Unclaimed dividend, SEC devises new plan
The country’s unclaimed dividend has reached an unprecedented figure of N90 billion and it appears no one is coming forward to claim it yet as the surplus keeps growing. But SEC has devised a new approach to address the problem. BUKKY OLAJIDE and ANTHONY OTARU report on the latest plan.
NIGERIA’S unclaimed dividend has risen by over 600 percent in the last 15 years. In 1999, it was about N2 billion, rose steadily to N8 billion in 2008, N41billion in 2011, N60 billion in 2013, and N80 billion at the end of 2014.
At the end of September 2015, the unclaimed dividend stands at N90 billion. This trend, according to industry observers, highlights not only the apathy of the Nigerian shareholders but also a regime of poor data management in the country.
Though some dividends sent to investors by posts get missing in transit, others do not reach the owners because certain investors fail to inform the companies holding their stocks or the market operators whenever their addresses change.
Hence, huge unclaimed dividends remain in the custody of registrars of Public Companies.
But the Securities and Exchange Commission (SEC) has recently directed all registrars to return unclaimed dividends, which have been in their custody for 15 months and above, to the paying companies with a promise of sanction against company that fails to comply.
The directive specifically compels registrars to return 90 percent of unclaimed dividends after 15 years to the quoted companies while the remaining 10 percent be retained with them.
The Companies and Allied Matters Act (CAMA) refers to “unclaimed dividends” as dividends not claimed within six months after a declaration, and are returned to the company, from where the investors can make claims up till, but not later than 12 years.
The genesis of the problem may be traced back to the 70s when Federal Government introduced indigenisation and the privatisation policies.
Some of the shareholders failed to inform the registrars of companies where they invested about their forwarding addresses, thereby making it difficult or even impossible for them to receive their dividend warrants.
There are also instances of the death of some shareholders and the inability of their next of kin to claim the dividends. Nigeria’s poor postal system also contributes to the growth of unclaimed dividends. And regulator appears to have no solution to the problem until recently when the agency introduced e-dividend. With the new method, an investor is expected to go to the bank and fill a form, which will contain certain information, so as to be able to collect their dividend electronically in their preferred bank.
The information required includes passport number, account number whether savings or current and the BVN. Central Securities Clearing System number will be required if the investor is already dematerialised.
Dematerialisation refers to the process whereby paper share certificates are replaced with electronic records of ownership. Once investors have handed in their certificates, they are sent to the relevant transfer secretary for validation. Once the authenticity of the certificate has been verified, the actual dematerialisation process begins. And the moment a share certificate is submitted for dematerialisation, it ceases to exist.
Dematerialised shares are safe from fraud, theft and loss. In addition, shares cannot be sold unless they have been dematerialised which may cause a delay in selling your shares.
The head, corporate communication of SEC, Naif Abdussalam, said the exercise was part of the commission’s implementation strategy for the 10-year capital market master plan
Any dividend not claimed after 12 years becomes status barred and will be forfeited by the shareholders in Nigeria, he said.
This section of CAMA, however, has been regarded as a major disincentive to investment in Nigeria since anyone who invests his hard earned money would rather prefer that dividend payment should not really expire but must be capable of being revalidated.
An investor believes that he or she must reap from his/her investment and this right should not be taken away from him under any guise.
Meanwhile, the order by SEC to banks and registrars of quoted companies to return all unclaimed dividends that have been in their custody for more than 15 months to the paying companies has once again reopened the debate on what to do with the growing surpluses.
The Director General of Association of Enterprise Risk Management Professionals, Olayinka Odutola, has advised that the unclaimed dividend can be channeled into financing housing development, especially low-cost housing, to bridge the current gap in the provision of housing in the country.
Alternatively, the government can invest in projects that have huge job-creating potential such as agriculture, or be used to finance budget deficit under agreed term, he said.
A chartered stockbroker, Sola Oni, welcomed SEC’s decision, saying the time has come for the registrars to wear thinking cap and device other sources of income if they must remain business.
According to Oni, one of the ways to solve the problem of unclaimed dividends is to compel the Commission to embark on e-dividend platform enlightenment campaigns.
The e-dividend platform, otherwise known as the ‘‘Electronic Dividend’’ refers to an online system for paying dividends to investors as soon as such companies declare profits meant for investors, rather than sending them by post. The dividends could be promptly wired to investor’s bank account.
Meanwhile, SEC recently launched a four-day enlightenment programme in Abuja to drive the e-dividend platform to the doorsteps of stakeholders.
Similarly, the Commission recently advised all shareholders and investors in the capital market to approach their banks or registrars to complete the E-dividend Mandate Form for immediate processing and upload to the e-Dividend Mandate Management System [e-DMMS].
Similarly, to eradicate the difficulties encountered by retail investors in claiming their dividends through their savings account, SEC, in collaboration with the Central Bank of Nigeria [CBN] and the Nigerian inter-Bank Settlement System [NIBSS] in July 2015 launched the e-payment platform.
At the launch of the e-dividend platform in Abuja, the Director-General Security and Exchange Commission, Mounir Gwarzo described the exercise as a game changer that will reduce infraction to the barest minimum.
Gwarzo said, “We have all agreed that this is the way to go, it is now left for the investors to go and register, we have agreed with all the stakeholders that for the first 90 days, the registration is going to be free but after the 90 days, anyone that wants to register will pay N100.
“Once the e-dividend is in place, the issue of a stale warrant will be a thing of the past, the issue of traveling from one place to another to deposit the warrant will be a thing of the past, the issue of change of address will also be eliminated.
“And once we are able to get through with the registration process, those dividends that are less than 12 years and once the registrars can certify that the people are the owners, they should be able to pay them, gradually, we should be able to address their problems of unclaimed dividends’’.
Gwarzo also listed the Direct Cash settlement as the direct-benefit investors would enjoy from the e-dividend registration any time their shares are sold as they would get the proceeds directly in their bank accounts.
The Head, Market Development department of SEC, Mr. Henry Rowlands, said that investors in the Nigerian Capital Market are entitled to their investments hence the need for the e-dividend portal and the enlightenment campaign being championed by the Commission. Rowland submitted that the e-dividend platform is expected to usher in a viable and reliable capital market that will strive on trust and openness.
Abdussalam, re-emphasized the determination of the Commission to implement the capital market master plan that would transform the market for the benefits of all stakeholders.
‘’We want to make sure that we take the message down to the grassroots, we want every Nigerian investor within this period of 90 days which is free to get registered because immediately after the 90 days, a fee of N100 will be charged, all you need to do is to walk into a bank or any of the Registrar’s office and you will be registered and once that is done, you start getting alert for your dividends’’, he noted.
A participant at the town hall meeting, Alhaji Muniru Alkali told The Guardian that the e-dividend platform being put in place by SEC was the best thing that has ever happened to the Nigerian Capital Market.
“For me I have now been told that I still stand the chance of getting paid for my N2 million worth of dividends which I have not collected for the past three years, in short, I am grateful to SEC, I am very happy and I use this opportunity to call on shareholders to join hands with SEC top move the Capital market forward.’’