Nov 20, 2019

Case Review: SEC V. Big Treat Plc & Ors (2019) LPELR-46520 (CA) | Ayodeji Ayolola


The Securities and Exchange Commission (SEC) is statutorily mandated as the apex regulator of the Nigerian capital market to ensure the protection of investors, and to maintain a fair, efficient and transparent market. One of the ways in which the commission carries out this function is intervening in the management and control of public companies which are ‘failing’, ‘failed’ or ‘in cirsis’.

A recent judicial precedent that affirms the powers of the commission in this respect is the case of SEC v. BIG TREAT PLC & ORS (2019) LPELR-46520 (CA). On 31st January, 2019, the Court of Appeal, in overruling the decision of the trial court, held that the Securities and Exchange Commission, being the ‘beacon light of the powers of the Appellant under the Investment and Securities Act’ had the power to intervene the management and control of Big Treat Plc, a public listed company.

Brief Facts:

Upon assessing the 2008 audited accounts of Big Treat Plc (1st respondent), the Securities and Exchange Commission (appellant) discovered that the 1st respondent was drifting into deplorable financial state, and therefore decided to intervene in the affairs of the 1st respondent to ascertain its true financial position and prevent further depletion of the company’s assets, thereby protecting the interest of the investors.

Consequently, the appellant instituted an action at the Federal High Court in the course of which it applied ex-parte for a preservatory order of injunction to restrain the 2nd - 6th respondents from obstructing the appellant in the appointment of an interim management to take charge of the day-to-day administration of the 1st respondent, with a view to preserving its assets and the interests of its stakeholders. The trial court however refused to grant the application on the ground that the 1st respondent was not a capital market operator and could therefore not be under the control and management of the appellant in times of financial distress. The appellant being dissatisfied with the order of the trial court appealed to the Court of Appeal.

Court of Appeal’s Decision:

Allowing the appeal, the Court of Appeal held in favour of the appellant that the 1st Respondent was a capital market operator having registered itself with the appellant as an operator in the Nigerian capital market. The learned justices maintained this position by relying heavily on section 315 of the Investment and Securities Act (ISA) which defines a capital market operator as any person, individual or corporate, duly registered by the Securities and Exchange Commission to perform specific functions in the capital market. The court also held in favour of the appellant that it (the appellant) had the statutory power to intervene in the management and control of the 1st Respondent, if in the appellant’s opinion; the company had failed, was failing or was in crisis by doing whatsoever it considered necessary to protect the interest of the investors. The court reached this decision by relying on Section 13(v) of the Investment and Securities Act which states that the Commission shall “…intervene in the management and control of capital market operators which it considers has failed, is failing or in crisis including entering into the premises and doing whatsoever the Commission deems necessary for the protection of investors”.

The Court of Appeal held thus:

“That the 1st Respondent, an issuer of securities, having been duly registered with the Appellants and was at all material times performing the specific function of issuing securities in the capital market was subject to the intervention of the statutory powers of the Appellant as the pinnacle regulatory authority for the Nigerian capital market whose sole purpose is to ensure the protection of investors and to maintain fair, efficient and transparent capital market as well as reduction of systemic risk as stated in the preamble of the ISA- the beacon light to the powers of the Appellant under the ISA.”


The court’s decision in this case reveals the extent of interpretation of the provisions of the Investment and Securities Act on the definition of capital market operators and the responsibilities of the Securities and Exchange Commission in relation to the control and management of failing capital market operators.

This recent judgment of the Court of Appeal therefore serves as a warning signal to many public companies in the capital market. Every capital market operator owes its investors a duty to thrive trade wisely in the capital market, and to continue to operate as a going concern by all means legally possible. Accordingly, as required by section 61 of the Investment and Securities Act, capital market operators need to take more practical steps to establish a system of internal controls over their financial reporting and security of their assets to ensure the integrity of their companies’ financial controls and reporting by means of policies, procedures and practices to ensure safety of assets, accuracy of financial records and reports, achievement of corporate objectives and compliance with laws and regulations.

The judgment also serves as a great beacon light of hope to millions of investors in Nigeria. Investors can feel safer to invest in the capital market, knowing full well that there is a watchdog commission which constantly monitors market activities to forestall manipulative, illegal or unfavourable practices.

Ayodeji Ayolola is an Adjunct Lecturer of Corporate Law Practice at the Nigerian Law School, Lagos campus; and an Associate Counsel at Wole Olanipekun & Co., Lagos, Nigeria.,