The effort of Nigeria’s Securities and Exchange Commission (SEC) to either eradicate or reduce to the barest minimum the incidence of unclaimed dividend is being stifled by interests of some share registration companies.
Till date, unclaimed dividend remains one of the undesirable features of the Nigerian capital market as it denies investors/shareholders the gain of participating in the capital market.
SEC makes effort to eradicate unclaimed dividends
The electronic-Dividend Mandate Management System is one of such initiatives by SEC to eradicate or reduce unclaimed dividend because the e-dividend payment system allows investors’ accounts to be credited immediately they are mandated with the registrars and the relevant banks.
Unclaimed dividend still increasing
The value of unclaimed dividends rose from N5.1 billion to N103.1 billion between 2002 and November 2016, compared with the value of N2.09 billion in 1999.
As at September 2018, unclaimed dividends remained high at N100 billion, and rose to N126.03 billion as at March 2019 despite the mechanisms put in place by the SEC to address the issue of the rising value of unclaimed dividends.
E-dividend system and how it should work
All registrars’ offices/accredited outlets are points of upload of completed e-Dividend Mandate forms by investors who may alternatively approach their banker to process their completed e-Dividend Mandate Form(s).
Every registrar is expected to validate an investor’s Shareholder Account Number, Name, Signature and Clearing House Number (CHN). This is followed with upload of scanned copy of completed e-Dividend Mandate Form(s) on to the portal for immediate access by the investor’s nominated bank for the verification of his/her bank account details.
Registrars are to exercise caution when validating names generated by the system for the Clearing House Number, Shareholder Account Number and Bank Account Number against the physical form to ensure there is a reasonable level of congruence before the document is accepted and saved on the portal.
Investors are to be educated to complete separate forms for each shareholder account number, as upload of e-Dividend Mandate Forms is to be on the basis of individual shareholder number and company of investment indicated by the investor on the physical e-Dividend Mandate Form.
The receiving bank may reject the mandate uploaded by presenting registrars if the signature on the mandate does not tally with the specimen signature of the account holder in the bank.
To mitigate errors in the treatment of e-Dividend Mandate Forms, registrars are to institute a marker-checker system that enables the verification and upload of e-Dividend Mandate Form(s) by a registrar uploader subject to confirmation and approval by a registrar checker.
Where banks upload e-Dividend Mandates to registrars for investor detail validation, such mandates must be confirmed by the receiving registrar authoriser within 72 hours (three days) of transmission by the presenting bank authoriser.
Shareholders’ experience
Jide, a shareholder who owns stocks in MTN Nigeria and Dangote Cement for which United Securities are their registrars, shared details of his frustrating experience trying to get electronically mandated for dividends he is due by the registrar and the back and forth e-mail messages between his stockbrokers and United Securities Registrar.
The shareholder filled his e-Dividend Mandate Forms in early August this year (2019), which was stamped by his bank (GTBank) and uploaded to the NIBBS portal. The forms were then taken to his stockbrokers who scanned them and sent to Central Securities Clearing System (CSCS) and the registrar.
However, the registrar (United Securities) demanded a ‘so-called’ signature specimen form. The shareholder returned to his stockbroker and filled the form in mid-August which were duly scanned and passed on to the registrar.
Two months later (October) after numerous back and forth between the registrar and his stockbrokers who were trying to confirm the status of his e-dividends, the registrar responded to a mail saying: “We are pleased to inform you that your mandate has been processed and confirmed on the NIBSS portal by your bank; however, we were unable to process your e-mandate request with us because of the following reason: ‘No signature specimen’.”
This was two months after such specimen had been submitted to the registrar. The stockbroking firm then proceeded to send hard copies of the mandate form and specimen to the registrar’s office for processing, but there has been nothing done by the registrar, United Securities, till today, according to emails seen by BusinessDay.
“It makes a mockery of the entire capital markets that registrars seem to be holding the system to ransom and nothing is being done by regulators to stop this scam. Why can’t dividends be paid into the brokerage accounts of stock market investors, instead of the current sham process of filling paperwork and waiting for months for registrars while they sit on your money and pretend they are working?” said Jide.
“The Nigerian stock market is largely a dividends play. That is what gets investors excited to invest in the market. You make it difficult for investors to get their dividends, you then wonder why they are shunning the stock market and buying Treasury Bills where they get their interest instantly, and this nonsense does not happen,” he said.
Another shareholder, Berthram, said he has done his e-dividend mandated for his shares in Union Bank and UBA and has started receiving dividends in his bank account, though it took over one month after he had completed the whole process.
“I just did that of Access Bank,” he said on phone.
A banker’s experience
A customer service staff of a bank told BusinessDay that most times, the only challenge they face has to do with portal downtime.
“But as soon as we upload the e-Dividend Mandate, it leaves us and goes to the registrar for them to authorise,” the banker said.
The registrars and their roles
Some of the share registration companies in Nigeria are Africa Prudential Registrars plc, APEL Registrars, CardinalStone Registrars, Centurion Registrars Limited, DataMax Registrars, EDC Registrars, First Registrars and Investor Services Limited, Flour Mills Registrars, and Citadel (GTL Registrars Limited).
Others are Sterling Registrars Limited, Unity Registrars Limited, Veritas Registrars Limited, ALL Crown Registrars Limited, GTB Registrars, AXA, Lighthouse Registrars, Mainstreet Registrars, Meristem Registrars, United Securities, and PAC Registrars.
Each of these registrars of shares keep up-to-date record of all stocks investors bought in any company, which include names of individual shareholders, their shareholdings, their addresses, signatures, amongst other salient information. Among their numerous functions, registrars also transfer shares on behalf of a deceased holder.
SEC extends e-dividend mandate till December 31, 2019
Because the e-dividend initiative remains critical to the elimination of the phenomenon of unclaimed dividend, the SEC management encourages all shareholders who are yet to do so to get mandated on the e-Dividend Mandate Management System (e-DMMS) platform before December 31, 2019.
SEC said it recently conducted a strategic assessment of the implementation of the e-dividend initiative across the country and reviewed feedback/observations received from stakeholders and the general public.
The assessment revealed that while remarkable progress has been recorded in concerted efforts through robust enlightenment campaigns to mobilise more shareholders to get mandated on the e-DMMS platform, there remain few pertinent issues that need to be resolved as a precursor to the total discontinuance of the issuance of dividend warrants by registrars.
Consequent upon the foregoing, the SEC management extended the deadline for the discontinuance of the issuance of dividend warrants to December 31, 2019 to enable relevant stakeholders deliberate on and address all outstanding issues.
SEC’s decision is in furtherance of its overriding mandate to ensure that all categories of shareholders and investors are adequately protected.
Reps investigate unclaimed dividend increase despite e-dividend
Just last week, the House of Representatives directed its Committee on Capital Market and Institutions to investigate unclaimed dividends in the capital market valued at over N126.03 billion.
This followed the unanimous adoption of a motion moved by one of the Representatives, Babangida Ibrahim, at plenary last week.
The motion was tagged ‘Need to Investigate the Rising Value of Unclaimed Dividends, Unremitted Withholding Tax on Dividends and their Attendant Effects on the Nation’s Economy’.
Ibrahim said unclaimed dividends had continued to increase over the years, thus increasing the unremitted withholding tax on dividends in the country.
“The House is aware of the mechanisms put in place to address the issue of the rising value of unclaimed dividends. These include the adoption of electronic dividend payment method, dematerialisation of share certificates, acceptance of dividend warrants in both savings and current accounts,” Ibrahim said.
“Others were the need for the consolidation of accounts by the Central Securities Clearing System and registrars and the need to resuscitate publication of names of owners of unclaimed dividends by companies, all of which had been applied with no significant positive outcome,” he said.
Ibrahim listed the implications of large value of unclaimed dividends on the economic development of Nigeria to include adverse investors’ confidence, decrease in the availability of long-term capital for economic development and the likely volatility in the regulation of the capital market.
The House, therefore, mandated the committee to investigate the rising value of unclaimed dividends and unremitted withholding tax on dividend and their attendant effects on the nation’s economy.
Iheanyi Nwachukwu
