SEC’s committee recommends establishment of Unclaimed Dividend Trust Fund

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By Peter Egwuatu

In an effort to address the current lacuna on unclaimed dividend in the Nigerian capital market, the Committee set up by the Securities and Exchange Commission, SEC has recommended for the establishment of Unclaimed Dividend Trust Fund, UDTF.

This was revealed at a public hearing organised by Senate Committee on Capital Market last week as the Commission made its submission based on the report of its committee set up last year to review the issue.

The Committee had recommended the followings: the removal of the 12 year statute of limitation on unclaimed dividends as contained in Section 385 of CAMA, to enable shareholders claim their dividends in perpetuity; the establishment of a Trust Fund as a body corporate, with a Board of Trustees, for the administration of unclaimed dividends; The Fund to be managed by an independent Fund Manager supervised by the Board of Trustees and regulated by the Commission.

It also recommended that members of the Board of Trustees should be selected from the capital market with representation from the following institutions: Federal Ministry of Finance, SEC, Institute of Capital Market Registrars, Shareholders association recognized by the commission, Nigerian Employees Consultative Association, and such other persons as may be determined by the Minister of Finance.

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The Committee recommended that  upon establishment of the Fund, the Minister of Finance shall issue a directive for all forfeited unclaimed dividends domiciled with the companies and  all subsequent unclaimed dividends, 15 months and above to be paid into the fund.

The submissions made by institutions, such as the SEC, Corporate Affairs Commission, Institute of Capital Market Registrars, Nigerian Stock Exchange, Recognised Shareholder Associations etc have alluded to the fact that the viable option of injecting these forfeited unclaimed dividends into the economy is through the establishment of an UDTF.

It was proposed during the public hearing that the Fund shall be managed by a Fund Manager registered with the SEC, and shall give periodic reports on the status of the Fund to the SEC and the Minister of Finance.

Speaking at the public hearing the Director General of SEC Mr. Mounir Gwarzo said “Going by the practices in other jurisdictions, we believe that it is apt for the Nigerian capital market to have a platform for the utilization of unclaimed dividends funds”.

As the financial regulators continue to push for greater levels of financial inclusion and encourage more Nigerians to invest in the capital market, the issue of unclaimed dividends must be tackled holistically.

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In a bid to mitigate the situation, the SEC had in September 2015 issued a directive to all Registrars of companies to return 90 per cent of unclaimed dividends in their custody for a period of fifteen months and above. Similarly, in November 2015, the Commission launched the E-Dividend Mandate Management System (E-DMMS).

The E-DMMS is an E-dividend payment portal that ensures the payment of dividends directly into a shareholder’s account.

Meanwhile, the public hearing came against the backdrop of increases in the volume of unclaimed dividends. Available data estimates that the quantum of unclaimed dividends has grown almost thirteen folds just between 2005 and end of 2012, and now N117 billion as at December 31, 2016.

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