SEC orders Republic Bank to pay Ghc1m for takeover breach

Business News of Monday, 9 March 2015


Dr Adu Antwi SEC

The Securities and Exchange Commission (SEC) has cleared Republic Bank of Trinidad and Tobago on allegations of insider trading, but has ordered the bank to pay one million Ghana cedis as settlement for breaching the takeover code.

Allegations of insider trading against Republic Bank surfaced last year during Republic Bank’s acquisition of HFC shares held by the Union Bank of Nigeria.

In January 2015, two independent members of the Board of Directors of HFC Bank also called on SEC to investigate allegations of insider trading against Republic Bank.

The two directors demanded that HFC bank initiate investigations through the Securities and Exchange Commission over allegations of “insider trading” by the Republic Bank of Trinidad and Tobago before the process of a mandatory takeover of HFC bank commences.

HFC Bank had on May 23, 2014 also sued the Republic Bank and the Securities and Exchange Commission (SEC) for what it alleged were breaches of the SEC Code on Takeovers & Mergers in Republic Bank’s attempt to do a mandatory takeover of HFC Bank by purchasing of HFC shares held by the Union Bank of Nigeria.

However, HFC Bank was ordered by the Supreme Court presided over by Justice Atuguba to present their accusation of insider trading by Republic Bank to SEC for investigation.

A letter however from SEC dated March 3, 2015 to [email protected], solicitors for Mr. Kwasi Asante, who had also requested SEC to investigate alleged breaches by Republic Bank Limited of the Takeover Code and insider trading, stated that Republic bank was culpable for the breach.

However according to SEC, the breach was unintended and cleared Republic Bank of insider trading allegations.

“…investigations into the matter has revealed that Republic bank breached Rules 4.1, 4.2 (a) and 4.3 of the Takeover Code by not reverting to the Commission for approval, but relying on the approval of the Bank of Ghana for the purchase of additional 23,638,340 share of HFC Bank from Union Bank within a 12-month period, when the Mandatory Takeover Offer Rule had been triggered and the Commission had not granted them exemption.”

According to the letter ‘the Director-General recognised the plea by Republic Bank of the lack of clarity between the directives of the Commission and consent from the bank of Ghana, which according to them made them undertake the purchase. Notwithstanding the recognition of the plea, Republic bank has been asked by the Commission to make a payment of one million Ghana Cedis (GHC 1,000,000.00) in settlement of breach as same was found to be unintended.”

The SEC’s code on takeovers and mergers rules 4.1 states that “No person shall make an offer to acquire shares or voting rights of a public company which together with shares or voting rights if any held by such person or by persons acting in concert entitle such person to exercise effective control in the Target Company without complying with the takeover procedures…”

Rule 4.2 (a) which Republic Bank was found to have breached, requires that where a person or persons acting in concert acquires or intends to acquire more than thirty percent (30%) but less than fifty percent (50%) of the voting shares of a public company in any 12-month period, the person shall be obliged to make a takeover offer for such public company and shall be required to comply with the takeover procedures set out under Rule 5 of the SEC’s code.

The SEC however found that the allegation of insider trading could not be substantiated. The letter signed by Dr. Adu Anane Antwi said Republic Bank duly disclosed the price per share on offer.

“…the Press Release of the Ghana Stock Exchange dated 10th June, 2014 indicated that Republic bank would make a public offer to all shareholders in the event that the Commission did not grant Republic Bank an exemption from the Mandatory Takeover Process. The price that Republic Bank sought to offer was disclosed as GHC0.56 per share.

Secondly, the Board of HFC Bank and the Bank of Ghana also approved the purchase of the additional shares.

It further found that the Republic Bank did not use any non-public price sensitive information to acquire the shares from Union Bank. The shares were available to the public and Republic bank also sought the approval of HFC Bank’s Board and the bank of Ghana to enable it acquires those shares.

“Republic bank did not acquire the said additional shares of 7.8percent of HFC bank with any non-public information they had,” the letter stated.