ExpdonaLoaded.blogspot.com (+2348097205188): Expdonaloaded News; Resolving the unclaimed dividends controversy

Thursday 11 June 2015

Expdonaloaded News; Resolving the unclaimed dividends controversy

THE directive by the Securities and Exchange Commission (SEC) to banks and registrars of quoted companies to return all unclaimed dividends that have been in their custody for more than fifteen months to the paying companies has been received with mixed feelings across the country.
The order has once again reopened the age-old debate on what to do with the humongous unclaimed dividends in the country. If not properly handled, the controversy over these unclaimed monies could discourage investment in shares.
The SEC directive came recently in the wake of reports that unclaimed dividends in Nigeria now amount to about N80 billion. This staggering sum requires immediate action to end this controversy once and for all.
Unclaimed dividends are profit pay-outs by quoted companies which are yet to be claimed or received by the shareholders and equity investors in the company. However, the order from the SEC, which is the apex capital market regulator, can only make a difference if the affected companies comply with it.
Part of the directive is that registrars should file evidence of unclaimed dividend remittances with the commission not later than the end of this month. Registrars are responsible for keeping records of shareholders and also ensuring that the amount of shares outstanding in the market corresponds with what is authorised by the company. However, the directors seem not to be diligent enough in ensuring that investors receive their dividend warrants.
Among those who are opposed to the SEC order is the Shareholders Solidarity Association of Nigeria. The association, in a statement, argued that the regulatory agency’s directive is contrary to the Companies and Allied Matters Act (CAMA), which stipulates that once dividends are declared, the money belongs to shareholders and not the companies until after 12 years.
Available statistics on unclaimed dividends could erode the confidence of the investing public in the stock market. For instance, by December 2013, the amount of unclaimed dividends was put at N60 billion. The figure has continued to grow at an unacceptable level. The increase has been put at over 600 percent in the last 15 years. In 1999, it was about N2 billion, rose steadily to N8bn in 2008, N41bn in 2011, N60bn in 2013, and N80bn at the end of last year.
Of the estimated N80bn worth of unclaimed dividends, Nigerian Breweries, Diamond Bank, former Intercontinental Bank and Bank PHB (now Keystone Bank) are listed as the big four with large holdings of unclaimed dividends. Many factors have been listed as responsible for these unclaimed dividends by the SEC. These include fraudulent activities of some market operators and banks’ refusal to pay dividend warrants into shareholders’ savings accounts.post by expdonaloaded.blogspot.com..Two years ago, ex-Director General of SEC, Ms. Arunma Oteh, had cited ignorance on the part of some shareholders for the accumulation of unclaimed dividends. She claimed that some of the shareholders did not inform the registrars of companies they invested in when they changed their forwarding addresses, thereby making it difficult or even impossible for them to receive their dividend warrants. Further blame has also been put at the doorsteps of Nigeria’s poor postal system. There are also instances of the death of some shareholders and the inability of their heirs to do what is required to access their dividends.Nonetheless, these are not sufficient reasons for unclaimed dividends to continue to mount. To resolve this issue, SEC should rein in registrars who are allegedly profiting from these unclaimed dividends. The agency should make good its threat that failure by registrars to “comply with the directive shall attract appropriate sanctions without further recourse”. Without doubt, compliance with this directive will improve confidence in the regulation of the capital market, which is currently experiencing a downturn on account of the fall in the prices of shares.post by expdonaloaded.blogspot.com...Besides, leaders of Shareholders’ Associations, company secretaries and legal advisers should ensure that this matter is resolved quickly. We are concerned about the unsuccessful attempt by the 7th National Assembly to classify unclaimed dividends as “Abandoned Property”, and to devolve the title of such dividends to the Federal Government. Government should not under any guise be allowed to reap where it has not sown. Dividends, once declared, belong to shareholders and should not under any circumstance be ploughed back into the companies. The use of such monies to trade by the companies, as has been alleged, is illegal.All in all, SEC and directors of quoted companies should urgently find a way out of this situation. We support the suggestion by SEC and other stakeholders that dividends should be paid directly into shareholders’ accounts, under the e-dividend policy. This would ensure that shareholders get their dividends as due. But, investors need to be properly educated on the benefits of electronic dividend management, and their bank account numbers collected at the point of purchase of shares. There should be public enlightenment campaigns on this matter, the same way bank customers are being educated on the Bank Verification Number (BVN) scheme.
In addition, it is important that the SEC seeks the amendment of the Unclaimed Dividends Law through a bill. The bill should, among other things, aim at reviewing the 12-year bar placed on unclaimed dividends in the capital market. The present stock of unclaimed dividends will continue to accumulate unless section 383 of the Companies and Allied Matters Act (CAMA) is amended. It must be clearly stated that dividends, once declared, belong to shareholders and should not under any circumstance be ploughed back into the companies’ operations, or used as slush funds for trading as some quoted firms are allegedly doing. Altogether, it is imperative that SEC and directors of companies find a solution to this problem. All the factors responsible for the accumulation of unclaimed dividends should be addressed immediately so that their owners can take full possession of the fruits of their investments in the capital market.