Mandatory DCS to reduce illegal sale of shares, others

To checkmate cases of infractions in the nation’s capital market, the Securities and Exchange Commission (SEC) has announced that Direct Cash Settlement (DCS) policy would be made mandatory for all market investors’ effective Sept. 1, 2017.

Besides, the commission also disclosed that a total of 2.2 million investors have registered for the e-dividend payment platform.Recall that The Guardian, in February, 2017, reported that industry regulators were struggling to restore investors’ confidence in the capital market, following what stakeholders described as poor handling of infractions and enforcement of discipline among operators.

The development came as a stock broking firm, Partnership Securities Limited (PSL), and its sister companies – Partnership Investment Company Plc; Life Care Partners Limited; and SBDC Microfinance Bank Limited, are embroiled in alleged N10 billion scandal, based on official estimates, relating to diversion and misappropriation of funds.

The Director-General of SEC,  Mounir  Gwarzo, while addressing Journalists at the 2017 first post Capital Market Committee (CMC) in Lagos yesterday, explained that full adoption of DCS policy would reduce illegal sale of shares, enhance transparency, boost investors’ confidence and improve trading velocity in the market.

DCS exercise facilitates the immediate crediting of an investor’s bank account with the net proceeds of the stock market transaction through the Central Securities Clearing System (CSCS). The policy states that when an investor offers some shares for sale, the proceeds from the sale (dividend) would immediately be transferred directly into the investors’ bank account.

“We introduced the DCS initially last year, we made it voluntary but when we saw some of the recent events in the market, the entire CMC have decided to make it compulsory for everybody to be inside the net.

“We have agreed that by Sept 1 DCS will be mandatory for every investor, meaning the every investor in the market will key into DCS unless if the investor decides to opt out at the end of the day.”

Furthermore, the director-general said that June 30, 2017 deadline for non-issuance of dividend warrants would not be extended, noting that the commission would continue to underwrite the cost of the e-dividend registration for investors till June 30.

According to him, the e-dividend form could be obtained and properly filled at various bank branches, offices of registrars and stock broking firms operational in the market.

He added that the major aim of the e-dividend payment system was to curb the rising unclaimed dividends in the market, noting that the unclaimed dividend figure was reducing due to the e-Dividend exercise. Gwarzo also unfolded the SEC’s plan to launch the Nigerian Capital Market Development Fund  (NCDMF) in the next CMC.

The fund, whish is initiated by the SEC with a seed fund of N5 billion, according to him, would not be managed by the commission but other operators for the benefit and development of the market.

“Investors who joggled their names for the purpose of multiple subscription would be given a forbearance period of six months regularise their accounts and lay claims to both their shares and accruing dividends. Affected investors would claim their shares and accrued dividends subject to establishment of their identity and a verification process by the SEC.”

He explained that such shares and accruing dividends would be transferred to the NCDMF if affected investors failed to regularise such accounts, nothing that shares and accruing dividends of non-existent shareholders would be forfeited and transferred to the NCDMF.

He warned that any person who engages in such act should be prosecuted. Also speaking, the General Manager operations, CSCS, Joe Mekiluwa said disclosed that the capital market has achieved 100 per cent dematerialization of share certificates.

“As many that have CSCS accoubt, their shares are now in electronic form in CSCS database but domiciled with registrars. They are expected to approve stock broking firms of their choice for trading to commence on the shares. CSCS cannot pick a stock broking firm for any investor. Investors will choose stockbroking firms that would trade on these shares.”

He explained that that the shares of Med-View Airline and Jaiz Bank that were listed recently on the exchange had been fully dematerialised, nothing that it has become mandatory that companies must be fully dematerialised at the point of listing.