Registrars under scrutiny as SEC applies new measures on unclaimed dividend

Registrars in Nigeria’s capital market may now have to wake up to defend their integrity, following new measures being put in place by the Securities and Exchange Commission (SEC) to verify the true status of unclaimed dividends, BusinessDay investigations show.

As a first step, SEC, the nation’s capital market apex regulator has directed registrars to return all unclaimed dividends which have been in their custody for 15 months and above to the paying companies.

In a move aimed at ensuring compliance and authentication, SEC has also directed the registrars in the country’s capital market to file evidence of unclaimed dividend remittance with the commission not later than June 30 this year.

Registrars are responsible for keeping records of shareholders and also ensuring that the amount of shares outstanding in the market, matches that authorised by the company.

The Institute of Capital Market Registrars (ICMR) had put the value of unclaimed dividends in the country at N50.94 billion as at December 31, 2013; a figure which it said represented 5.05 percent of the total dividends declared for the past ten years.

Unclaimed dividends represent the monetary value of profit pay-outs by quoted companies, which have not been claimed or received by shareholders or equity investors in the company.

Analysts the measures are to put to rest the unending controversy over the actual amount of unclaim dividends, which arose because of the absence of infrastructure over the years, to ensure that all shareholders’ records are captured in a single database.

With the relative improvement in infrastructure, SEC is insisting that the time has come for the shareholders with verifiable evidence to enjoy their sweat which had been denied them. It said the problem was partly due to the fraudulent activities of some market operators and banks’ non acceptance of dividend warrant then into savings accounts, particularly over the last ten years.

“Failure to comply with this directive shall attract appropriate sanctions without further recourse,” SEC said in a recent circular.

Mounir Gwarzo, director-general of the commission had earlier this year said the move was to ensure that registrars return unclaimed dividends to paying companies, so as to engender confidence in the investing public.

Gwarzo had told leaders of major shareholders’ associations in Nigeria during their visit to the SEC in Abuja, that the Companies and Allied Matters Act (CAMA) resolved the issue of return of unclaimed dividends, stating that they should be reverted to the companies after 15 months and that the companies should not invest the monies in their operations.

He had also in a meeting with company secretaries and legal advisers of manufacturing companies, urged them to be in the vanguard of supporting the directive to registrars to return unclaimed dividends to the companies after the stipulated period, insisting that there was no reason why registrars should keep the unclaimed dividends beyond the period stipulated by law.

This development comes on the heels of the commission’s insistence that Capital Market Operators who are yet to comply with the new minimum capital requirement should do so before the deadline of September 30, 2015.

“Note that the Commission is committed to this deadline and would not grant any further extension,” said SEC in a recent circular to all capital market operators.

The commission in December 2013 approved the new minimum capital requirements for Capital Market Operators aimed at improving operators baseline infrastructure, market access and service delivery.

The capital requirement for broker/dealer was increased from N70 million to N300million. For broker only, the capital requirement was increased from N40 million to N200 million; while for dealer, it was increased from N30 million to N100 million. The minimum capital requirement for Issuing Houses was increased from N150 million to N200 million; while that of underwriters was increased from N100 million to N200 million.

For a registrar in the Nigerian capital market, the minimum capital requirement is now N150 million, from N50 million; while for those in the trustees business, the capital requirement was raised to N300million, from N40 million.

Furthermore, the minimum capital requirement for rating agencies was increased from N20 million to N150 million; while the capital requirement for Corporate Investment Adviser remains at N5 million.

From an initial capital requirement of N500,000 every Individual Investment Adviser is expected to have  at least N2million as capital; while Fund/Portfolio Manager’s minimum capital requirement was raised from N20 million to N150 million.

While majority of the market operators have met their minimum capital requirements, many others are yet to do so, lead to the September 30 extension by SEC. The compliance was stated as a prerequisite for the registration of new CMOs.

Iheanyi Nwachukwu