Expert lauds SEC move to promote electronic issuance of annual report

A financial expert, Dr Uche Uwaleke, on Wednesday commended the Securities and Exchange Commission’s (SEC) move to commence issuance of soft copies of annual reports to shareholders.

Uwaleke, Head of Banking and Finance Department, Nasarawa State University Keffi, made known in Lagos that the initiative would save a lot of costs for quoted companies.

“It is a welcome development for the capital market, especially now that the market regulators are promoting electronic transactions.

“Like the e-dividend that has done away with company registrar, mailing dividend warrants to shareholders, sending soft copies of annual reports to shareholders will save a lot of costs for quoted companies,” he said.

Uwaleke said that quoted companies spent a lot in printing of annual reports, noting that some even printed reports abroad and competed for attention on the basis of quality.

“A good number of listed firms have thousands of shareholders and each is entitled to a hard copy of the annual report, regardless of the number of units of shares held.

“So, even if one has just 1, 000 units worth N1, 000, one is entitled to a copy of the report which cost about N5, 000 or more to produce.

“Some companies even print their reports abroad and compete for attention on the basis of quality of print which adds no value to shareholders’ wealth,” Uwaleke said.

He also said that the new measure would bring convenience, adding that shareholder would not be compelled to carry bulk document about each time he or she needed it.

The financial expert said that shareholders could select from the electronic version only those aspects they considered essential to their investment decision.

‘’Indeed, the average shareholder may not bother about some aspects of the report such as ‘accounting policies’ and ‘notes to the accounts’ which contribute to making company annual report bulky.’’

He said that the use of soft versions of reports would ensure that most shareholders, if not all, receive them and in good time.

This he said was opposed to the current costly practice of mailing hard copies which hardly gets to a majority of shareholders.

Uwaleke stated that in the current system of processing annual reports to the shareholders, there might be failure to update the registrar with forward address and challenge of postal system.

He said with the current method, those charged with responsibility of distributing the report might also be waiting to distribute them during AGM.

“I do not think there is an investor in the capital market, no matter how uneducated who do not have access to the internet or phone,’’ he said.

‘’This is considering that all share certificates have been dematerialised with the construction skills certificate scheme (CSCS).

Uwaleke said that the elderly shareholders who had retired to the rural areas with no modern communication facilities would also find issuance of soft copies of annual reports to shareholders helpful.

According to him, such shareholders will probably have children or relations residing where there is communication facilities who can help them.

“In any case, the same investor in a remote area is worse off since his company’s annual report will most probably not get to him.

‘’So, the electronic-version has a lot of merits over the hard copy.”

Reports indicate that Mr Mounir Gwarzo, the Director-General of Security and Exchange, said recently that the commission was perfecting arrangements toward ensuring electronic circulation of annual reports to shareholders, to save cost.

The director-general said the planned programme would be done through a pilot scheme.

He stated that the issue had been reviewed in line with economic realities and SEC decided to float a pilot scheme for electronic distribution of annual reports to the share holders.

According to him, the scheme, when operational will also ensure enhanced dividend payment in the market among other advantages.