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What’ll happen to over N100b unclaimed dividends?

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SEC headquarters, Abuja

The rising portfolio of unclaimed dividends currently estimated at over N100billion has remained a source of worry to the regulatory bodies in the capital market, especially the Securities and Exchange Commission (SEC) which has devised means and ways to address the issue, reports Ibrahim Apekhade Yusuf

One issue that has remained on the front burner of public discourse in recent times, especially amongst stakeholders in the capital market is the issue of unclaimed dividends.

To address the problem frontally, the Securities and Exchange Commission few years ago had introduced e-payment system.

Specifically, SEC set machinery in motion requesting all Registrars of public companies to return all unclaimed dividends, which have been in their custody for 15 months and above, to the paying companies with evidence of remittance expected to be filed with the Commission not later than June 30, 2015, yet not much was achieved with that.

Subsequently, the apex regulatory body had two years ago stepped up efforts towards free dividend (e-dividend) registration with a deadline initially set for last December 2017, but was forced to extend it again to February 28, 2018.

Justifying the new deadline, the Commission said the extension was part of its developmental and an effort to encourage more shareholders to key into the initiative.

According to SEC, the review of the progress in the e-dividend registration exercise, after the December 31, 2017 deadline, showed that there was still a great influx of shareholders desirous of mandating their bank accounts for payment of dividends electronically. “In light of the foregoing, the SEC, as part of its developmental role, has extended the period for the free e-dividend registration exercise till February 28, 2018, to encourage more shareholders mandate their bank accounts.

“Accordingly, shareholders that are yet to register should continue to approach their banks or registrars to mandate their accounts for the collection of their dividends electronically, including unclaimed dividends, not exceeding 12 years of issue,” the SEC stated.

Acting Director General of SEC, Dr. Abdul Zubair, who made the announcement at a press briefing recently, enjoined all the investors who were yet to register to key in.

He said “Such investors should continue to approach their banks or registrars, as usual to seamlessly mandate their bank accounts for the collection of their dividends electronically, including unclaimed dividends, not exceeding 12 years of issue.”

Zubair also announced an extension of the forbearance window for multiple accounts consolidation to March 31, 2018.

He said:  “With a view to encouraging many more investors to consolidate their multiple subscriptions into one account, the SEC wishes to announce an extension of the forbearance for multiple accounts till 31st March, 2018.

“Accordingly, investors that bought shares of the same company during public offers, using different names, are allowed till 31st March, 2018 to continue to approach their stockbrokers or registrars to regularise their shareholdings, in line with SEC rules on customer identification. Thereafter, all shares not regularised shall be transferred, on trust, to the Capital Market Development Fund.”

Thorny issues with e-dividend mandates

The Securities and Exchange Commission, SEC, and Nigerian Stock Exchange, NSE, had few years ago begun the implementation of the Direct Cash Settlement (DCS) initiative. But the initiative may not have fared any better judging by the growing level of apathy from stockbrokers and investors.

As to be expected shareholders have accused registrars of frustrating the electronic dividend (e-dividend) registration, by not implementing the e-divided mandate and merging of multiple accounts even after investors have registered for the e-dividend.

Consequently, they requested that the SEC should allow continuation of the free e-dividend registration exercise, which closed effectively today, and merging of multiple accounts, claiming that most registrars do not have the capacity in terms of manpower and technology to meet the deadline.

Modus of operandi of DCS

While the e-dividend was introduced to address the increasing trend of unclaimed dividend in the capital market, the DCS was part of the ongoing initiatives introduced by SEC and NSE to protect investors and eliminate fraudulent activities in the Nigerian capital market.

It took effect from January 4, 2016. It is the direct payment of proceed of sale of shares/securities into an investor’s nominated bank account. It is a process where cash proceeds from trades executed by stockbrokers on the Exchange settles directly into investors’ bank account.

It starts when a client gives his broker the mandate to sell his or her shares. Once those shares are sold, payment is made directly into the client’s account. This is in contrast to the old practice where proceed from sale of shares securities is paid directly into the stockbroker’s account and stockbrokers then deduct transaction fees and remit the balance to the client’s account.

Alleged conspiracy of registrars

In the past there have been allegations that some operators, especially registrars do trade with the unclaimed dividends in their possession and looking at the quantum of the money available as unclaimed, the commission needs to discourage this act and reduce the amount of unclaimed dividends.

Shedding light on this claim, a staff of SEC, who would not be named because he was not authorised to speak, said shareholders need to approach registers for their unclaimed dividends while the registrars are expected to carry out some verification exercise on the shareholders and reference the issue to the paying company who is now expected to release the dividend in question to the registrars for onward payment to the shareholder.

However, speaking on the registrars’ side, the President of Council, Institute of Capital Market Registrars, Mr. Bayo Olugbemi said we should rather talk about how it affects the shareholders and not registrars.

He said, SEC is the regulator and Registrars will comply but looking at the issue from the angle of contacting the payment company before shareholders can get paid will only amount to stressing the shareholders.

Mr. Oderinde Taiwo, the National Coordinator of Proactive Shareholders Association of Nigeria, A member of World Federation of Investors speaking from the shareholders angle said the directive is not in the best interest of shareholders.

Furthermore, Sir Sunny Nwosu the National Coordinator of Independent Shareholders Association of Nigeria also said it is very wrong and not in favour of minority shareholders. He further said a rule is a rule and a law is a law, SEC rule cannot supersede the law and concluded that he would lend his weight against such move from SEC.

Lending credence to the foregoing, the President, Constance Shareholders Association, Shehu Mallam Mikail noted that the procedure for claiming dividends for deceased persons was most cumbersome such that interested parties are usually discouraged from pursuing their claims.

“Actually, the procedure for claiming the dividend of the dead person is too stressful and cumbersome, and the next of kin might not even know how to process it. “It involves court process, and here in Nigeria, there are many delays, which may frustrate the next of kin to abandon the entire process, and this is part of the reason why there is still huge unclaimed dividend figure in the capital market.”

Mounting criticisms against DCS

While commenting on the DCS initiative, the Chairman, Progressive Shareholders Association of Nigeria,   PSAN, Mr. Boniface Okezie said, stockbrokers are not helping matter on this direct cash settlement. “They (stockbrokers) still prefer the indirect payment settlement. My recent transaction with them showed that they prefer the old system to the new system. They are supposed to inform me to supply my account details to key into the direct cash settlement, but they did not.

“Also, the NSE and SEC need to carry along the entire stakeholders when introducing new measures and products to the market. There should be proper and enhanced enlightenment on this new initiative if its objectives are to be achieved. The NSE needs to up its game. In most cases, retail investors are ignored and are not involved on issues that affect the market.”

Echoing similar sentiments, the National Coordinator, Proactive Shareholders Association of Nigeria, PROSAN, Mr. Oderinde Taiwo said, “The DCS initiative is good, but most local retail investors are not much aware of it let alone its benefits. The regulators, especially the NSE do not parley and regard us as major stakeholders. We are the ones that sustain the market when it crashed in 2008 because it is our own; we do not have alternative market, but the so called big investors (foreign and institutional) left the market for other markets. So, there is need for enhanced enlightenment by the regulators so that investors will key into this laudable initiative.”

In the view of the Managing Director, APT Securities & Funds Limited, Mallam Kasimu Kurfi, said; “The Direct Cash Settlement still has a long way to go because most of our local investors want to have cash before or immediately after disposal of their sharers which the system does not allowed. Only few wait for the Transaction Date plus three working days (T+3days). There is need for more enlightenment.”

On his part, Managing Director/CEO, High Cap Securities Limited, Mr. David Adonri said: “Direct cash settlement by CSCS for sales made by investors is wonderful development. It is still at its infancy of implementation but those who are already utilising it can attest to its numerous benefits. Shareholders are hereby encouraged to embrace and key into it without further delay.”

In his own remarks, the spokesperson of Independent Shareholders Association of Nigeria, ISAN, Mr. Moses Igbrude said: “Direct cash settlement is a new initiative which all stakeholders need to support and pursue to logical conclusion. Registrars frustrating e-dividend Igbrude however noted that there are still problem with the implementation of the e-dividend initiatives, as registrars still post dividend warrants to shareholders even when they have completed the exercise. I think some registrars are having human and technology gaps.

“When shareholders fill the e-dividend forms instead of posting it immediately they just dump it by the side of their table and later on they forget to affect it in shareholders accounts. So, SEC should carry out proper audit on the e-dividend registration. The exercise should be made to remain open rather than fixing deadline given some of the lapses identified.”

In her remarks about the e-dividend registration, Chairperson of Pragmatic Shareholders Association of Nigeria, Mrs. Bisi Bakare said:” There have been several complaints from some of our shareholders on the e-divide registration. The exercise still have some hiccups as shareholders still get dividend warrants in their addresses both old and new. Even the merging of multiple accounts has not recorded the expected results. And for me as a person, I had an issue with the merging of my accounts. After complying with the registration processes, my accounts were yet to be merged as my registrar still posts dividend warrant to my old address. The regulators should take this matter serious with the registrars and deadline for any registration of e-dividend and merging of accounts should be removed; rather there should be continuous sensitisation.”

NCMDF to the rescue

It is instructive to note that the Nigerian Capital Market Development Fund, NCMDF is a new initiative by the Securities and Exchange, SEC, aimed at reducing or eradicating the rising unclaimed dividend by shareholders of quoted companies.

Thoughts on NCMDF

Expectedly, Nigerian shareholders continued to lend their support for the NCMDF initiative by SEC. According to Egbejiogu Chigozie, a businessman, “The seed funding coming from the Commission is laudable and showing its commitment to end unclaimed dividend. The problem is managing the fund; many shareholders believe that government agencies are not good at managing money. I am not so sure of what SEC’s role would be in this development Fund. Until we get the full detail of how it will be run, one cannot really say much.  Apparently, it is not good for investors to use fake names in investing in shares; it is my hope that with the Capital Market Development Fund, such practice would be eliminated. It is about time we begin to eliminate practices that will discourage both local and foreign investors from coming into our market.”

In the view of Ebuka Benedict, an entrepreneur and shareholder, the NCMDF is a good initiative, provided it will be well managed.

“The only issue is how the Fund would be managed and who is to be held accountable when it is mismanaged. I hope that the Board of this Fund should be occupied by people with integrity and track record. I hope with the existence of such Fund, investors will stop using fake names to buy shares, knowing that when caught such shares would be forfeited to the Fund. I think the Fund to be established by SEC is like a security measure against financial malpractice and it will also help to checkmate money-laundering in the capital market. Hope it will not be mismanaged.”

Divergent view over NCMDF

While commenting on SEC’s introduction of the Unclaimed Dividend Trust Fund, Gbenga Bamidele, a market analyst recalled that in the past such attempts were resisted by shareholders because of lack of trust in the management of public funds, thus he wondered what has changed thus far.

Raising some posers, he asked, “Why is it that SEC is always interested in using shareholders money to develop the market?”

Noting that the Commission receives allocations from the federal government, which should be enough to develop the market, Bamidele said, “The shareholders should be allowed to determine what happens to their money. I believe that the Companies and Allied Matters Act, CAMA settles the issue of unclaimed dividend. The SEC should concentrate on the area of market development and not interfering with shareholders’ money.”

No cause for alarm

According to Sammie Opeoluwa, a capital market analyst, it is pertinent to note that at the centre of the issue of unclaimed dividends is the problem of ignorance on the part of shareholders. “There is really no cause for alarm as far as the issue of unclaimed dividends is concerned. We need to educate investors at this time that their unclaimed dividends are safe and can still be claimed provided it is not up 12 years as stated in Section 385 of CAMA. Based on this SEC directive, shareholders still need to contact the affected registrars for their unclaimed dividends who will now refer the issue to the paying company after it has been duly verified that they have an outstanding dividend to claim before they eventually get paid.”

The post What’ll happen to over N100b unclaimed dividends? appeared first on The Nation Nigeria.

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