Mary Uduk is the Director-General, Securities and Exchange Commission. In this interview with NGOZI AMUCHE, she says though SEC had been notified of the planned merger between Access Bank and Diamond Bank, no formal application has been made to that effect. She also discloses that the impact of the increase in interest rate in advanced countries, especially in the United States, has impacted negatively on the performance of the Nigerian stock market. Excerpts.
The Stock market has not been performing well in recent times, why is it so?
Yes, the capital market has been down for quite some time, this is because a large percentage of those who do business in our market are foreign investors, and as at the third quarter of 2018, the capital outflow stood at N513billion as against N477.7billion incoming. We can see that the increase in interest rate in advanced countries, not just in the US, has impacted on capital outflow, thereby leading to reduced performance in our markets. I want to also say that the interest rate increase in advanced economies does not affect only Nigeria but also affects other emerging markets in the world.
Let’s talk about the value of unclaimed dividends. How much has been paid out this year?
The law provides that 15 months after dividends have been declared, unclaimed ones should be returned to the companies. As at September 2018, the value of unclaimed dividends stood at about N100billion, and those that were returned this year stood at about N10billion.
We have received formal notification informing us about their proposed merger but we have not yet received any formal application from them. But some people are worried about the fate of the shareholders. The fate of the merger is actually to be determined by the shareholders
What steps is the SEC taking to reduce this unclaimed dividends profile?
One of the efforts we are making is the e-dividend initiative. The e-dividend mandate management system allows investors’ accounts to be credited immediately they are mandated with the registrars and the relevant banks. Within 24 hours, your dividend hits your account and even the backlog that was not paid for years also hits the account.
You also must have heard of our multiple subscription initiative, which we have extended for another one year because we want investors that subscribed to shares in multiple names to regularise their accounts. Many of them do not even remember the names with which they bought the shares and this increases the quantum of unclaimed dividends in the market. That is why we are engaging the receiving agents to check into their records and see how this can be reduced and the owners can claim their dividends.
I urge more Nigerians to take advantage of the ongoing e-dividend registration to reduce the unclaimed dividends profile as well as increase liquidity in the capital market and the economy.
Apart from that, the Commission is currently leading the entire capital market industry in an effort to migrate all shareholders to an e–Dividend regime.
The essence of the e-Dividend Mandate Management System is to eradicate or reduce, to the barest minimum, the incidence of unclaimed dividend. Unclaimed dividend is an undesirable feature of the Nigerian capital market, which denies investors/shareholders the gains of participating in the capital market. It denies the economy access to the huge amount of money, which should have accrued to shareholders and would have gone into circulation to oil the wheels of the economy.
It is a consequence of the bottlenecks, which are inherent in the erstwhile paper dividend warrant regime such as postal system inefficiency, change in investors’ addresses, poor fidelity and human fallibility in dividend payment processes, amongst others.
How does the e-Dividend regime help here?
The e–Dividend regime bypasses these limitations by ensuring that dividends, which do not exceed 12 years of issue, are credited directly to an investor’s account after declaration by the paying company and within a stipulated payment period through simple interbank transfer.
Multiple share subscription deadline is now on till December 2019. Why do you think Nigerians are not coming out to regularise their accounts?
I would not say they are hesitant because it is in their interest to come forward and consolidate their holdings. We are aware that during the banking and insurance sector consolidation of 2005-2007, a lot of investors completed more than one application form for particular companies and they did that by juggling their names and sometimes using fictitious names. What they fail to realise is that the capital market has a way of checkmating such violations. To be able to claim these shares, they have to be able to identify themselves. For those juggled and fictitious names, they do not have identities that are traceable to these individuals and so, they were not able to claim their shares. Therefore, they cannot trade and are also unable to claim dividends and other benefits that may accrue to them. We also realised that a lot of the unclaimed dividend is as a result of this issue because investors cannot claim their shares and are unable to claim their dividends.
A lot of these people bought shares in companies that were doing well and wanted to increase their holdings, hence the use of multiple and fictitious names. What we have done now is to go back to the receiving agents to go through their records, particularly those paid for and let them to be registered. Investors are also advised to contact their registrars. I want to stress that there is absolutely no penalty attached to Multiple Accounts Regularisation. Investors are enjoined to visit their stockbrokers, registrars, bankers or any other capital market operator through whom the shares were purchased on guidance for the steps to take to regularise them. We just want it for the sake of the growth of the market and for their sake. This will enable them to take ownership of their shares and also reap the benefits of buying those shares. We are not penalising them, we just want the market to grow and boost investor’s confidence.
What is the update on Access Bank/Diamond Bank Merger and what is the fate of shareholders?
We have received formal notification informing us about their proposed merger but we have not yet received any formal application from them. But some people are worried about the fate of the shareholders. The fate of the merger is actually to be determined by the shareholders; they are the ones to either support it or disallow it depending on the proposals before them.
What other initiatives should stakeholders look forward to?
We are implementing a number of Capital Market Masterplan Initiatives, which are aimed at making our market deeper, vibrant and more effective. As you are aware, the Commission launched its 10-year CMMP in 2014. The Master Plan is the outcome of consultations and work with the entire market community to identify challenges and opportunities to help catalyse our market to a world-class capital market. The implementation of the 10-year master plan will transform the Nigerian market, facilitate the diversification of our economy, encourage savings and create wealth. This will, no doubt, grow investor confidence, improve the breadth and depth of the market in terms of product offerings, engender market integrity, and contribute to the country’s economic growth.
We have also developed a two-pronged approach to addressing the intractable challenges associated with transmission of shares related to the estate of deceased investors. The first step would involve engagement with and enlightenment of the Probate Registry with a view to providing solutions to the cumbersome process of transmitting shares. Secondly, Rules would be developed around the time frame for transmission of shares and the fee structure.
The Commission is working with other major stakeholders in setting up a committee that will look into and proffer solutions to problems around identity management in the Nigerian capital market. So, for instance, to boost the e-dividend mandate and Direct Cash Settlement initiatives, we are engaging the Nigeria Inter-Bank Settlement System on behalf of the capital market community to facilitate identity validation and account validation in an effort to enhance market processes.
The electronic distribution of annual accounts by public companies to shareholders continues to record tremendous success, as shareholders have largely accepted the new initiative and are willingly providing their email addresses. Alongside other stakeholders, we have continued sensitisation to further enlighten shareholders on the benefits of the initiative.
