In this interview with PETER OBIORA, Editor of Investadvocate, Bayo Olugbemi, president/chairman of Council, Institute of Capital Market Registrars (ICMR) and managing director /chief executive officer of First Registrars Nigeria Limited, discusses issues relating to the current status of unclaimed dividends in the Nigerian Capital Market, the newly proposed Security and Exchange Commission’s new rules/amendments on return of unclaimed dividend to paying companies, the way forward for the industry and other related issue: Excerpts.
What is the status of unclaimed dividend in Nigeria?
Let me say one thing about unclaimed dividend, first and foremost is not a static figure, it can be N60 billion today and it can be N50 billion tomorrow. It depends on collection cycle and how we intensify in doing our marketing and ensuring people collect it. And I want to tell you that in the past one year, there have been a lot of efforts on our side to ensure that people who want to collect their dividends collect them. Whether is N60 billion or N50 billion, it will be difficult for me to give you a figure as we speak, but what I know is that statistically and I want us to be realistic about it, we should not just look at the volume, we should also look at the percentage outstanding. For example, I have heard the chairman of SEC saying when he was the DG, unclaimed dividend was then about N10 billion or N15 billion and my question is N15 billion of how much? Over the past 10 years we have had a lot of companies coming to the market who were never in the market before; for instance the Dangote Group and the kind of dividend that the company has paid over the years.
Their Registrar was telling me the last payment they made in one of the Dangote companies was over N100 billion, this is one dividend and within this period about three months or thereabout, the balance was less than N300 million out of over N100 billion. Same with other Registrars, when I came on board here, First Bank was paying just about N3 billion as dividend; the last time they paid, they paid about N33 billion as dividend. Same with other companies, on the whole the volume may be as high as N50 billion or thereabout; but N50 billion of how much and I stand to be corrected or proved right by anybody, what we have today as unclaimed dividend if you actually define what is unclaimed dividend it’s from 15 months and above; it’s just about six percent (6%) or between 5% across the board.
Thus, as Registrars we believe we have tried because in the past it was about 25-30 percent and that is not to say a dime is to remain as unclaimed dividend; but who is to be blamed? Is it the Registrar? Is it the shareholder? I don’t want to place blame anywhere; however, as Registrars, we try our best to ensure that shareholders embrace the e-dividend payment system. How many in terms of shareholders have embraced this, they are not many; but in terms of volume; if you are claiming N10 million and above, it can only be done via electronic payment. Therefore, you have no choice, I was trying to look at the last dividend of First Bank, how many people have N10 million and above, and have not claimed it, the money was just about N500 million and these people are just about 20 and we have made effort to get in touch with them, we have written and about three of them have come back to us and given their account numbers for us to pay, others are yet to come and I can show evidences and letters that we have written unfortunately some of them have no phone numbers on our record so we can’t contact them through phone; but the only thing we can do is to write their last known address. There is a particular one that has about seven to eight different accounts belonging to the same person or family. We have written, they have not supplied us their account number; so how would we pay that money?
I’m trying to say this and I can argue it anywhere and I can show evidences that as Registrars we do our own beat by ensuring that these things are sent as at when due. Of course we cannot send any dividend above N10 million now because of the new regulation, we can’t print it, and the only way is to go through e-payment. So, if you fall into this category of investors, you have to give us your account details.
Year in year out if you look at annual reports say in the past six to seven years, or less say five years, we started it, we made it mandatory for our client companies to include e-dividend form, the Central Securities Clearing System (CSCS) dematerialisation form on their annual reports, we made it compulsory to even attach change of address form on annual reports so that everybody will do the right thing.
When we look at the annual reports, it is stated that some dividends remain unclaimed and that shareholders should kindly come forward to claim them. Last year and early this year, we have done publicity, early this year, we have done so in about four newspapers requesting those who have unclaimed dividend or unclaimed certificates to come to our offices or get in touch with us online to claim them. We make effort to ensure that these things are done; having said that the quantum cannot be static, it moves from time to time depending on who is claiming and how it is been claimed.
Then on the whole, what we have today as unclaimed dividend is just about six percent. Whether by regulation or what anything anybody is doing, I have asked a question which nobody has been able to answer. Where is the place of the shareholder or the investor in this? Whether is with the Registrar or the company have we resolved the issue of the unclaimed dividend? Returning it to the companies, have we resolved the issue of unclaimed dividend? It will not because it’s just passing it from one hand to another.
And let me also say this, which most companies as it were today as stipulated in Companies and Allied Matters Act (CAMA) 382, it says a company may invest unclaimed dividends in a vehicle outside the company at an interest which is not accruable to the shareholder and many companies have been doing that; but one thing they don’t do is collect 100 percent because they know that the shareholder will still come to the Registrar to claim the money. And what SEC is trying to do now is to say give everything to the company. And the question is that when we do that, how do we continue to administer unclaimed dividends? And they are saying shareholders will still come to us and when they do, we are expected to write the companies for funds. I think there is a lacuna in this, for today we bear all the risks associated with conversion, interception or stolen warrants, the issuing companies does not bear these risks, we make losses, some of them we have to refund and not getting the refund from the companies. We have to pay back, is at our cost. So, if I now return the money and the document to the company who bears the risks? And you are still telling us that when shareholders come, we will still take the risks to identify them and write the companies for funds; if it is N300 we wait for the company to provide the funds, if it is N500 we do the same.
How many times will we write the companies? Most of the administrative bottlenecks, who pays? These are the questions that we want SEC and everybody in this market to look at, I’m not against companies asking for part of the dividends which they have been doing in the past and we have evidences and we have shown them to SEC. The 12 months return period is even wrong, CAMA says 15 months.
CAMA is clear on this; dividend does not become unclaimed until after 15 months. We are putting together our position and will forward it to SEC. The industry may be the worse for it because at the end of it, it is the shareholders that will suffer more because for every kobo they come to collect, we can say they should wait or come back at a particular time for collection; because now that the fund will be with the companies, it will take some time for them to claim their money. My question is that has this solved the problem of unclaimed dividend? It will not solve it. Will it be beneficial to the shareholder? It will not be. What will be beneficial though they want to start doing that now which we have said overtime is sustained enlightenment campaign.
We have been doing ours as Registrars, we have been placing adverts, sometimes, we go from city to city to distribute unclaimed dividends and certificates, and we did that over the years. Then we also went ahead to have offices in the six geopolitical zones. We offices in Enugu, Port Harcourt, Kaduna, Kano, Abuja, Ibadan and Lagos. There is a particular Registrar that has offices in about 20 states of the federation. It’s a form of ensuring that people claim what belongs to them. Some shareholders when they get these dividend warrants, they keep them; maybe its N5, 000 and they neglect it; even people in SEC are not on e-dividend, I challenged them recently, most of you propagating e-dividend are you practicing it? I am on e-dividend, 99 percent of my investment are on e-dividend despite the fact I’m a Registrar and can easily collect my money; I do e-dividend. You don’t do e-dividend and you blame the Registrar for it, you can’t do that.
I think what we need to do to actually reduce unclaimed dividends is to have what I call sustained enlightenment campaign. Registrars, Nigerian Stock Exchange, SEC, Stockbrokers and every capital market stakeholder should get involved in this. We are the only ones doing it for now and nobody else is joining us. It’s one of the developmental roles of SEC to enlighten the investors, they should spend money to do it; but honestly taking the money away from the Registrar and giving the companies will only compound the problem and that’s the truth.
Could part of the problem be from the investors?
At a capital market committee meeting last year, one of the respected operators said something which I have reflected a couple of time, there is what we call amnesty. I will explain that, there are some people during the boom days in the market that had as many as 20, 30, 40 or 50 applications for public offerings because they want to get allotments and many of them used pseudo names to apply. Names they cannot open an account with and we suggested to SEC if we can do something by way of doing an amnesty. We will announce that we are giving an amnesty period of say six months and we would announce that any investor that has done multiple application in the time past should come forward with evidence, bring what they have and we will consolidate it and it will be in our account. Of course we will find a way of indemnifying one another in the event of the unexpected and we will know what to do.
Unfortunately, nobody has come forward, if SEC comes out with a circular or so and say if you know there was a time say in the past 20 years or thereabout that any investor knows he or she has done multiple application, we are giving those concerned about six months or thereabout within which they go to their registrars, sign some documents and we consolidate it after all evidence have shown they are truly the owner. Some of them will know because you see they have the same address, the same surname; but with different other names. Some of them are having unclaimed dividend, but you won’t see high net worth investors having this problem; except very few, often times, it’s the retail investors that consist the bulk of the problem of unclaimed dividends.
Some may not see the money as anything to go by and therefore, they will just collect their warrants and keep them; even those in SEC, they have been collecting dividends and keeping them. Just this weekend, some people met me and accosted me and asked me to help them to revalidate their dividend warrants. These people received their warrants and kept them, some of them who accosted me gave warrants from different registers to revalidate. I got about 16 dividend warrants for one family from different registrars. Are we saying all these Registrars deliberately refused to send warrants and pay dividends; all these were sent and often times some people keep them.
Is it the fault of the Registrars? We have been saying it overtime and maybe nobody seems to be doing anything. Before, when we have returned warrants, we use to remove the envelops; but we have now stopped that in the event that somebody comes, the person will see the date it was sent and the day it was returned. One thing is sure, whether you take the money from the Registrars and give it to the companies; we are yet to resolve the issue of unclaimed dividend. We need more publicity like I said earlier and SEC has to take the lead. I’m happy last week they called me and said they want to do jingles and advert can you give us samples of what you have done in the past? Which I clearly observed, I’m not against seeking for a permanent solution; but this one is not a permanent solution and it won’t solve the problem.
What’s your thought on the companies using the returned money to do guarantee income investment?
The company has the right to invest the money, as CAMA said they may invest in a vehicle outside their purview. Like I said earlier, some of the companies are actually collecting their money; but they don’t collect 100 percent. These have been going on for some time; we have told SEC that these funds are not with us a 100 percent. There is a quarterly report that we do that shows how much has been returned to the companies and how much that is with the Registrars. The records are there; but like I said earlier, SEC has the responsibility and I think we should all sit down together. I use to say the antidote for headache is not to cutoff the head, when there is a headache, you find a solution. Is either you rest or you use medication to check it. You don’t cutoff the head and all we are trying to do now is to throw away the baby with the bathwater and it wouldn’t do anybody any good.
On the penalties for the proposed new rules for erring Registrars and companies
The proposed rules and its penalties were done in haste and if you look at it, it’s conflicting. Number one, you don’t solve problems by bring in draconian law; you may end up teaching people things which are not suppose to do. You know the registrars business started as an ancillary business to banks for their client companies and it was not a profit making venture. But now the rules says it should not be part of the banks anymore, of course I won’t tell you that the dividend money with me is just lying down in the current account, it has to attract some investment returns because I pay cost.
We don’t charge companies; but may start doing that now with the proposed new rule. We don’t charge them reconciliation fees; but if the money goes to them, we have to start doing that as well; I won’t be doing reconciliation for you while you are taking the benefit. I’m taking the benefit now and the risk which is worthwhile. If I’m no longer taking the benefit, I won’t take the risks. So, we have to sit down and talk, you can’t eat your cake and have it. You can’t ask the companies to take the money and ask me to be administering nothing; it’s a proposed rule and we would also get back to them with our thoughts.
Number one, our thought is on what CAMA said which is 15 months and they are now saying it should be 12 months. When CAMA says 15 months, that’s something to have in mind. Then we didn’t have the number of companies that we having now or the number of shareholders. How many was the number of shareholders when CAMA came? It was about 5,000 in 1994; but as at date, 1.3 million shareholders in First Bank, between 12 months and 15 months, that three months gap is for reconciliation; then we have about 20,000 shareholders in the bank. Today I have 1.3 million shareholders and you are not giving me a day to do reconciliation, it doesn’t make sense.
FACTS CHECK: Below are penalties on SEC’s Proposed New Rules/Amendments on Return of Unclaimed Dividends to Paying Companies.
“Failure to remit unclaimed dividends to the paying company by the
Registrar as stated above shall attract a penalty of N5 million and an additional sum of N100, 000 for every day such contravention persists”.
“The responsibility of paying dividends to a shareholder after the dividends have been returned to the company shall lie with the Registrar”.
“Paying companies shall remit the portion of unclaimed dividends claimed by a shareholder(s) to the Registrar within 48 hours of receiving a request/claim for payment”.
“Failure by the paying companies to comply with the above provision shall attract a penalty of N1 million in the first instance and N100, 000 for every day such contravention persists”.
“Failure by the Registrars to comply with the above provision will attract a penalty of N2 million in the first instance and N500, 000 for every day such contravention persists”.
Source: SEC
The use of Permanent Voters Card (PVC) as a means of valid Identity in the Capital Market
I think it’s not wise, the reason is that in our own response we will tell them the shortcomings of most PVCs, one is that most PVCs are not properly captured, the pictures are not clear enough, they didn’t do a professional work on the PVCs, when you put down say about 20 PVCs, you can hardly see about three that the faces appeared to be clear. Therefore, people have to be very careful; I think we should be looking at the Bank Verification Numbers (BVN). I was at a polling station in my ward when somebody wanted to collect his PVC, he cannot even tell the agents his really names, he said when they were insisting it must be three names, he wrote one name that was not actually his, a kind of nickname, many people did that or in some of the PVCs, your surname has been taken as your first name and vice versa. It will cause problems, we are not matured enough to use PVCs in this clime for identification purposes. We the Registrars are advising against it for now, because a lot of people wrongly did the PVCs and would want you to accept that as a means of valid identification if SEC goes ahead with the proposal.
What’s the future of Registrars business in Nigeria?
Let me say that sometime last year Registrars came together and had a retreat, the CEO’s and top management staff. We had a retreat on how to do this business going forward because we know it will not be business as usual, we know that we have a lot of challenges even with unclaimed dividends because overtime it will go when everybody embraces e-dividend. I had to be frank with you too; most of our client companies don’t pay us economic fees; because they believe that we have floats that we make money from. If that is no longer there, the companies have to pay commercial rate. We told SEC also that they are part of our problem because they are primary market transactions. SEC put a kind of fee that we must collect which are not commensurate to our services. For instance a company is raising N1.0 billion and maybe there are only 5,000 shareholders and I should collect only N30.00 per form. Meanwhile Stockbrokers and other operators will collect percentage; this has to be reviewed, you don’t review one side and leave the other.
Our fees as it were today are inadequate because our clients believe that we are making money from other sources or from their dividend money which will no longer be available. Also, a lot of companies are even owing us, they don’t pay us as at when due; even the ones that pay, do so at discounted rates. They give us some excuses, they are doing a public offering, other operators collect their commissions in percentages; while we are asked to collect any amount; meanwhile we do bulk of the menial jobs, for instance capturing all the forms, bringing out the data and so on. Even the CSCS charges the clients companies on percentage of market capitalisation at the end of November every year, but we cannot do that, they are also operating like us. They call it eligibility fee which every quoted company is paying every year and like I said earlier it’s a percentage of the companies’ market capitalisation. Registrars may be paid about N50 per account which cannot be compared to what the CSCS is charging. Unless we are allowed to charge commercial rates, then it will not augur well for us and we have important roles to play, we are like the goal keepers.
What is the total amount of shareholders who do the e-dividend?
In terms of shareholders who have taking advantage of it, in terms of absolute figure of investors (human beings), I think it’s just about 30 or 35 percent. But in terms of value, because you know the normal Pareto principle (also known as the80–20 rule), you see a lot of 20 percent of shareholders holding 80 percent of the investments and in their case; they have no choice but to do e-dividend because of the volume involved. You see these days on the first day of dividend payment, 80 percent of the money is gone due to volume. But in terms of absolute human beings, just about 30 percent or thereabout, and this is why we say SEC as well have to make it mandatory over the years, it can’t be under a year; but a gradual process. If you are not on e-dividend, you will not be able to claim your money; it has to be a gradual process.
What’s the status update on First Registrars Dividend Paycard?
The enrolment figure is low, the acceptance is slow, it took CSCS 10 years to have 30 percent of enrolment; we don’t even have up to 10 percent, the dividend paycard has a limitation, if you are claiming a certain amount of money, you cannot use the card; its only for retail investors who are claiming say N100,000 or thereabout, but if it’s moving up to N500,000 you cannot be on that platform due to the Central Bank of Nigeria rules and also risk management. For instance if we mistakenly load N10 million on somebody’s card, it’s gone, it will be difficult to recover, from the risk management perspective, it’s not very good to load so much money on a card.
On your proposed rebranding
Let me say effectively we divested in 2013; but not up to two years and I can assure you that we just got approval for our rebranding. We are waiting for SEC to approve our restructured name. They are working on it and soon it will be unveiled. Our logo will be different from what we have now; maybe in the next one month or thereabout.
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