By Yakubu LAAH InvestAdvocate

Lagos (INVESTADVOCATE)-Nigeria’s Securities and Exchange Commission (SEC) on Monday directed all Registrars of public companies to return all unclaimed dividends, which have been in their custody for fifteen (15) months and above, to the paying companies.

SEC in a circular dated June 1, 2015 said Registrars are required to file evidence of remittance with the Commission not later than June 30, 2015.

It also warned that ‘failure to comply’ with the directive shall attract appropriate sanctions without further recourse.

The Commission has recently put unclaimed dividends at over N70 billion, this is a recurring issue in the Nigerian Capital Market (NCM) market. SEC official data had said unclaimed dividends increased sharply from about N27.8 billion in 2008 to N41.3 billion in 2009, to N41.7 billion in 2010. In 2011 it hit N50.2 but slightly increased further to N50.7 billion as at September 2012.

The data showed by the end of 2012, SEC put unclaimed dividend at N60 billion.  Unclaimed dividend is currently estimated at more than N70 billion, based on its three-year growth average.

SEC earlier this year proposed the return of unclaimed dividend to paying companies within 12 months in its draft amendment of new rules.

SEC affirmed that all unclaimed dividends in the custody of the Registrars shall be returned to the paying company twelve (12) months after the date of approval of dividends at a general meeting (for final dividends) or a board meeting (for interim dividends) and evidence of remittance forwarded to the Commission within 24 hours.

The commission in the proposed new rule added that where dividends are returned to the company unclaimed, the company may invest the unclaimed dividend for its own benefit in a guaranteed income investment outside the company and no interest shall accrue on the dividends against the company.

“Unclaimed dividend shall not be used by the company for its own business except in accordance with provisions of CAMA,” the proposed rule states.

Bayo Olugbemi, CEO of First Registrars in an interview in January 2015 with InvestAdvocate faulted this proposal, according to him returning unclaimed dividend to companies will not solve the problem.

”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,” he said.

According to him what the NCM has currently 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,” Olugbemi added.

According to the CEO at First registrars, as stipulated in companies and Allied Matters Act (CAMA) 382, 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,” he affirmed.

Olugbemi said what SEC is trying to do now is to say give everything to the company.

He questioned that when all the funds are returned to companies, how would the Registrars 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,” he added.

The MD of First Registrars queried if the money and documents are returned to the company who bears the risks?