Embattled stakeholders who dared the Securities and Exchange Commission (SEC) to invest more than the permissible limit during the 2008 market boom are now at logger heads with Capital Market regulators over demand for them to consolidate their holdings.
Rattled by the market boom of 2008, the said investors had frantically joggled their names in different forms to enable them purchase more than the permitted units of shares in some of the public offers sold at the time. But unknown to them, the trend has turned back to hurt them today, having ballooned the quantum of unclaimed dividend inthe nation’s capital market.
According to Director, External Relations, Securities and Exchange Commission (SEC), Henry Rowland, Nigerian Capital Market’s unclaimed dividend currently stands at N103 billion as at January 2018 despite measures put in place to stem its rise, as returns on investment have continued to accumulate on a yearly basis without being claimed.”
He argued that the development could be counter-productive to the growth and development of an emerging economy that wants to achieve world-class market and attract Foreign Direct Investment (FDI).
The SEC, being aware of the enormous challenge of this development, constituted a market-wide committee with the aim of proposing strategies by which securities as well as dividends accruing to persons with multiple applications could be treated.
According to a notice obtained from SEC’s website, the committee had concluded its assignment and its recommendations were adopted by the entire capital market community.
Consequently, the Commission declared it has granted forbearance to investors whose identities can be verified.
“Concerned investors were, therefore, advised to contact their stockbrokers or registrars with proof of identity (SEC Approved KYC) to consolidate their accounts on or before September 1, 2017, failing which, all such securities and accruing dividends shall be transferred to the Nigerian Capital Market Development Fund. With regard to securities which have not been claimed and cannot be verified, such would be transferred to the Nigerian Capital Market Development Fund along side their acruing dividend,” the Commission noted.
But against the backdrop of the low compliance level by stakeholders, the capital market regulator later granted an extension of forbearance in respect to multiple account consolidation till March 31, 2018. According to the immediate past Acting Director General of SEC, Abdul Zubair, the extension was aimed at encouraging many more investors to consolidate their multiple subscriptions into one account.
“Investors that bought shares of the same company during public offers, using different names, are allowed till March 31, 2018 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.”
Addressing journalists at the 2018 Post-Capital Market Committee in Lagos recently, SEC’s new Acting Director General, Mary Uduk, said registrars have acknowledged that investors have started coming forward to regularise their stakes in the affected company but however added there are challenges in the process. Part of that challenge is the fact that process of compliance was moving at a slow pace that would make the deadline unrealistic.
“The CMC deliberated and recommended the appropriate Technical Committee to seek input and come up with recommendations to address the challenges. So the forbearance window has now been extended to September 2018.”
“Therefore, we encourage all affected investors to come forward and take advantage of the window before the new deadline,” she said.
When Daily Sun inquired about the number of investors that have complied with the directive, a source at SEC who prefered not to be named in print said there has been low compliance as stakeholders were yet to fully embrace the forbearance window.
With this development, it would be safe to say that the efforts of the Commission through various initiatives like the e-dividend introduced to address the delay associated with the verification of proceeds of public offers as well as challenges encountered by investors in getting returns on their investments to reduce market infractions might not create the desired impact unless the challenge of multiple subscriptions and other knotty issues are addressed.
Speaking to Daily Sun, on the problem multiple shares subscription pose to the market some shareholders urged SEC to extend the period of the forbearance window to enable more people come on board and ensure the incidence of rising unclaimed dividends is reduced.
National Coordinator, Independent Shareholders Association of Nigeria (ISAN), Adeniyi Adebisi, for instance explained that the issue of multiple subscriptions started in 1977 when NSE came into existence and subsequent indigenisation of Nigerian companies.
“During those periods, there were no sufficient means of keeping track of share certificates and signatures and the 12-year ultimatum by Companies and Allied Matters Acts (CAMA) to declare dividend statute barred marked the growth of unclaimed dividend in Nigeria.”
“When the boom happened in 2008, a lot of investors who were not knowledgable on how the capital market works bought shares for themselves in the names of their wives, children’s and relatives with the same signatures, which, unfortunately, some of them cannot remember again. This is the more reason those shareholders are still unable to open bank accounts with those names for the purpose of e-dividend collection,” he said.
Adeniyi advised, “what SEC does not know is that these unclaimed dividends can be traced to abandoned properties as well because many people, during IPOs, bought shares worth millions of naira. Now, most of these investors are dead and their relatives did not know these shares were bought in their names as well. So I think the September deadline should not have been put at all because this is supposed to be a continuous process.
This is why the reduction number of unclaimed dividends is still small.”
President, Constant Shareholders Association of Nigeria (CSAN), Mallam Shehu Mikail, said, “To be realistic, there should not have been a deadline in the first place because this issue is a continuous process as getting people from different parts of the country to embrace the forbearance window deadline given by SEC is difficult.
This is because SEC has to do more in disseminating the information to the investing public especially to those in the rural areas. Furthermore, most stockbrokers who helped with the subscription process are no longer in the system to assist in resolving this dilemma, while some of them have relocated abroad, so this makes the whole thing difficult.
“Rather, I will suggest that SEC comes up with a one- to three-year deadline. This will in a way reduce the volume of unclaimed dividends. If the present government doesn’t have hidden agenda regarding those unclaimed dividends, then there should be an extension.”
For his part, National Coordinator, Proactive Shareholders Association of Nigeria (PSAN), Oderinde Taiwo, urged the commission to extend the deadline to allow more people to key into the initiative, adding that it will be to the advantage of investors because investors who have already complied with the directive were not many.