SEC adopts measure to tackle multiple subscriptions

By Helen Oji   |   30 June 2017   |   4:25 am  

Securities and Exchange Commission

Equities regulator, the Securities and Exchange Commission (SEC) has announced that capital market investors with multiple subscriptions for the same public offer may forfeit their investment.

Considering the negative effect of the act to the market, the Commission had constituted a market committee, aimed at reaching a collective decision on how the shares and dividends accrued to such investors through multiple applications should be treated.

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.

According to a statement by the Commission, “The SEC at its last Capital Market Committee meeting (CMC) has approved the report of a market wide committee on formulating a uniform position for the treatment of multiple subscriptions to public offers.

“The Nigerian Capital Market cannot and should not be seen to reward the wrongful acts/illegality of the perpetrators. This was with a view to ensuring the global sustainability of the Nigerian capital market’s integrity and reputation.

“The Circular observed that one major source of unclaimed dividend remains the use of non-existent identity to make multiple subscriptions to public offers. The Committee unanimously agreed that the action of submitting multiple applications for the same Public Offer was, in every consideration, illegal. The wrongful acts were carried out, by the perpetrators, under false pretense.”

However, SEC explained that forbearance would be granted to investors whose identities can be verified, while urging concerned investors to contact their stockbrokers or registrars with proof of identity to consolidate their accounts on or before September 1, 2017.

SEC added that for failure to comply with the directive, all securities and accruing dividends of the investor with regard to securities which have not been claimed and cannot be verified, such securities as well as the accruing unclaimed dividend shall be transferred to the Nigerian Capital Market Development Fund,.

The Commission recently said it was set to launch a market development fund this year, to lead efforts in galvanising capital market activities in the country.

The Director General, SEC, Mounir Gwarzo, disclosed this at the first post-Capital Market Committee press conference for the year 2017.
He said the fund, which is not a SEC fund, would be rolled out in the second Capital Market Committee for the year.

“The report describes two groups of investors involved in multiple subscriptions. The first group (Group A) of investors actually existed but joggled their names in different forms to enable them purchase more than the permitted units of shares on offer.

“That Group ‘A’ above should be considered for a level of forbearance by giving them a grace period up to 1st September, 2017 within which to come forward and expressly prove their individual identities, subject to highest KYC criteria, to be defined by the SEC. Those owners, whose identities are established, would then be allowed to consolidate their accounts.

“After the expiration of the timeframe, unclaimed dividends, traceable to this category if investors that have not been identified and consolidated, along with their securities shall be transferred to the Nigerian Capital Market Development Fund to be managed transparently in a separate basket under clear guidelines.

“That category ‘B’ refers to those securities with non-existent owners, the unclaimed dividends and related securities of this category cannot be ascribed to anyone. Therefore, both the unclaimed dividends and securities shall be transferred to the Nigerian Capital Market Development Fund.

That, going forward, anybody who engages in the wrongful act of Multiple Subscriptions for the same Public Offer, shall be prosecuted. The Market shall put in place adequate processes, leveraging on technology, towards detecting and identifying such cases of Multiple Subscriptions, in the future;

“Consequently, all investor with cases of multiple subscriptions under Group (A) that are considered for forbearance should by this circular approach stockbrokers or registrars,” it added.



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