By ADEBAYO OBAJEMU
A war of wit seems to be brewing between the capital market apex regulator, Security and Exchange Commission, SEC, and capital market operators over the issue of unclaimed dividends. This matter has been stemmed in one controversy or the other since the federal government, hobbled by dwindling revenue mooted the idea of borrowing the funds for infrastructure development.
The Director General of Security and Exchange Commission, SEC, Mr. Lamido Yuguda, recently went public, accusing capital market operators of frustrating the success of e- dividends operation in the capital market.
The plank of his grouse is that about 4.01 million accounts still have incomplete Know Your Customers, KYC, information as of April 8 despite the government’s efforts. He attributed this development to insincerity of capital market operators.
He further admitted that operators’ uncooperative attitudes have frustrated the e-dividend mandate process, leading to a rise in unclaimed dividends in the capital market.
Although, the government idea of borrowing the fund is being resisted by both operators and regulators, SEC insists that the e-dividend policy was intended to resolve the problem of unclaimed dividends, because of the bottle necks inherent in the present format. SEC believes that there is apparent collusion between the companies and operators to frustrate the e-dividend policy.
Recently, the DG of SEC, said that unclaimed dividends continue to experience an increase in spite of its efforts to deal with the problem.
He was speaking at the 2021 first post-Capital Market Committee (CMC) virtual news conference, according to a NAN report. Yuguda, in his statement, said that the commission was aware that some CMOs were frustrating the e-dividend mandate process.
He said, “We implore all stakeholders to comply with all directives of the Commission in this regard, as defaulters would be sanctioned appropriately. We have observed that the growth in the number of mandated accounts has been on the decline for some time.
“The capital market community has directed its e-Dividend Committee to engage with the Committee of Heads of Banking Operations to encourage better cooperation from banks as we tackle the challenges of unclaimed dividends.
The SEC boss said it was common knowledge even among all CMOs that the commission’s directive on the update of investors’ Know Your Customer information was still in effect, deploring the low level of response from operators, in spite of the fact that SEC has had several engagements with them
He said, “Despite several engagements, we realised that as of April 8, there were still 4,012,311 accounts with incomplete KYC information. This exercise is critical to deepening the participation of retail investors and we direct all CMOs to accord it the highest level of priority.’’
But some operators who spoke with this newspaper said it was wrong for SEC to accuse them of virtually sabotaging the e-dividend mandate. They added that operators were doing their best to ensure the success of the e-dividend mandate.
Mr. Ambrose Omokordion, chief research officer at Investa told BusinessHallmark that “while we have great respect for SEC’s DG, his accusation that capital market operators are frustrating the success of the policy may not be totally true.
“I know for sure that we operators what the e-policy to succeed.”
Another operator, Eziekel Allan of Statistca in his chat with BH said that “If the SEC DG believes that some operators are behind the rise in the number of e-dividend through their uncooperative attitudes he should sanction them”, while noting that operators are doing their best with regards to ensuring its success.
Recall that SEC had earlier impressed upon all Capital Market Operators (CMOs) to update their investors’ Know Your Customer information due to the low level of compliance. The CMOs were also warned by SEC to stop providing any form of support to unregistered entities operating unlawfully in the country within the capital market as that would not be condoned.
Market operators say E-dividend has significantly reduced incidents of unclaimed dividends. They said the value of unclaimed dividends in the system has reasonably decreased to some N60 billion compared to N129 billion in 2017. Although the Capital Market Committee has yet to release its latest unclaimed dividends report, a source at the SEC told BusinessHallmark that the value has indeed reduced by as much as 53.4%.
This development shows that the decision to introduce the E-dividend solution has yielded the expected result. Recall that capital market operators were highly optimistic about the E-dividend initiative by the NSE, describing it as a great initiative that will ultimately reduce the rate of unclaimed dividends to the minimum.
Omordion said that since shareholders have regularised their multiple subscriptions, it has facilitated the efforts being made to reduce the number of unclaimed dividends in the market. The E-dividend mandate was introduced in 2015 by the Securities and Exchange Commission (SEC) in an effort to confront the persistent issue of unclaimed dividends which had in the main, became a source of concern among capital market stakeholders.
The process is intended to make it easier for investors to complete their bank mandate with company registrars. In order words, shareholders are to download the E-dividend form, fill out the information needed and submit at their bank or with the registrar. Afterwards, their dividends would be electronically transferred to their accounts.
So far, more than 2,599,641 mandates have been approved since the commencement of the E-dividend initiative. There was, however, an 11.38% performance. Meanwhile, some shareholders have blamed banks for frustrating their efforts to register for the E-dividend.