Investors’ apathy undermines initiatives to reduce unclaimed dividend
NSE extends registration for e-dividend
The continued rise in the value of unclaimed dividends in the capital market from about N20 billion 2008 to N90 billion as at the first quarter of 2016, has become a source of worry for market.
Despite measures put in place by the Securities and Exchange Commission (SEC) to stem the rising figure and put an end to the cankerworm, returns on investment have continued to accumulate yearly without being claimed.
This is because investors have shown a high level of apathy to the initiatives so far introduced by the capital market regulators to reduce the high incidence of unclaimed dividend.
Indeed, the Commission, saddled with the primary responsibility of protecting investors has introduced several initiatives to ensure that investors are not denied their right of investing in the capital market.
For instance, the SEC had last year rolled out an e-dividend payment platform to address the rising incidence of unclaimed dividends, and enjoined all shareholders and investors in the Nigerian Capital market to complete the e-dividend mandate documents with their banks and Registrars.
E-dividend is an electronic dividend payment platform, which will enable an investor’s account to be credited after 24 hours that dividend is paid.
Recently, SEC also inaugurated the e- dividend champions for banks and registrars at its Lagos Zonal office.
Where there are issues on the registration, the champions would have the responsibility of forwarding all shareholders complaint on registration to Nigerian Interbank Settlement System (NIBSS) to give clarifications on the issues within three days.
The e-dividend champion would help ease shareholders’ difficulties during registration, as they would handle the operations of each bank on the registration.
The Commission initially told investors to approach the relevant banks and Registrars to process and upload their mandates to the e-Dividend Mandate Management System (e-DMMS) for free over the next 90 days, effective December 14, 2015, after which subsequent registration would attract N100.
The e-registration platform was launched as part of efforts by the Capital market regulatory authority to eradicate the difficulties encountered by retail investors in claiming their dividends through their savings account.
SEC undertook the initiative in collaboration with the Central Bank of Nigeria (CBN), and the Nigeria Inter-Bank Settlement System (NIBSS).
The Director General of SEC, Mounir Gwarzo, said at the formal unveiling of the e-mandate registration platform that it would address the lingering problem of unclaimed dividend in the market.
The platform, which is part of the 10-year capital market master plan, would also address the non-payment of dividends into customers’ savings account.
Gwarzo said: “The era of stale dividends and huge unclaimed dividends in the market will be a thing of the past with the launch of e-dividend payment platform. The Commission will conduct intensive training for bankers and registrars on the usage of the new portal.
“All registrars’ offices/accredited outlets shall be points of upload of completed e-Dividend Mandate forms by investors, who may in the alternative, approach their bankers to process their completed e-Dividend Mandate Form(s).”
On the modality for the use of the portal, the SEC said every registrar should validate the investor’s shareholder account number, name, signature and Clearing House Number (CHN).
“This will be followed with the upload of scanned copies of completed e-Dividend Mandate Form(s) on to the portal for immediate access by the investor’s nominated bank for the verification of his/her bank account details,” he added.
But these efforts seem to be hitting the brick wall as the apex regulator, and the one that broke the camel’s back was the recent pronouncement by the SEC that to transfer shareholders unclaimed dividend into capital market development fund after 12 years of declaration.
The proposed plans have continued to generated heated criticism from shareholders who argued that the decision is contrary to the Companies and Allied Matters Act (CAMA) specifications that dividends which remain unclaimed after fifteen months of being declared are supposed to have been returned to the company from which the beneficiary/investor may make a claim not later than 12 years afterwards.
Subsequently, such unclaimed dividend is considered statute-barred and thus forfeited by the shareholders.
They stated that sections 379 – 386 of CAMA, where dividends are returned to the company unclaimed, the company should send a list of the names of the persons entitled with notice of the next annual general meeting to the members.
After the expiration of three months notice, according to them, the company may invest the unclaimed dividend for its own benefit in an investment outside the company and no interest shall accrue on the dividends against the company.
Prescribing leeway to forestall issues of unclaimed dividend in the market,
The President, Constance Shareholders Association of Nigeria, Shehu Mallam Mikail said: “There are more to be done first SEC needs to have a joint meeting with all registered Shareholders’ Association and all Companies Registrar there could be a meaningful resolution that will definitely reduce the issue of the unclaimed dividend.
“Also all the stock brokers shall be involved whereby CSCS and NSE have to mandate all the brokers to submit all their customers KYC to all the Registrars for a proper identification.
“A meeting with shareholders association can quickly reduce all these issues because we are closer to the people both in rural, urban areas and likewise foreign investors in the area of information dissemination and registrars should put list of unclaimed dividend on their website and the companies.”
The Chairman, Ibadan Zone Shareholders Association, Sola Abodunrin, who admitted that SEC has done a lot to curb issues of unclaimed dividend in the market, however, noted that the commission should educate the banks and the registrars more on their e dividend policy
He pointed out that the e dividend exercise is a welcome development but added that a lot has not been done in the areas of enlightenment since the introduction of the exercise.
“The effort is good but SEC has to educate the banks and the registrars to cooperate with them so that we can achieve maximum returns.
“Not much has been done since the e dividend policy was put in place and there is an urgent need for SEC to do more enlightenment so that the retail investors who have the majority of unclaimed dividends will understand the policy.
“The target date set will work but this date may have to be extended and SEC should continue to monitor the responses of shareholders to the policy so as determine the next line of action,” he added.
The Managing Director of Crane Securities Limited, Mike Ezeh admitted that the issue of unclaimed dividend has been an issue of great concern to market stakeholders over the years.
He, however, explained that the if the current approach by the regulators where by registrars are mandated to stop issuance of dividend warrant to investors by the end of June 31st 2017 is followed head on, it would go a long way to address the problem of unclaimed dividend in the market.
“With this, it is believed that any investor that has account in the market will have in the bank and those who have savings account can also use it. It would restore sanity in the market,” he said.
Regulator issues new directive
The SEC boss had issued directive mandating registrars operating in the Nigerian capital market to end issuance of dividend warrant to investors by June 31, 2017.
This, according to the him, would compel retail investors to embrace the e-dividend registration exercise, increase the low level of patronage and stem the rising unclaimed dividend figure in the capital market which is currently put at N80 billion.
He explained that the CMC has agreed that all banks should appoint an e dividend champion that would interface with retail investors to ensure a seamless registration.
Gwarzo added that the SEC has also extended the write off period for free registration process from September 14th to December 31, 2017 to enable more investors to partake on the exercise.