The House of Representatives on Tuesday resolved to invite Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun; Minister of Budget & National Planning, Senator Atiku Bagudu; Governor of Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso over non-operationalisation of Unclaimed Dividend Trust Fund.
Chairman, House Committee on Capital Market and other Institutions, Hon. Solomon Bob who issued the notice during an interactive session with Director General of Securities Exchange Commission (SEC), Mr. Lamido Yuguda, who confirmed that unclaimed dividend stands at N210,981,480,402.44 as at September 30, 2023, out of which N166,671,399,552.73 was in custody of paying companies while N44,310,080,849.73 was in custody of the Registrars.
In his remarks, Hon. Bob tasked the Commission to give details on some of the naughty issues affecting the capital market, including unresolved issues of Unclaimed dividends.
While reiterating the Committee’s resolve to minimize the incidences of Unclaimed dividends to the barest minimum, he observed that there are some inconsistencies in the report of the 9th Assembly’s Committee on Capital Market and SEC’s submission, hence the need to reconcile the discrepancies.
He also emphasised the need for SEC and other stakeholders to interact with the Committee during subsequent engagements with a view to address the myriad of challenges facing the capital market.
In his address, SEC Director General, Mr. Yuguda explained that the Act stipulated that all the unclaimed dividend and unutilized amounts in a dormant bank account shall be transferred either by the public limited company, Registrar or deposit money bank.
He further disclosed that there are two aspects of return on equity invested into various companies operating in the country. These are: dividends and capital appreciation/gain.
While noting that there are some companies that do not pay periodic dividends but rely solely on capital appreciation such as goggle and tech companies, buy and sell some of their holdings on investment.
According to him, “as at end of September 2023, that’s about four months ago, the total quantum of Unclaimed dividend was N210,981,480,402.44. of this amount about N166,671,399,552.73 was in custody of paying companies while N44,310,080,849.73 was in custody of the Registrars.”
He explained that: “These Registrars are the capital market operators that have the responsibility of paying the dividends of companies to their various investors. We have a number of reasons why there are unclaimed dividends in Nigeria.”
While noting that the Commission has not had a lot of IPOs in the recent past, he observed that most investors used multiple identities in order to get more allocations than if they used a single identity, yet do not give actual details of themselves, adding that, some of the investors also bought shares through fictitious names.
He maintained that since the Commission had stopped paying dividends through warrants alongside the Annual General Meeting (AGM), it introduced electronic dividend payment which requires Shareholder’s NIN and BVN.
Worried by his submission, Hon. Bob said: “what do you think has been responsible for the non-operationalisation of the Fund after the Act was passed.
“I think after now we need to broaden the list of this engagement, all those persons listed under the Act you just read out, CBN Governor, yourself, DMO and the rest of them, so that we can broaden this engagement, to give teeth to that law and immediately commence the operationalization of that Fund.”
In his response to the Chairman’s inquiry, Mr. Yuguda said: “We have not really seen a full take off and the implementation of the Unclaimed Dividends Trust Fund both the Commission has been working with the DMO and Ministry of Finance to ensure that this transition happens without really any hiccups.”
Speaking further the SEC helmsman explained that: “from the commencement of this Act, Unclaimed dividends in a listed company and unutilized amounts in a dormant bank account maintained in or by a deposit money bank which has remained unclaimed or unutilized for a period not less than 6 years from the date of declaring the dividend or domiciling the funds in a bank account shall be transferred immediately to the Unclaimed Funds Trust Fund: The Debt Management Office established by the Debt Management Office (Establishment, etc.) Act 2003 or subsequent statutes which replace this Act shall supervise the operations of the fund.
According to him, some of the regulatory actions taken by the Commission to guarantee investor protection since the year 2000, to stop the growth of unclaimed dividends, include: issuance of an Executive Bill before the National Assembly for the establishment of Unclaimed Dividend Trust Fund but the idea was shelved due to strong opposition from some of the stakeholders in the Market. Ultimately, the best solution to the growth in unclaimed dividends is to ensure all Registrars have the account details of all of the shareholders in their record.
He added that the “Commission in September 2015 directed all Registrars of companies to return unclaimed dividends in their custody for a period of fifteen months and above to the paying companies.
“Abolition of use of in-house Registrars by paying Companies in order to improve transparency and eliminate conflict of interest. As a result, Registrars became separate entities from their parent companies.
“Prohibition of piecemeal payment of dividend by way of creation of Rule 108 (1) & (2) which mandate dividends to be paid en-bloc to the Registrars within 24 hours by the paying company once approved at an Annual General Meeting. The Registrars are required to effect payment to investors within 24 hours.
“Creation of a Rule, requiring Registrars to pay dividends via electronic payment channels directly into the bank accounts of shareholders.
“Engagement with the probate registry in different States of the Federation to improve the process of obtaining and administering probate.
“Forbearance granted to shareholders with multiple accounts to harmonize and consolidate their accounts.
“The implementation of the e-Dividend system – Through partnership with the Central Bank of Nigeria (CBN) and the Nigerian Inter-Bank Settlement System (NIBSS), the SEC was able to launch the e-Dividend Mandate Management System (eDMMS) in January 2016. The eDMMS is a portal that enables the seamless enrollment of shareholders leveraging the robust KYC of the Bank Verification Number (BVN) system. This ensures payment of dividends directly inte shareholders’ bank accounts.”
Mr. Yuguda called for separation of Unclaimed dividends from shares and unclaimed funds in dormant accounts.
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