America’s gun pandemic: how “originalists” failed the Republic

 

Students and faculty of University of North Carolina at Chapel Hill gathered Wednesday night at the Dean Smith Center to pay their respects to the professor shot and killed this week on campus. Credit: AP

Last Monday, August 28, 2023, there was yet another incident of gun violence in the US. This time, a faculty member at the University of North Carolina at Chapel Hill was shot dead on campus. A graduate student has been charged for the murder. This is yet another reminder of how unregulated guns continue to impact American society.

 While some states have made decent attempts at regulating guns, the posturing of the US Supreme Court compounds the problem. Two consequential regulations failed to survive judicial intervention in District of Columbia v Heller (2008) and New York State Rifle & Pistol Association, Inc., v. Bruen (2022). The Supreme Court declared the District of Columbia regulation requiring persons to obtain registration certificates for handguns and the New York State regulation of public carry of handguns  unconstitutional on grounds that they conflict with the Second Amendment to the Constitution of the United States (the “Constitution”) which provides for the right to “keep and bear arms”.

 The reasoning of the Court in Heller (written by Justice Scalia) and Bruen (written by Justice Thomas) is troubling, considering the significant public interest or public policy justifications for the regulatory attempts, in my view.

 First, Justice Scalia's “originalist” thinking in Heller seems subjective and offers no objective test with which to approach the issue. In his view, the rationale for the Second Amendment stems from the concerns of Antifederalists that the Federal Government would disarm the people in order to disable the States citizens’ militia; enabling a politicized standing army or a select militia to rule. Hence, the Second Amendment was to deny Congress the power to curtain the ancient right of individuals to keep and bear arms, so that the ideal of a citizens’ militia would be preserved. While Justice Scalia relies exclusively on history in his analysis, he ignores the fact that history is no effective barometer with which to assess the right to keep and use guns in the context of modern day circumstances. None of the historical concerns that informed the framers’ thinking on the Second Amendment are present in modern day America.  

 Secondly, Constitutions all over the world containing elaborate Bills of Rights recognize the power of the State to restrict certain rights where the state can show sound public interest or public policy justification. Of course, the state's power to restrict rights is not absolute, just as no right is. Even the right to life is restrictable in modern constitutional democracies. Therefore, where there is a conflict between an individual right (such as the right to “keep and bear arms”) and a larger public interest, the Court must have an objective test for doing a necessary balancing act. The “originalist” Justice Scalia fails to do any such balancing act and relies exclusively on history; an inadequate and often subjective tool.

 Curiously, we see Justice Scalia undertake a balancing act in Vernonia School District v Acton (1995) when a Student Athlete Drug Policy (the “policy”) which authorizes random urinalysis drug testing of students is challenged on constitutional grounds; that it conflicts with, amongst others, the Fourth Amendment which prohibits unreasonable searches and seizures. Justice Scalia gives judicial blessing to the policy. In the words of the Court, “The Fourth Amendment does not protect all subjective expectations of privacy, but only those that society recognizes as “legitimate’”. The school had a sound public policy justification for the random tests: to address a drug problem amongst students.

 Given the facts and circumstances of Vernonia, Justice Scalia’s reasoning was persuasive. However, a comparative analysis of Scalia's opinions in Vernonia and Heller—both involving individual rights (privacy and the right to “keep and bear arms”) shows a certain lack of consistency in his judicial approach. In Vernonia, he undertakes a balancing act, and rightly so. In Heller, he relies on history. 

Decided earlier in time, Justice Thomas dwells on Justice Scalia’s “originalist” thinking in Heller to inform the Court’s opinion in Bruen, even though Bruen posed a more nuanced question concerning the right of a citizen to carry a gun in public. 

Of course, at the time of deciding Heller in 2008, Justice Scalia was fully aware that gun violence was a “serious” problem in the US—a “pandemic” even, to borrow his words in Vernonia. But Scalia concluded “…it is not the role of the Court to pronounce the Second Amendment extinct”. Heller and Bruen still leave many questions unanswered about the scope of state regulation of guns that is allowable under the Constitution. However, these consequential precedents would predictably inform the Court’s decisions in cases to come, however narrowly the legal questions are framed. 

In his dissenting opinion in Bruen, Justice Breyer sets out the bare facts: “In 2017, there were an estimated 393.3 civilian-held firearms in the United States, or about 120 firearms per 100 people. That is more guns per capita than in any other country in the world”. “…in 2020, an average of about 124 people died from gun violence everyday”.

Of what use is constitutional design if it cannot be leveraged to address a major national pandemic?

 

 

A Practical Guide to Real Estate Investment Trusts (REITs)

 

A diagram on the structure of REITs. Credit: Tam Ging Wien

The popularity of Real Estate Investment Trusts (REITs) is on the rise globally and Ghana is no exception. This is driven by investors’ need for a more financially flexible way to invest in various segments of the real estate market. In Ghana, investors are also turning to REITs instead of traditional investment products following an unprecedented sovereign debt default which has had ripple effects throughout society. The National Pensions Regulatory Authority (NPRA) for instance now considers REITs as a permissible investment for pension funds, according to its Guidelines on Investment of Pension Scheme Funds.

This article explains how REITs work, explores the benefits and risks of investing in REITs; and highlights how REITs are regulated, particularly in Ghana.

How REITs work

A REIT is a public company that invests in real estate assets to generate recurrent income (rental and interest) from operating, owning, or financing income-producing real estate and real estate-related investments.

REITs invest directly in diverse real estate assets such as residential properties, warehouses, shopping malls, and more. These assets are professionally managed, and revenues—primarily rental income— are distributed at regular intervals as dividends to REIT holders. In simple terms, when you invest in a REIT, your money is pooled together with that of other investors in a collective investment scheme that invests in a portfolio of real estate assets to generate income. Some REITS do not directly own or operate real estate assets. Rather, they invest in real estate-related securities. For instance, some mortgage-giving banks, in a bid to reduce their liquidity challenges, often bundle together a bunch of mortgages and sell them as bonds which REITs invest in and distribute their returns to REIT holders as dividends. You can invest in REITs the same way you would invest in stocks— through a broker.

The key structures of REITs

The Securities Industry (REITS) Guidelines, 2019 (the “Guidelines”) SEC/GUI/001/01/2019 issued by the Securities and Exchange Commission (the “SEC”) require that every REIT must have a Custodian (a trustee). The Custodian is a licensed bank or a trustee company, or a subsidiary of a bank which  holds the assets of the REIT on behalf of the REIT holders/ beneficiaries . As a fiduciary, the Custodian must act solely in the interest of the REIT holders and is responsible for, inter alia, supervising the activities of the REIT Manager. A Custodian is required to meet certain minimum unimpaired paid-up capital requirements, currently pegged at GHS 50,000,000 by the SEC.

The Guidelines also require a REIT to have a Manager. The Manager is a company incorporated in Ghana that is independently audited and has personnel with the experience and skill set to manage the REIT. The REIT Manager is responsible for the acquisition, management, and disposal of the assets of the REIT. As a fiduciary, the Manager is also required to exercise due diligence in investing the assets of the REIT and must act solely in the interest of REIT holders. The Manager is also required to meet certain minimum capital requirements to be determined by the SEC.

The Benefits of Investing in REITs

Benefits of investing in REITs include:

●        Diversification:  The risk arising from investing in one property is diluted when you invest in a pool of properties through a REIT.

●        Affordability: As an individual investor, you may not be able to afford a direct investment in a large asset such as office buildings or shopping malls. By investing in a REIT, you can invest in these large assets in bite-size chunks.

●        Liquidity:  It is easier to buy and sell units in a REIT than to buy and sell properties. REITs are required to list on the stock exchange. This makes it easier for an investor to trade units in a REIT throughout the trading day.

●        Transparency and Flexibility:  You can access information on REIT prices and trade units in a REIT throughout the trading day on the stock exchange. Investors can also gain transparency in the management of assets because as fiduciaries, both the Manager and the Custodian have a duty to account to shareholders.

The Risks of Investing in REITs

Like all investment options, REITs equally have risks. The key risks are summarized below:

●        Market Risk: REITs are traded on the stock exchange and the prices are subject to demand and supply conditions. The prices generally reflect investor confidence in the economy, interest rates, the property market, etc.

●        Liquidity/Income Risk: Distributions (dividends) are not guaranteed and are subject to fluctuations in the REIT’s income. A REIT’s rental income may be affected if the occupancy rate falls.

●        Concentration Risk: If a substantial portion of the REIT’s value is from one or a few properties, REIT holders face a greater risk of loss should something happen to any of the properties.

 

How REITS are regulated

In Ghana, REITs are regulated by the SEC. Given the general lack of knowledge and understanding of financial products and markets by the investing public (consumers), the SEC’s primary role as a regulator is that of a “consumer protection agency”; to protect the unsophisticated investor from market exploitation. In doing so, the SEC, amongst others, demands of public companies (sellers) to make honest and comprehensive disclosures (prospectus et al) to investors (purchasers) at the time of issuing securities or suffer penalties for false disclosure. The very nature of securities makes it difficult for investors to reasonably examine their financial soundness. In the words of American securities lawyer, Alan B. Levenson, “…a security is quite unlike a melon, an automobile, or other tangible consumer goods which can be immediately tested and quality controlled. The investor qua consumer cannot judge a security by the paper upon which his interest is evidenced—he must look to and rely upon material disclosure information regarding the issuer of the security.”

To regulate the licensing and activities of REITs, the SEC issued the  Guidelines. By the terms of the Guidelines, an applicant for a REIT licence must be a  a public company or an external company with a place of business in Ghana and must  have the financial and technical ability to carry on the business of a REIT competently. The SEC also investigates whether the directors of the company have previously taken part in any fraudulent business practices or contravened any relevant laws protecting investors against financial loss. In addition to having a custodian and a REIT Manager which are independent of each other and licensed by the SEC, the Guidelines require that the REIT must meet certain minimum capital requirements to be determined by the SEC.

Further, the registered constitution of the REIT must contain provisions that expressly indicate, amongst others, that the company shall derive at least seventy-five (75%) of its revenue from rents, mortgage interest and investment income from indirect property ownership. The registered constitution must also indicate that at least seventy-five (75%) of the REIT’s total assets shall comprise of real estate; that it shall distribute at least 80% of its distributable profit to shareholders; that the REIT shall list on the stock exchange within 3 years of operation; and that it shall not invest more than 40% of its capital in a single property. All these requirements are aimed at protecting the investor (consumer) from market exploitation or financial loss.  

Conclusion

As shown in this article, REITs offer a more financially flexible way for individual investors to invest in various segments of the real estate market. However, it is important for investors to consult a stockbroker, a banker, a lawyer, or another investment professional for appropriate advice before making an investment decision. 

The Attorney-General’s unsolicited advice to the Auditor-General: Why the Attorney-General gets it wrong

The Attorney-General (the “AG”), Godfred Dame, has taken issue with the publication of a special audit report on the government of Ghana’s COVID-19 expenditures covering the period March 2020 to June 2022 by the Auditor-General. In a letter dated February 8, 2023, addressed to Auditor-General, Johnson Akuamoah Asiedu, the AG argued that the publication of the audit report was improper and wrongful in law and advised the Auditor-General to withdraw the report from its website. The Ghana Center for Democratic Development (CDD-Ghana) in response, published a press statement on February 10, 2023, describing the AG’s position as “shocking”. In a press statement dated February 15, 2023, the AG appears to have taken issue with CDD-Ghana too.

In this piece, I shall catalogue the key arguments the AG canvasses in his publications and address them for the purposes of public education.

In his letter to the Auditor-General, the AG argues that

1. “…It is only after satisfying the constitutional requirement of submitting the Auditor-General’s report to Parliament, the subsequent debate by Parliament thereon and conclusion of work by the appropriate committee of Parliament, that the report of the Auditor-General may be considered final and relevant action may be taken thereon.”

2. That “…In light of the constitutional provisions pertaining to the duty of the Auditor-General after the preparation of audit reports, I consider a publication of the COVID-19 audit report or indeed any audit report particularly when same has not been either considered by Parliament or referred to a committee of Parliament, premature.”

Response:

One, by statutory design, the Auditor-General is required to publish audit reports on public accounts “as soon as the reports have been presented to the Speaker to be laid before Parliament” (Section 23 of the Audit Service Act, 2000 (Act 584)). Nowhere in the Audit Service Act or any other law, including the Constitution, is it even suggested that the Auditor-General must wait until his report has been laid before or debated by Parliament before he may make it public. A report laid before Parliament is a public document to which the public cannot be denied access

Two, the Attorney-General appears not to fully appreciate the nature of auditing processes and the stage at which an audit is finalized. His suggestion that the Auditor-General’s report is finalized only after it has been debated by Parliament following the conclusion of the Public Accounts Committee’s (PAC) work is not supported by the law or even accounting practices. The Auditor-General is neither required by law (statute or Constitution) nor international best practice to wait for the outcome of hearings initiated by PAC before he can make public an audit report. Further, the international audit standards are clear. As part of the audit process, an auditor is required to communicate in writing to the management of auditee-entities any observations and or significant deficiencies in internal controls identified. Based on the responses from the management of auditee-entities, the audit report may be modified where necessary.

Three, unlike the Internal Audit Agency (IAA) which is part of the Executive branch and acts as its “internal auditor”, the Office of the Auditor-General, is by constitutional design, an “external auditor” assigned by the Constitution, not Parliament, to audit public accounts. The duty placed on the Auditor-General in article 187(5) of the Constitution to submit his report to Parliament within six (6) months after the end of each financial year is to enable Parliament to ascertain whether public funds have been used in accordance with law (the Appropriations Act, et al). The requirement for the Auditor-General to submit his report to Parliament cannot, under any circumstances, be interpreted to mean he must wait for the outcome of hearings initiated by PAC to make public an audit report. Such an interpretation would be inconsistent with the protections the Constitution gives the Office of the Auditor-General as an independent constitutional body (article 187(7)(a) of the Constitution).

Four, if persons implicated in the Auditor-General’s report feel aggrieved, Parliament is not the appropriate forum to seek redress. The Courts are.. Similarly, any  person surcharged by the Auditor-General pursuant to an audit report can seek redress at the Court. The appropriate procedure for challenging any disallowance or surcharge issued by the Auditor-General has long been established by statute and given judicial blessing . (Occupy Ghana v. Attorney-General [2017-2018] 2 SCLRG 527).

In his press statement directed at CDD-Ghana, the AG also argues that

3. “Contrary to the strange view of CDD-Ghana, the letter and spirit of laws governing the work of the Auditor-General make him part of the Audit Service of Ghana and, therefore, a regular member of the public services of Ghana to whom the Attorney-General can give advice pursuant to his mandate under article 88 of the Constitution.”

Response:

This assertion by the AG is not only strange but exposes a shocking lack of understanding of the constitutional architecture of the Office of the Auditor-General as an Independent Constitutional Body (ICB).

First, the Auditor-General of Ghana is established under the 1992 Constitution (the “Constitution”), as under the antecedent constitutions (1957 and 1969), as a unipersonal office; the office and its occupant are, in the eyes of the Constitution, one and the same. This fact distinguishes the office of the Auditor-General from the other ICBs such as the Electoral Commission (EC), the National Commission for Civic Education (NCCE), and the Commission on Human Rights and Administrative Justice (CHRAJ), all of which are multi-member bodies with the mandate and functions of the body reposed in the body and its members acting together. Ghana, in effect, follows the “sole commissioner” model when it comes to the office of the Auditor-General. 

Under the terms of Article 187(2) of the Constitution, the power and duty to audit and report on the public accounts of Ghana is reposed exclusively in that one officeholder called Auditor-General who is appointed pursuant to Article 70(1) (b) and who, “before entering the duties of his office,” took and subscribed to the Oath of the Auditor-General set out in the Second Schedule to the Constitution.” (Article 187(16)).

Secondly, the Audit Service, established separately under Article 188(1) of the Constitution, exists to provide the Auditor-General with the professional and administrative staffing and support he needs to discharge his duties effectively. Instructively, the Constitution reposes no auditing responsibility or power in the Audit Service or any other person independent of the Auditor-General. The reason is simple: The Audit Service is the instrumentality with and through which the Auditor-General is expected to perform his functions and exercise his powers. Just as the Judicial Service exists to serve the Judiciary in the performance of its functions, so does the Audit Service exist to assist and serve the Auditor-General to ensure the effective and efficient discharge of his constitutional mandate. The Framers were careful to arrange the relationship between the Auditor-General and the Audit Service in such a manner as to avoid divided responsibility or divided accountability for the supreme audit function. Notwithstanding the existence of administrative Deputy Auditors-General in the Audit Service, the Auditor-General of Ghana remains constitutionally a one-person office, with all the constitutional powers and prerogatives of the office vested in that one person appointed to the position of Auditor-General in accordance with Article 70(1) (b) of the Constitution.

In Transparency International v Attorney-General & 2 Others [Petition No 388 of 2016, 16th February, 2018], the High Court of Kenya, the superior court clothed with original jurisdiction to hear and determine constitutional suits under the Constitution of Kenya has occasion to pronounce on the unipersonal status of the Office of the Auditor-General. At issue in Transparency International was the constitutionality of certain provisions of Kenya’s Public Audit Act, 2015. Section 12 of the Public Audit Act, 2015, had created the position of “Acting Auditor-General” and authorized the President of Kenya to designate, upon the recommendation of the Public Services Commission, the senior most person in the Auditor-General’s office as the “Acting Auditor-General” to exercise the full powers of the Auditor-General in the absence of the Auditor-General. Section 15 of the Act also created a position of “Senior Deputy Auditor-General”. Like Ghana’s, the Constitution of Kenya (2010) provides for the appointment of an Auditor-General (in accordance with a prescribed constitutional procedure) but purposely makes no provision for a Deputy Auditor-General.  Plaintiffs in Transparency International challenged as unconstitutional the creation by statute of both the new “Acting Auditor-General” position and the position of Senior Deputy Auditors-General.   The Court held that the Constitution of Kenya establishes and recognizes as Auditor-General only that one person bearing that designation who is appointed to that office in accordance with the Article 229(1) of the Kenyan Constitution. In the words of the Court:

‘. . . the petitioner argued that the position of Acting Auditor General is unconstitutional because only one person is recognized by the Constitution as Auditor General and I agree. The Constitution uses the word “an” Auditor General, meaning an individual and not individuals. The Constitution does not mention other substantive positions. Although the Constitution allows the Auditor General to recruit his own staff and in doing so, must develop staff organizational structure for the performance of his functions and exercise of powers...’

The AG also argues that

4. “A proper reading of the Constitution, especially the provisions on the Public Services of Ghana, leads to the inescapable conclusion that the Attorney-General is fully vested with the constitutional function of giving legal advice to all the Public Services specifically listed in article 190(1) of the Constitution, including the Audit Service, and such other public services as will be established by law.”

Response:

While the AG is clothed with the responsibility of instituting and conducting all civil cases on behalf of the state, the Supreme Court has held that to avoid conflicts of interest and to preserve the principles of separation of powers and checks and balances, Independent Constitutional Bodies (ICBs) are entitled to hire, retain, and act on the advice of their chosen counsel. They can also sue and be sued in their own name (Amegatcher v Attorney-General [2012]). Therefore, while the AG may seek to provide unsolicited advice to the Auditor-General, such advice can, and in this case must be disregarded as being legally flawed.