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Unclaimed dividends surge on absence of ‘central portal’ for investor data

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In every 100 investors’ signature specimen forms (transfer forms) a registrar requests from stockbrokers to enable proper identification of a shareholder, less than 50 will be received within the required timeframe.

Unclaimed dividend in Nigerian capital market has, as such, risen to over N120 billion, despite initiatives by the Securities and Exchange Commission (SEC) to eradicate or reduce it.

Factors seen hindering the total elimination of unclaimed dividend include investors’ identity management, investors’ lethargy in handling dividend-related issues, multiple account holding, moribund stockbroking firms and their customers, and the time it takes the key parties to securities transactions – Central Securities Clearing System (CSCS), stockbrokers and registrars – to respond to requests.

Till date, stockbrokers still engage in physical delivery of the transfer forms. The time it takes to deliver this form slows the circle of processing unclaimed dividend payments.

One of the initiatives by SEC to eradicate or reduce unclaimed dividends is the electronic-Dividend Mandate Management System (e-DMMS), which allows investors’ accounts to be credited immediately they are mandated with the registrars and the relevant banks. The other mechanism is the dematerialisation of share certificates.

Already, about 2.82 million investors have enrolled in e-Dividend Mandate Management System.

An informed source told BusinessDay that several factors are responsible for unclaimed dividends which he acknowledged remains one of the undesirable features of the Nigerian capital market denying investors the gain of participating in the capital market.

He said that while SEC makes efforts to address other causes, it should not ignore the importance of allowing a “central portal” for investors’ data which could be under the custody of the CSCS, updated by stockbrokers and easily accessed by registrars.

This, he said, will help eliminate the bottleneck resulting from the time it takes registrars to receive transfer forms from stockbrokers as needed.

“Registrars don’t have luxury of Know Your Customer (KYC). They rely on stockbrokers to give that information which is delivered physically. The law doesn’t allow registrars to do KYC. BVN helped but it was not foolproof and has not delivered 100 percent,” the source said.

Because the e-dividend initiative remains critical to the complete elimination of the phenomenon of unclaimed dividend, the SEC management encourages all shareholders who are yet to do so to get mandated on the e-DMMS platform before December 31, 2019.

Mary Uduk, acting director-general of SEC, said the commission encourages investors to take advantage of the regulatory window to regularise their multiple accounts and claim their dividends.

The value of unclaimed dividends rose from N5.1 billion to N103.1 billion between 2002 and November 2016, compared with the value of N2.09 billion in 1999. As at September 2018, it remained high at N100 billion, and stood at N126.03 billion as at March 2019.

One of the interesting resolutions at the just concluded third Capital Market Committee (CMC) meeting in Lagos was the decision for registrars to discontinue the practice of requesting for confirmation of bank signature during the e-DMMS process.

SEC is yet to communicate to the relevant parties its decision on the request made by Association of Stockbroking Houses of Nigeria (ASHON) to extend the time for its members to comply with the transfer of complete investor data among operators –brokers, registrars and CSCS.

Ahead of the expected decision, having a central portal where data and mandates of securities investors can be viewed by authorised parties is very important at this time to compliment regulatory efforts aimed at reducing unclaimed dividends.

Registrars’ data management services include, among others, the maintenance of client companies’ register of shareholders which includes change of addresses, bank mandate, probate or letters of administration, change of names, etc.

Registrars are also responsible for payment of dividend/interest to shareholders/bondholders, respectively; registration of share transfers; verification of shareholders’/bondholders’ signature; liaising with CSCS to update the register of shareholders/ registration of share transfers, among many others.

In carrying out this responsibility, they liaise with the Central Securities Clearing System (CSCS) and the stockbrokers who are responsible for the physical transfer of duly signed/mandated investors’ forms to registrars.

 

Iheanyi Nwachukwu & Olufikayo Owoeye