities exchange/capital trade point/clearing and settlement agency, capital market operators and self regulatory organizations. The IST also has jurisdiction over disputes between the SEC and investors, the SEC and capital market operators, the SEC and self regulatory organizations and the SEC and issuers of securities.

The Supreme Court affirmed the decision of the Court of Appeal on the basis that there was no decision or determination by the SEC in respect of Okorocha’s grievance against the offer parties and that the offer parties having been struck out, the action against SEC could not be sustained.
The Supreme Court disagreed with Okorocha’s argument that approaching the SEC for determination of the dispute before approaching the IST would result in a breach of his right to a fair hearing simply because he had a complaint against the SEC. The Supreme Court decided that SEC’s decision on the dispute between Okorocha and the Offer parties was a prerequisite to the invocation of the jurisdiction of the IST.

This case is significant as a perusal of Section 284 (1) shows that the Act, in essence, empowers the IST to conduct a second level review of the decisions of the SEC on the specified disputes and to determine first hand, disputes between the SEC and the stated parties.

The dispute between Okorocha and the Offer parties fell in the category of disputes that needed to first be decided by the SEC before the IST could assume jurisdiction. On the other hand, while Okorocha could bring an action directly against the SEC in the IST, Okorocha’s only claim against the SEC was for an order compelling SEC to sanction the offer parties over whom the IST found that it could not exercise jurisdiction at the time. In the absence of the Offer parties in the suit, the claim against SEC could not stand. For these reasons Okorocha’s suit failed.

While the contention about the jurisdiction of the IST vis a vis that of the Federal High Court in respect of decisions of the SEC remains a sore point, the IST however continues till date to decide disputes in accordance with the scope prescribed by S. 284 of the Act. The IST’s role as an adjudicator over disputes arising from capital market operations therefore continues to remain important.

In light of the decision in the Okorocha’s case, care must be taken to follow proper procedure and seek relevant advice in presenting disputes for determination by the IST.