…as stakeholders accuse coys of diverting funds
Unclaimed dividends by shareholders in the Nigerian stock market rose to over N120 billion as at the close of business in 2016, from about N90 billion in 2015, investigations by our correspondent have revealed.
The new figure, obtained from an impeccable source at the Securities and Exchange Commission, and which had accumulated from 1999, reflects a N30 billion increment in 2016 alone.
This is in spite of the introduction of the electronic dividend payment system in the Nigerian capital market by regulators to fast track the process and assist investors with claims.
According to findings by our correspondent, the e-dividend system has had little or no impact, partly because subscription to the electronic dividend system still hovers in the region of about 40 per cent of the total investors in the capital market.
According to the SEC source, the top five companies on the list of firms with unclaimed dividends are Nigerian Breweries Plc, UACN Property Development Company, former Bank PHB, Diamond Bank Plc and the defunct Intercontinental Bank Plc. While NB had a total unclaimed dividends of about N6 billion, UPDC, PHB, IB and Diamond Bank had about N5 billion, N5 billion, N4 billion and N3.4 billion, respectively, as at the middle of 2016.
The Companies and Allied Matters Act defines ‘unclaimed dividends’ as returns on investments that were not claimed by investors within three months after declaration at the annual general meetings, and are returned to the company, from where investors can claim such up till, but not later than, 12 years.
A check through the records revealed that the apex regulator of the market introduced the electronic dividend paying system on June 16, 2008, to reduce incidences of unclaimed dividends.
Nine years on, deadlines had been fixed six times by SEC for all shareholders in publicly quoted companies to migrate to the e-dividend platform. But the deadlines had always been shifted.
From a December 31, 2008 date, the deadline was shifted to September 2011, October 2012, June 3, 2013, and then, to December 2014. Recently, the apex regulator, again, directed shareholders of public quoted companies to forward their bank account details to their registrars and stockbrokers by June 30, 2017, to ensure effective implementation of the scheme.
Some stakeholders and insiders in the capital market have, however, revealed a dusturbing trend, which they said, included the diversion of unclaimed dividends as operational costs by some of the companies or for personal use of some members of the boards of the firms.
BLAME INVESTORS, REGISTRARS FOR BACKLOG – SHAREHOLDERS
Analysts have, however, listed several factors as responsible for the nonimplementation of the e-dividend system in the market. To some stakeholders, shareholders of quoted companies are largely responsible for the frequent extension of the deadlines for the exercise, as they oftentimes refuse to forward their account details to either their registrars or stockbrokers.
These shareholders are said to cut across the low and middle-class categories. Chairman, Ibadan zone Shareholders Association of Nigeria, Mr. Eric Akinduro, said, “I have friends and clients, who are lawyers, accountants and farmers, who have been investing in the market for over 20 years and are used to the conventional way of collecting their dividends.
“Since the e-dividend was introduced, they have refused to subscribe to it, claiming that the regulators need to guarantee them that their monies would not be missing in transit and also assure them that the registrars have the required infrastructure to operate such electronic transactions.”
Indeed, many investors in this category are afraid of situations where their monies would be ‘missing in transit’. So to them, migrating to electronic platform would be a risky venture.
The threat by SEC that shareholders, who refuse to embrace e-dividend, will forfeit their future dividends has also contributed to the non-compliance, according to findings. Former National Coordinator, Independent Shareholders Association of Nigeria, Mr. Sunny Nwosu, warned that any quoted firm that adopted SEC’s directive on loss of dividends for non-compliance to e-dividend would pay seriously for such action, noting that his group was ready to challenge SEC and its policies in the court of law.
Basing his arguments on Section 385 of the CAMA, which says any dividend declared is valid for 12 years, Nwosu said that there was no law in Nigeria that said that shareholders must subscribe to e-dividend.
“CAMA currently stipulates that once dividend is declared and ratified, the dividend is payable to the shareholder over 12 years, after which the money would be ploughed back into the account of the company that declared the dividend.
Subscription to e-dividend should be optional and not mandatory, because SEC has no authority over dividend,” he argued. Some investors have also stated that the lack of capacity on the part of the registrars contributes to the growing problem of e-dividend.
They alleged that their registrars still sent dividend warrants to them, instead of remitting to their accounts, even after the account details had been sent to them, a problem they attributed to lack of infrastructure on the part of the registrars.
“SEC has been overwhelmed with complaints by investors, particularly against registrars, over their failure to post the dividend electronically. I have done my bit by submitting my details to my stockbroker, and I expect the operators to do their bit by not sending warrants to me again,” another investor, Mrs. Felicia Omole, told The Point.
However, a top source at the Institute of Capital Market Registrars, who asked not to be named, defended the registrars. He said some investors failed to provide correct account details in the forms submitted, thus making it impossible for their accounts to be credited. But some investment analysts have insisted that some shareholders do not get their dividends electronically, because the registrars are often overwhelmed by the deluge of work they have to do.
ENDING THE TREND – Experts
Meanwhile, some market operators and analysts have predicted that the unclaimed dividends could be worth over N150 billion by the end of 2017, if certain measures are not taken.
Some of these measures, according to them, include full dematerialisation of the market and the urgent passage of the bill recommending the setting up of an Unclaimed Dividend Trust Fund by the National Assembly, among others. Managing Director, Skynet Investments, Dr. Akinwole Oni, explained that full dematerialisation would enable stockbrokers and registrars to have access to correct information of each and every investor and dividends would be paid directly to their bank accounts.
He said, “If we can now achieve full compliments of our database with customers’ Know Your Customers requirements, plus their bank accounts and also achieve full dematerialisation, then going forward, payment of dividend will become automatic and will be full and complete.
“Even, if we achieve 95 per cent payment of dividends going out by virtue of the usage of e-dividend, then the remaining thing we will need to pay attention to will be the legacy. And that means, with time, we are going to deplete it. And of course, SEC has issued a circular to the registrars to remit all old dividends back to the issuers, which are the companies that issued the dividends.”
On the other hand, another stockbroker, Mr. Femi Soyinka, explained that the UDTF would solve the problems of unclaimed dividends by looking for the owners. He added that the initiative was designed to drastically reduce or completely eliminate the incidence of unclaimed dividends.
If passed into law, he said the bill was expected to remove The Point of domicile for unclaimed dividends from their originating companies to UDTF. According to him, it will also remove the incentive, which feeds the collusion between certain players in the market to frustrate shareholders’ access to dividend accumulations on their investments.
He added, “The bill will bring sanity into the issue of unclaimed dividends in the nation’s stock market. The market needs a law guiding how the issue of unclaimed dividends is treated.
Sections of CAMA, relaing to the time frame for unclaimed dividends to be reverted to originating companies, need to be amended and investors need to be persuaded to embrace the e-dividend system to ensure payment of their dividend within 24 hours after they are declared.
“Investors should be able to claim their dividends at any given time. Once dividends are declared, they remain debts owed investors and the commission is set to do everything it can to protect investors’ interest.”
WE’RE MAKING PROGRESS – SEC
To ensure that all investors benefit from the e-dividend initiative, SEC has said that it is set to pay the cost of enrolment. Arising from this exercise, SEC’s spokesperson, Mr. Naif Abdulsalam, disclosed that over N30 billion, which was hitherto unclaimed, had so far been credited to respective bank accounts of investors.
Abdulsalaam said, “The advantage of the e-dividend is not only to enable investors collect subsequent dividends electronically, but it also allows all accrued dividends to be credited to investors’ bank accounts.
SEC is committed to reducing, to the barest minimum, hurdles associated with electronic dividend registration in the market and that is the reason SEC inaugurated the e-dividend champions for banks and registrars at its Lagos zonal office.
“The e-dividend champion will help ease shareholders’ difficulties during registration, as they will handle the operations of each bank on the registration. Where there are issues on the registration, the champions will have the responsibility of forwarding all shareholders’ complaints on registration to the Nigerian Interbank Settlement System, to give clarifications on the issues within three days.”
