Fraud against Minority Shareholders in Nigeria: Constraints and Prospects

Abstract Investor protection has become compelling in the face of the dangers of expropriation of investments of minority shareholders by controlling shareholders and corporate managers. Expropriation is achieved through a variety of mechanisms such as power to control the appointment of directors, influencing company strategy to support block holders’ idiosyncratic objectives, influencing resolutions at general meetings, asset stripping and outright embezzlement of company funds. This paper uses doctrinal research to explore measures to track, limit, and penalize fraudulent investment and exploitation of investors in the Nigerian capital market. It finds that fraudulent investment schemes at the expense of minority shareholders is rampant and requires robust institutional and country-specific regulation for investor protection. To remedy fraudulent investment and prejudicial conduct, the paper recommends optimal approaches to track, limit and penalize fraudulent investment schemes in the capital market, especially through proactive regulation.