Stakeholders urge SEC to fast track modalities for share certificate dematerialisation
Dematerialisation refers to the conversion of share certificates (physical paper-form/certificates or documents of title representing ownership of securities) to an electronic form, which is domiciled directly with the Central Securities Clearing system (CSCS). Here, actual stock certificates are slowly being removed and retired from circulation in exchange for electronic recording.
Specifically, the Group Managing Director of GTI , Abubakar Lawal explained that full dematerialization would help track all shares in the issue to companies.
He described the process as ‘global best practice, adding that full implementation would accelerate market growth and help eradication the risk of loss of share certificate either by misplacement, theft and forging leading to loss of Investment.
“It is a global practice and it is a process that would lead to the next phase of capital market dream realization. Imagine the practice of capital market pre CSCS and where we are now. It should be embraced immediately”, he said.
The Managing Director of First Registrars, Bayo Olugbemi explained that full dematerialization would create a more transparent market.
“With full dematerialization, once dividend is paid it would go directly to the person’s account. It would address the problems of shareholders because it would encourage them to open an account for dividend.”
The Nigerian Capital Market, has till date, operated a system whereby share certificates are issued to investors as evidence of their investment in companies.
The system of issuing share certificates has posed a myriad of problems such as delays in issuance and dispatch of certificates, delays in verification of share certificates, loss, theft and forgeries of certificates.
But the Director-General of the SEC Mounir Gwarzo, recently announced that the final blueprint for dematerialization exercise would be ready by July.
Gwarzo, while fielding questions to Journalists during the Second Quarter post Capital Market committee (CMC) press briefing held in Lagos recently, said that the commission would release the final blueprint of the dematerialization for effective implementation at the second quarter CMC meeting.
“There is already a committee set up for that and where we are now, we are thinking about implementation ad now we have decided to set up committee that will drive implementation and all technical committee will look at it and suggest ways it will be done. The membership of the committee comprises SEC, NSE, and registrars, CSCS. The technical committee has not started work but by the next CMC we should be able to get the report ready”
The Director-General said that the blueprint would address the blueprint would address legacy issues that had affected dematerialization exercise.
“The CMC dematerialization committee submitted extensive report, we are now talking of implementation and we have set up a technical committee to handle it,” Gwarzo said.
He said that the report of the technical committee comprising the Nigerian Stock Exchange, registrars, SEC and the Central Securities Clearing System (CSCS), would be out by the next CMC meeting, adding that the major aim of the technical committee was to drive dematerialization implementation exercise.
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