Databank, Cal Bank in Messy Triangle

Subscribers risk shortchanging, SEC bares teeth Chronicle -- CalBank, whose Initial Public Offer (IPO) was oversubscribed by 450% is to refund ¢240.45 billion to unsuccessful shareholders through Data Bank, its brokers.

The refund which is being done through its receiving banks and brokers, Cal Bank, SG-SSB Bank, EBG Stockbrokers, Strategic African Securities, NTHC and Merban Stockbroker, accrues 5% interest on the refund as the stipulated 14 days for the reimbursement had elapsed, according to the Securities and Exchange Commission (SEC) law and the companies' companies' code.

CalBank, whose Initial Public Offer (IPO) was oversubscribed by 450% is to refund ¢240.45 billion to unsuccessful shareholders through Data Bank, its brokers.

The refund which is being done through its receiving banks and brokers, Cal Bank, SG-SSB Bank, EBG Stockbrokers, Strategic African Securities, NTHC and Merban Stockbroker, accrues 5% interest on the refund as the stipulated 14 days for the reimbursement had elapsed, according to the Securities and Exchange Commission (SEC) law and the companies' companies' code.

Section 284 (4) of Ghana's 1963 companies code, Act 179 provides that, 'refund should be made within14 days of closure of the offer period and 5% interest per annum accrued after such a date.' In one of Databank's failed efforts on the bond market in the Golden Development Holding Company Limited, they delayed in refunding subscribers funds and were hit with a 5 percent refund, which they paid.

Although Data Bank has started refunding the over-subscribed amount, sources at Data Bank, told The Business Chronicle that the repayment of the equity to unsuccessful shareholders of Cal would not attract the 5% interest. In a response to formal official Chronicle questionnaire last Friday which conspicuously appeared in the Statesman, sold on to Databank, the bank and its managers maintain their position that no interest is to be paid on the monies that were taken for CAL Bank's IPO, since none was unconsciously earned. This, according to some officials from the SEC, was contrary to the regulations of SEC and the companies' code cited above.

However, the Managing Director (MD) of CAL Bank, Mr. Frank Adu was reported to have stated that he always operates within the law and that the bank would pay the interest if directed by the SEC to do so. “I always operate within the law. If the SEC directed that we pay interest to shareholders in the light of the recent circumstances, I would willingly do so.”

Databank failed to directly answer the Chronicle's formal questions and chose to place adverts in newspapers and go on to respond to the questionnaire in their own newspaper, making nonsense of the journalistic requirement to consult and interview before going to press.

Cal Bank's public offer closed on October 1 this year and the refund should have been made by October 15, this year, yet “the fund managers of the offer did not comply.” They attributed the delay in the refund to the heavy over-subscription and some technical hitches in returning shareholders' funds. Suddenly they changed tack and are now alleging that they did not know they have to pay interest.

Due to the failure of Cal Bank to undertake the refund on time, the bank is presently not trading on the Ghana Stock Exchange, since SEC has been keen on its operations and wants the proper thing done.

Market players in the banking and finance industry that The Chronicle spoke to believe that Data Bank may be trading with the over-subscription fund on the short-term money market (at 17% T-Bill rate), hence delaying the refund process.

In a press release last week, the SEC stated that when raising money from the public, companies must disclose the terms of the offer, including the amount required, the intended purpose of the fund, what would happen in case of over-subscription, amongst others. These are stated in the SEC Regulations 2003, LI 1728.

Meanwhile, when The Chronicle contacted the manager in charge of marketing and research development of SEC, Mr. Emmanuel Ashong-Takai, he said the surveillance department had gone out last Tuesday to monitor whether Data Bank was refunding. He said they had discovered that there were efforts by Data Bank to refund all monies to unsuccessful subscribers.

“If they haven't done that, then the investor has the right to demand 5% on their investments.” They have to be paid the 5% interest because the 14 days have elapsed already.”

He said the commission could further impose penalty for breaching the law.

On the issue of lodging the funds raised into a non-interest bearing escrow account at Cal Bank, market players told the Chronicle that it was not an excuse to avoid paying the 5% interest rate on the money.

Cal Bank wanted to raise ¢54 billion. However, they stipulated that they would increase the amount to ¢63 billion if there was excess demand. They stated further that if they could not obtain at least ¢27 billion, they would refund the entire amount to subscribers.

The SEC regulation provides that where a company anticipates an over-subscription of its share offer, the company must state the maximum amount that it would absorb.

Cal Bank complied with this requirement and stated in its prospectus that in the event of over subscription, they would issue additional shares to bring the total share offer to ¢63 billion and that the whole amount would be refunded through registered mail within two weeks after the close of the offer.

The statement signed by the Director General of SEC, indicated that the amount Cal wanted to raise would be used to undertake retail banking operations through the opening of retail branches in Accra, Tema, Kumasi and Takoradi with ATM facilities connected to the branches as well as allowing existing shareholders to realize their investment by offloading some of their shares.

“No where was there reference to the ¢70 billion stated capital requirement by the Bank of Ghana for Universal Banks, one of the reasons given by Cal Bank for not wanting to refund the full amount of the over-subscription. Despite the clear statements to the public on the amounts to be raised, the purpose of the offer and additional amount to be absorbed in the case of over-subscription, Cal sought to increase the amount on the offer to ¢100 billion after the offer had closed.

The SEC could not approve such a fundamental change of the terms of the offer to the detriment of the subscribers.”

According to the Director General, it would have failed in its regulatory role if it had allowed Cal Bank to keep more money than it had demonstrated a need for in its prospectus. Cal would have violated the terms of the offer on which applicants had based their decision to apply for shares, by increasing the offer amount to ¢100 billion. Previous cases of over-subscription have included the public share of Clydestone Ghana Limited and Benso Oil Palm Plantation.

It would be recalled that the Golden Development Holding Company Limited with its Data Bank broker in 2003, after it failed to raise money from the bond market, refunded fully the under-subscribed shares and paid 5% interest when it delayed in the refund process. The refund, according SEC sources, is still being made even though it is alleged that data bank invested the money into short-term treasury instruments at Treasury bill rate.

Last Friday, the Chronicle sent a questionnaire to Data Bank to justify why Data Bank did not refund the money to investors with an annual interest rate of 5% after the mandatory 14 days within which the bank were to refund had elapsed.

No response came but the reaction was later found in the Statesman.

Section 284 (4) of Ghana's 1963 companies code, Act 179 provides that, 'refund should be made within14 days of closure of the offer period and 5% interest per annum accrued after such a date.' In one of Databank's failed efforts on the bond market in the Golden Development Holding Company Limited, they delayed in refunding subscribers funds and were hit with a 5 percent refund, which they paid.

Although Data Bank has started refunding the over-subscribed amount, sources at Data Bank, told The Business Chronicle that the repayment of the equity to unsuccessful shareholders of Cal would not attract the 5% interest. In a response to formal official Chronicle questionnaire last Friday which conspicuously appeared in the Statesman, sold on to Databank, the bank and its managers maintain their position that no interest is to be paid on the monies that were taken for CAL Bank's IPO, since none was unconsciously earned.

This, according to some officials from the SEC, was contrary to the regulations of SEC and the companies' code cited above.

However, the Managing Director (MD) of CAL Bank, Mr. Frank Adu was reported to have stated that he always operates within the law and that the bank would pay the interest if directed by the SEC to do so. “I always operate within the law. If the SEC directed that we pay interest to shareholders in the light of the recent circumstances, I would willingly do so.”

Databank failed to directly answer the Chronicle's formal questions and chose to place adverts in newspapers and go on to respond to the questionnaire in their own newspaper, making nonsense of the journalistic requirement to consult and interview before going to press. Cal Bank's public offer closed on October 1 this year and the refund should have been made by October 15, this year, yet “the fund managers of the offer did not comply.” They attributed the delay in the refund to the heavy over-subscription and some technical hitches in returning shareholders' funds. Suddenly they changed tack and are now alleging that they did not know they have to pay interest.

Due to the failure of Cal Bank to undertake the refund on time, the bank is presently not trading on the Ghana Stock Exchange, since SEC has been keen on its operations and wants the proper thing done.

Market players in the banking and finance industry that The Chronicle spoke to believe that Data Bank may be trading with the over-subscription fund on the short-term money market (at 17% T-Bill rate), hence delaying the refund process. In a press release last week, the SEC stated that when raising money from the public, companies must disclose the terms of the offer, including the amount required, the intended purpose of the fund, what would happen in case of over-subscription, amongst others. These are stated in the SEC Regulations 2003, LI 1728.

Meanwhile, when The Chronicle contacted the manager in charge of marketing and research development of SEC, Mr. Emmanuel Ashong-Takai, he said the surveillance department had gone out last Tuesday to monitor whether Data Bank was refunding.

He said they had discovered that there were efforts by Data Bank to refund all monies to unsuccessful subscribers.

“If they haven't done that, then the investor has the right to demand 5% on their investments.” They have to be paid the 5% interest because the 14 days have elapsed already.”

He said the commission could further impose penalty for breaching the law.

On the issue of lodging the funds raised into a non-interest bearing escrow account at Cal Bank, market players told the Chronicle that it was not an excuse to avoid paying the 5% interest rate on the money.

Cal Bank wanted to raise ¢54 billion. However, they stipulated that they would increase the amount to ¢63 billion if there was excess demand. They stated further that if they could not obtain at least ¢27 billion, they would refund the entire amount to subscribers.

The SEC regulation provides that where a company anticipates an over-subscription of its share offer, the company must state the maximum amount that it would absorb. Cal Bank complied with this requirement and stated in its prospectus that in the event of over subscription, they would issue additional shares to bring the total share offer to ¢63 billion and that the whole amount would be refunded through registered mail within two weeks after the close of the offer.

The statement signed by the Director General of SEC, indicated that the amount Cal wanted to raise would be used to undertake retail banking operations through the opening of retail branches in Accra, Tema, Kumasi and Takoradi with ATM facilities connected to the branches as well as allowing existing shareholders to realize their investment by offloading some of their shares.

“No where was there reference to the ¢70 billion stated capital requirement by the Bank of Ghana for Universal Banks, one of the reasons given by Cal Bank for not wanting to refund the full amount of the over-subscription.

Despite the clear statements to the public on the amounts to be raised, the purpose of the offer and additional amount to be absorbed in the case of over-subscription, Cal sought to increase the amount on the offer to ¢100 billion after the offer had closed. The SEC could not approve such a fundamental change of the terms of the offer to the detriment of the subscribers.”

According to the Director General, it would have failed in its regulatory role if it had allowed Cal Bank to keep more money than it had demonstrated a need for in its prospectus. Cal would have violated the terms of the offer on which applicants had based their decision to apply for shares, by increasing the offer amount to ¢100 billion.

Previous cases of over-subscription have included the public share of Clydestone Ghana Limited and Benso Oil Palm Plantation.

It would be recalled that the Golden Development Holding Company Limited with its Data Bank broker in 2003, after it failed to raise money from the bond market, refunded fully the under-subscribed shares and paid 5% interest when it delayed in the refund process. The refund, according SEC sources, is still being made even though it is alleged that data bank invested the money into short-term treasury instruments at Treasury bill rate.

Last Friday, the Chronicle sent a questionnaire to Data Bank to justify why Data Bank did not refund the money to investors with an annual interest rate of 5% after the mandatory 14 days within which the bank were to refund had elapsed.

No response came but the reaction was later found in the Statesman.