SEC to channel unclaimed dividends to newly created fund

The Securities and Exchange Commission (SEC) has established the Nigerian Capital Market Development Fund (NCMDF), which unclaimed dividends beyond a 12-year mark shall be channeled for the development of the capital market.
The SEC also revealed that it will be providing N5billion to jumpstart the fund which will be managed by a Fund manager registered with the commission.
“It is beyond doubt that the idea to channel these unclaimed dividends into the NCMDF was well thought out by the Commission and would go a long way towards providing necessary funding for the provision of critical infrastructure which is urgently needed in the Nigerian capital market to position it as the leading capital market in Africa and one of the best in the world,” the commission said in a note to BusinessDay.
The subsisting regulation on unclaimed dividends is provided by section 382 of Company and Allied Matters Act (CAMA), which empowers an issuing company to invest these dividends for its own benefit while awaiting shareholders to claim same. However, section 385 provides that where a shareholder fails to claim the dividend within a period of 12 years, such dividend can no longer be claimed. The lacuna here is CAMA makes no provision on who should have custody of the dividends beyond this point.
The lacuna presented a legal and moral dilemma which prompted SEC to evoke requisite powers conferred on it in Section 313 (n) of the ISA to make necessary rules for dealing with unclaimed dividends and unclaimed certificates by public companies.
This is in line with the provisions of Section 4 (a) and Section 13 (j) (s) (dd) of the Investments and Securities Act (ISA), 2007, which empowers the Commission to formulate general policies for the development of the Nigerian Capital Market.
The CMDF, according to SEC, was established to facilitate the development of the Nigerian capital market, promote financial literacy and encourage an in-depth understanding of the Market and carry out infrastructure projects and initiatives.
“The Commission is providing seed funding of N5bn to jumpstart the fund. The Fund has a Board made up of the Management of the Commission, some Capital Market Trade Groups and Independent members,” SEC noted.
The NCMDF of the Commission can be likened to the Investor Education Protection Fund (IEPF) obtainable in India.
Just like the NCMDF, the IEPF is a fund for the promotion of investor awareness and protection of the interests of investors. Research has shown that the IEPF has made tremendous contributions to the development of the Indian economy.
The inclusion of representatives of capital market trade groups and independent members/shareholders on the Board of the NCMDF was aimed at maintaining the highest level of governance, instilling transparency, ensuring inclusiveness and objectivity in the management of the Fund, the note to BusinessDay highlighted.
“The Commission sincerely hopes that the channeling of statute barred unclaimed dividends into the fund will enhance the capacity of the fund to achieve the purpose for which it was set up and therefore all stakeholders are urged to lend their support to this initiative,” the commission stated.

Iheanyi Nwachukwu