AN APPRAISAL OF THE LAW AND PRACTICE OF THE INVESTMENTS AND SECURITIES TRIBUNAL IN RESOLVING CAPITAL MARKET DISPUTES IN NIGERIA

AN APPRAISAL OF THE LAW AND PRACTICE OF THE INVESTMENTS AND SECURITIES TRIBUNAL IN RESOLVING CAPITAL MARKET DISPUTES IN NIGERIA

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ABSTRACT

Corporate governance is a principled-based system by which corporations are organised and managed. It is made up of rules and regulations and ordered by a sound system of internal and external control. It exists for the benefit of all stakeholders. The principal role of corporate governance is to stem corporate maladministration and procure that companies are properly managed and directed. The prevalence of codes across jurisdictions justifies this proposition.But despite the heightened focus on corporate governance companies still fail, particularly in the Nigerian banking industry. For example Nigeria experienced its first major wave of financial crisis in the 1990s, and followed by the second major wave which occurred immediately after the banking consolidation in 2009. The second wave sent some banks to insolvent liquidation. That banks still face and experience life threatening shocks in the presence of robust governance provisions is without doubt a contradiction, nay a conundrum. There must be something wrong with the corporate governance architecture in the banking industry, because no other industry has gone through the level and ferocity of crisis the banking sector had experienced in Nigeria. Against this background the objective of the research was, among others, to examine corporate governance principles and models across national cultures in the light of the CBN industry specific Code applicable to the Nigerian banking sector, to analyse and appraise the legal framework for a sound system of corporate governance in the Nigerian banking sector and to identify the challenges which constrain the implementation of the sound system of corporate governance in the Nigerian banking sector. In order to give effect to the objective of the research, doctrinal and empirical research methodologies were adopted. This doctrinal methodology depended principally on examination and analysis of annual reports and financial statements of selected banks, existing laws and literature on the subject; while the empirical methodology deals with an analysis of an interview session with the Corporate Governance Team of the Central Bank of Nigeria. The research revealed among others that there is an inextricable relationship between the national corporate governance culture and corporate success, with the result that companies that adopt Anglo-US models, of which Nigeria is one, frequently go through shocks and implodes despite the presence of robust corporate governance architecture. It was also revealed by the work that the CBN is statutorily the right regulator but it is functionally a poor enforcer of corporate governance in the Nigerian banking sector. Equally it was found that there is a causal link between sound system of corporate governance and efficient risk management systems in the Nigerian banking sector. Moreover, the study revealed that the CBN industry specific Code of Corporate Governance for Nigerian Banks Post Consolidation was inefficient in tackling corporate malfeasance just as the Code failed woefully to provide for external audit and company secretary. Significantly and despite the inadequacy of the CBN Code, it was found that the implementation of corporate governance in the banking sector was bedevilled by endogenous and exogenous challenges. The practice clearly shows that in the Nigerian Banking sector, there is no knowledge of the distinction between corporate governance framework and corporate governance structure, in comparism with a foreign bank. Consequently, it was, among others recommended that the there should be a conference or workshop on corporate governance with the view to coming out with a corporate governance framework that appeals to our peculiar circumstances and business environment. It was also recommended that the CBN, not being an efficient functional enforcer even of its own Code should recluse itself from this role and handover to the statutorily empowered body in Nigeria, the Financial Reporting Council. Further it was recommended that the issue of corruption can be tackled by appointing the Economic and Financial Crimes Commission as the relevant authority of the law, Bank Employees, Etc (Declaration of Assets) Act which seeks to constrain managers of banks to appropriate corporate behaviour; while it was suggested that the industry specific Code should be reviewed to accommodate this statutory post incorporation compliance matter, and more importantly the law relating to professional negligence of external auditors should be made more punitive to discourage tainted mindsets that tend compromise their audit role.

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CHAPTER ONE

GENERAL INTRODUCTION

1.1         Background to the Study

Various concepts and measures have been developed globally and nationally to ensure that corporate

organizations, financial institutions and other institutions will not only survive but operate in the best

interest of the economy, stakeholders, shareholders, banks, organizations, operators, regulators and the

government. One of such concepts is corporate governance.In the financial system, corporate

governance is one of the key factors that determine the health of such an institution and its ability to

survive economic shocks.1 There has been renewed interest in the corporate governance practices of

modern corporations, particularly in relation to accountability since the high profile collapses of a

number of large corporations during 2000-2001, most of which involved accounting fraud. Corporate

scandals of various forms have maintained public and political interest in the regulation of corporate

governance.

The failure of the Johnson Mathey’s Bank (JMB), Bank of Credit and Commerce International (BCCI),

Baring Bank, Nomuru Securities, Brex and Long Term Capital Management (LTCM) of the 80s and the 90s

and the Enron and WorldCom debacles, brought corporate governance to the lime light. The collapse of

Enron i


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