Reps concerned over projected N200bn unclaimed dividends at the close of 2020
…SEC says N29bn claimed through accounts harmonization
The House of Representatives Wednesday expressed serious concerns over the projection that unclaimed dividends will hit N200 billion or above at the close of 2020. Said this is not a good picture of the state of the capital market and should be a source of concern to capital market watchers.
It recounted that in 1999, the value of unclaimed dividends was put at N2.09 billion; it was N100 billion in 2017, N120 billion in 2018 and at the close of 2019, it had risen to N158.44 billion.
Chairman, House Committee on Capital Markets and Institutions, Babangida Ibrahim(APC, Katsina) stated this in an investigative public hearing on:
The Need to Investigate the Rising Value of Unclaimed Dividends, Unremitted Withholding Tax on Dividends and their Attendant Effects on Nation’s Economy,”
Held at the National Assembly Complex, Abuja, he said the problem of huge accumulated unclaimed dividends is a major challenge to the development of the Nigerian Capital market, stating that despite the efforts of capital market regulators, the issue of huge unclaimed dividends remains a lingering problem.
According to him, the problem of the huge volume of unclaimed dividends has very significant adverse implications on the economic development of Nigeria, including adverse investor’s confidence, decrease in the availability of long-term capital for economic development and the likely volatility in the regulation of the capital market.
“We are aware of measures that have been taken by the capital market regulators in the past to address the problem, but we can all see that the problem remains and in fact the situation is worsening by the day.
“Some measures include e-dividend, dematerialization of share certificates, publication of names of owners of unclaimed dividends, etc. All these measures are very commendable especially the fact that they are primarily aimed at ensuring that the shareholders who are owners of the dividends get the benefits of their investment.
“It is important to underscore this point. Dividends are distributions of earnings to shareholders. Dividends whether cash dividends or share dividends also known as bonus shares, belong to the shareholders and not to the company who distributed them or neither to the government. Therefore, every effort must be made to ensure that the shareholders gets their dividends from their hard-earned investment.
“Nevertheless, we must also be interested in knowing what happens to the dividends’ money when they remain unclaimed. You may recall that the Securities and Exchange Commission (SEC) had attempted to address this issue in 2006 when it sponsored a bill to establish the Unclaimed Dividends Trust Fund (UDTF). The National Assembly however did not pass the bill following opposition from body of shareholders”, Ibrahim stated.
In his presentation, Director General of SEC, Lamido Yuguda said about N29 billion of unclaimed dividends have been claimed by investors through the introduction of regularization of multiple accounts.
SEC introduced the regularization of multiple accounts in 2015 where it requests all shareholders with multiple accounts to harmonize their accounts by filing e-dividend mandate forms and submitting the same to their banks or stockbrokers for onward transmission to their respective registrars
The SEC Boss disclosed that the Commission is currently working on an initiative to ensure consolidation of multiple accounts which involves the verification and isolation of the account beneficiaries with a deadline of first quarter of 2021.
Yuguda also said the Commission is seeking that the issue of inclined dividends be brought to an end due to the importance of dividends in maintaining and sustaining investments in the capital market.
He stated that accumulated unclaimed dividends should be invested through a capital market vehicle that will focus on critical infrastructure development for the benefit of investors, saying this will be a win all round, as the incentive for accumulating unclaimed dividends will be curbed, the investors who earned the dividends will benefit and the taxes levied on the capital market vehicle will generate the much-needed revenue for the government.
Yuguda highlighted various initiatives by the SEC to address the challenges of unclaimed dividends to include abolition of use of in-house registrars by paying companies, for their operations to improve transparency and remove conflict of interest which has resulted in registrars becoming separate entities from their parent companies.
He said prohibition of piecemeal payment of dividend by the formulation of Rule 108 (1)&(2) which mandates dividends to be paid en-bloc to the registrars within 24 hours by the paying company once approved at an Annual Genera Meeting was another initiative.
“Other initiatives are creation of rule, requiring registrars to make electronic payment of dividends directly into shareholders accounts, engagement with the probate registry to improve the process of obtaining and administering probate.
“All these initiatives are aimed at improving the efficiency of dividend payments, reduce the quantum of unclaimed dividends and as a consequence grow and sustain the confidence of existing and potential investors” Yuguda added.
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