The House of Representatives on Tuesday resolved to invite the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun; Minister of Budget & National Planning, Senator Atiku Bagudu; Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso over the non-operationalization of the Unclaimed Dividend Trust Fund.
Chairman, House Committee on Capital Market and Other Institutions, Hon. Solomon Bob, issued the notice during an interactive session with the Director-General of the Securities Exchange Commission (SEC), Mr. Lamido Yuguda, who confirmed that unclaimed dividends stood at N210,981,480,402.44 as of September 30, 2023. Out of this amount, N166,671,399,552.73 was in the custody of paying companies, while N44,310,080,849.73 was in the custody of the Registrars.
In his remarks, Hon. Bob tasked the Commission to provide details on some of the issues affecting the capital market, including unresolved issues of unclaimed dividends. He reiterated the Committee’s resolve to minimize the incidence of unclaimed dividends, noting 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 emphasized the need for SEC and other stakeholders to interact with the Committee during subsequent engagements 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 unclaimed dividends 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 the return on equity invested in various companies operating in the country: dividends and capital appreciation/gain. While noting that some companies do not pay periodic dividends but rely solely on capital appreciation, such as Google and tech companies, he pointed out that some investors also bought shares through fictitious names.
Mr. Yuguda maintained that since the Commission had stopped paying dividends through warrants alongside the report of Annual General Meeting (AGM), it introduced electronic dividend payment which requires Shareholder’s NIN and BVN.
Worried by his submission, Hon. Bob asked, “What do you think has been responsible for the non-operationalization of the Fund after the Act was passed? I think after now we need to broaden the list of this engagement, including all those persons listed under the Act you just read out—CBN Governor, yourself, DMO, and the rest of them—so that we can 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 takeoff 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 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 include the issuance of an Executive Bill before the National Assembly for the establishment of Unclaimed Dividend Trust Fund. Still, the idea was shelved due to strong opposition from some 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 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.
Other actions include the abolition of the use of in-house Registrars by paying Companies to improve transparency and eliminate conflict of interest. Registrars became separate entities from their parent companies.
There was also the prohibition of piecemeal payment of dividends by way of creating 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 General Meeting. The Registrars are required to effect payment to investors within 24 hours.
Another initiative was the creation of a Rule requiring Registrars to pay dividends via electronic payment channels directly into the bank accounts of shareholders.
Moreover, the SEC engaged with the probate registry in different States of the Federation to improve the process of obtaining and administering probate.
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Forbearance was granted to shareholders with multiple accounts to harmonize and consolidate their accounts.
The implementation of the e-Dividend system was achieved through a partnership with the Central Bank of Nigeria (CBN) and the Nigerian Inter-Bank Settlement System (NIBSS). The SEC launched 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, ensuring payment of dividends directly into shareholders’ bank accounts.
Mr. Yuguda concluded by calling for the separation of unclaimed dividends from shares and unclaimed funds in a dormant account.