As the controversy over unclaimed dividends in the nation’s capital market continues unabated, Capital Market Operators and other stakeholders in the financial industry said negligence and complicity of registrars are the bane of the rising figures.
The Point reports that despite the e-dividend registration campaign embarked upon by the Securities and Exchange Commission for nearly two years, the number of unclaimed dividends in the country has steadily been on the increase.
However, data from the SEC’s statistical bulletin show that the number rose from N84.3 billion in December 2012 to N129 billion in December 2017 while the free registration began in 2015 and was extended to April 2018.
Dividends are return on investment paid to shareholders out of profits made by the company. They are paid periodically upon recommendation by the board of directors.
Unclaimed dividends are those that have not been claimed by investors after six months. Under current rules, all dividend payments are to be made through electronic means (e-dividend payment)
Registrar proffers solution
Reacting to the development, Managing Director/ Chief Executive, First Registrars Nigeria Limited, Mr. Bayo Olugbemi, said the solutions and strategies are being developed to ensure that every shareholder receives his or her dividends as at when due, noting that the major factors accounting for the astronomical rise in the past was the introduction of the Central Bank of Nigeria’s Unified Bank Account Number scheme and investors’ rising apathy towards the collection of dividends with negligible or insignificant amounts.
Olugbemi however explained that to correct this anomaly, electronic e-dividend was introduced to forestall the rising incidence of unclaimed dividend at the Nigerian Capital Market.
Shareholders indict Registrars
National President, Progressive Shareholders Association of Nigeria, Mr. Boniface Okezie, said Registrars are expected to ensure that the amount of shares outstanding in the market matches the amount of shares authorised by the company.
According him, apart from the lackadaisical behaviour of some registrars, unclaimed dividends also arise from other reasons which include shareholders who died without information of next of kin, so their dividends cannot be claimed by anybody, multiple applications by applicants during the investment process thereby making it impossible for them to have accounts to pay in different dividend warrants.
Other reasons he noted are banks not accepting dividend warrants into savings accounts before the e-dividend scheme.
“There were also deliberate actions by companies to deny investors their benefits through various schemes by some registrars and companies who lack the funds to back up their dividend declarations,” he said.
President, Nigeria Shareholder’s Solidarity Association, Mr. Bello Olowonikoko, said the e-dividend helps to reduce a lot of unclaimed dividends, and that is the one advantage.
“Remember, some shareholders have been shouting in the past that they don’t get their dividends, one of the reasons is that when they change their place of residence without notifying their registrar, they cannot get the dividend warrant because the registrar would have posted it to their former address,” he said.
“But with the e- dividend mandate, the moment the e-mandate form is filled and signed by the bank after verification and returned to the registrar for implementation, once dividend is declared by a company, the registrar will just post the dividend accruing to a shareholder directly into his bank account.”
The Managing Director, Lambeth Trust & Investment Company Limited, Mr David Adonri, explained that unclaimed dividends were increasing every year due to several factors which included shareholders’ multiple subscriptions in fictitious names and whose signatures they couldn’t 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.
According to him, unclaimed dividends were statute barred and forfeited to the companies in which case recovery by the affected shareholders might not be possible in the absence of means of identification.
To correct the irregularities, the Securities and Exchange Commission, the Nigerian Stock Exchange, the Central Securities Clearing System, Registrars, the Tax authorities and the Nigeria Interbank Settlement System moved in an unprecedented manner to launch the electronic dividend (e-dividend) system.
An economics expert, and policy analyst, Mr. Nnamdi Onwuka, said the e-dividend system ensures that accounts of the investors in banks are credited directly within 24 hours after the declaration of dividends by the companies. But how many of such investors are aware and how many have given the required mandates and information for the system to have maximum impact, is a question to be answered.
“This is where the stakeholders have failed. An important new system that has the potential to improve the dividend payment system tremendously and have very positive impact on restoring investors’ confidence has not been publicised enough, and in a sustained outreach programme that should be ongoing for at least four years,” he said.
But acting Director General of the SEC, Mary Uduk, while speaking at an Enlightenment programme on e-Dividend and contemporary issues in the Nigerian Capital Market over the weekend, said the essence of the e-dividend mandate management system is to eradicate the incidence of unclaimed dividend.
Uduk said all Nigerians should take advantage of the on-going e-dividend registration in a bid to reduce the unclaimed dividends profile as well as increase liquidity in the capital market and the economy.
According to her, “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.”
She stated that the e–dividend regime bypasses these limitations by ensuring that dividends which do not exceed 12 years of issue are credited directly to an investors account after declaration by the paying company and within a stipulated payment period through simple interbank transfer.
The SEC boss disclosed that the Commission was implementing various initiatives which are aimed at making the capital market deeper, vibrant and more effective.
“The forbearance window for shareholders with multiple subscriptions has been extended by another year from the December 31, 2018 deadline previously communicated. Consequently, we enjoin those who have not come forward for the regularization of shares purchased with multiple identities, to do so.
“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 shares and the fee structure,” she said.
