Despite the suspension of deadline on multiple subscriptions, there is still need for investor education especially in the rural areas to help address the knotty issues it presents, especially as regards unclaimed dividend. Chris Ugwu writes
he sustained efforts by the apex capital market regulator and other stakeholders to finally address the knotty issue of multiple subscription by some investors appear to be paying off despite some negligible dark spots.
The effort with the launch of e-dividend portal and other modifications such as direct cash settlement is believed to have stemmed the tide of unclaimed dividend, and may possibly end it if the tempo is sustained.
Despite the feat so far, more effort is still needed to bring inept investors and rural dwellers to embrace the window opened by the regulator to drastically reduce unclaimed dividend to the barest minimum.
Though the forbearance window on multiple subscriptions have enjoyed continuous extension in order to allow investors key into it, the commission at a recent Capital Market Committee (CMC) meeting again removed the deadline for multiple accounts regularisation in order to give room for more shareholders to key into the system.
Multiple subscriptions to public offers occurred during the market boom when investors joggled their names in different forms to enable them purchase more than the permitted units of shares in public offers. This contributed to a large extent to the rising wave of unclaimed dividends.
The Managing Director, Crane Securities Limited, Mr. Mike Eze, speaking to New Telegraph, traced the genesis of the rising wave of unclaimed dividend to the indigenisation era of the administration of General Yakubu Gowon.
According to him, “during this exercise, those in position of authority who had the wherewithal, acquired shares in the privatised companies with fictitious names of their drivers, cooks, gardeners, dead brothers, dead fathers etc in such a way that when the dividends came, they were not able to claim them why because there is no such persons to claim such.”
Speaking in the same vein, the Managing Director, Highcap Securities Limited, Mr. David Adnori, explained that unclaimed dividends were increasing every year due to several factors.
According to him, the problem started several years ago during the indigenisation exercises when several shareholders made multiple subscriptions in fictitious names whose signatures they cannot remember.
He noted that the affected shareholders were also unable to open bank accounts in these fictitious names for the purpose of e-dividend collection.
He added that most of the unclaimed dividends were statute barred and forfeited to the companies in which case recovery by the affected shareholders may not be possible in the absence of means of identification.
The worrying situation became more prevalent because it is believed that the continued rise is detrimental to the growth and development of an emerging market that wants to achieve a world class market and attract direct foreign investment.
SEC had, at the end of the Second Quarter Capital Market Committee Meeting in Lagos, announced that considerable progress had been made in the implementation of its consolidation of multiple shareholder accounts and electronic Dividend Mandate Management System (e-DMMS) as so far about 3.4 billion shares have been consolidated.
Both measures were introduced as part of checking the growth and possibly eliminating the unclaimed dividend menace in the nation’s capital market.
Acting Director General of SEC, Ms Mary Uduk, had expressed satisfaction with the regularisation of multiple shareholders accounts since it was launched last year, describing investor response as very impressive.
According to her, with the help of the Multiple Subscription Committee, 3.4 billion shares have so far been effectively consolidated.
The committee “informed the meeting that the committee of Heads of Banking Operations had agreed to collaborate with the Commission to display banners in (their) banking halls all over the country, sensitizing the public on the regularization of multiple subscriptions of shares,” she said.
Similarly, stockbrokers and registrars are requested to make available to the Committee on Multiple Subscription Account, on a periodic basis, the number of regularised accounts.
Company secretaries of listed companies, she continued, “have also agreed to display similar information on their website and offices.”
The meeting rose with a resolve that the SEC should engage relevant stakeholders on the e-Dividend and Multiple Subscription Accounts so as to ensure “that complete investor data are transferred among operators such as Brokers, registrars and the Central Securities Clearing System (CSCS).
SEC is also to help discourage unclaimed dividends from building up from securities of newly-listed companies, just as modalities should be developed for validating shareholders’ registers, such that “registrars are furnished with incomplete information such as missing account numbers.”
Speaking further, the acting DG noted that the issue of unclaimed dividend was dynamic, given that as the old heap is being cleared by the registrars, new ones are mounting by the day.
SEC removes deadline
SEC last week suspended the regularisation deadline put in place for shareholders that opened accounts for the purchase of shares with different names.
This was part of the outcome of the third Capital Market Committee (CMC) meeting that was held in Lagos, recently.
Uduk said this would enable other shareholders that are having challenges with their details to come up and regularize their holdings, noting that, the commission has discovered that some shareholders are avoiding it due to the fear of prosecution.
According to her, “the Multiple Subscription Committee presented the status of its ongoing engagement with the Central Bank of Nigeria (CBN) and Committee of Heads of Banking Operation to display multiple accounts regularization banners in the banking halls all over the country. The committee also reported that CMOs have commenced the filing of report on regularized accounts with the commission, on a quarterly basis. Given the relevance of this exercise and the need to create more awareness, the committee requested for an extension of the deadline of multiple accounts regularisation.
“We are keeping it open for now with no deadline. We are also encouraging investors to take advantage of this to regularise their accounts and claim their dividends.”
She explained that other resolutions that were reached at the meeting include the fact that “registrars are to discontinue the practice of requesting for confirmation of bank signature during the E-DMMS process. CMOs are to display awareness campaign banners of e-DMMS at their offices and Venue of Annual General Meetings (AGM). Capital market operators should also work with the Commission to share awareness information on their social media platforms.”
Speaking on e-Dividend Mandate Management System (e-DMMS) introduced to curb unclaimed dividends, Uduk said that a total of 2.82 million had enrolled into the platform at the end of third quarter 2019.
She said that registrars had been directed to discontinue the practice of requesting for confirmation of bank signature during the E-DMMS process to tackle unclaimed dividends.
Uduk said that capital market operators were to display awareness campaign banners of e-DMMS at their offices and venue of Annual General Meetings (AGM).
She stated that the Non-interest Finance Committee presented the importance of granting the PFAs the permission to invest a given percentage of a willing contributor’s Retirement Savings Accounts in Non-Interest capital market products.
Shareholders call for increased awareness
Some shareholders of quoted companies, who commended the current efforts, said the efforts may still not be realistic unless the market regulators increase and sustain awareness campaign to enlighten investors.
A shareholder group under the aegis of Progressive Shareholders Association of Nigeria (PSAN) called on SEC to reconcile all knotty issues surrounding to the programme.
The National Chairman, PSAN, Mr. Mr. Boniface Okezie, in a chat with New Telegraph, said that SEC had not put adequate measure in place before implementing the policy.
“What SEC need is to create more awareness as a large number of retail investors in rural area affected might not be aware about this initiative,” he added.
He called on SEC and the Nigerian Stock Exchange (NSE) to collaborate with market operators for a better structured public awareness campaign about multiple subscriptions.
Okezie said there was need for a better structured public awareness campaign to be jointly anchored by NSE, SEC and market operators for the education of shareholders and the protection of their interests, especially the small investors.
Also reacting, founder, Independent Shareholders Association of Nigeria (ISAN), Sir Sunny Nwosu, said the regulators needed to address the knotty issues responsible for the growth of unclaimed dividend especially the unbanked rural dwellers.
Nwosu said: “There is a lot of jobs to be done, many people in those days used shares as gifts to relatives and friends which included rural dwellers and up till now many of them have no bank accounts. All these ought to be taken into consideration. It is definitely going to be a problem getting the rural dwellers to key into the system. The regulators should do more on enlightenment.”
The National President, Constance Shareholders Association of Nigeria, Shehu Mikail, described the indefinite suspension as a welcome development and called on the shareholders to take the opportunity to regularise their holdings. He noted that the inability of the regulators to advance the awareness to rural areas instead of concentrating in the urban areas is casting damper to the initiative. He called on the regulators to take time and reach the grassroots.
If they don’t have the capacity, they collaborate with shareholder groups, media houses and banks to help in the awareness campaign through use of local languages,” he said.
In the light of the lessons learned from the efforts, there is a strong need to strengthen investor education/awareness function, especially for retail investors, to avail them adequate knowledge of the nation’s capital market.