A fresh dimension may be unfolding over the unclaimed dividend debacle, as the Securities and Exchange Commission (SEC) recently issued a circular ordering capital market registrars to return every kobo in unclaimed dividend account to the originating companies.
It seems that the matter has defied solution, leading to speculation that the huge sum of money belonging to unidentified shareholders has been hijacked by a cabal.
But in this interview with Assistant Business Editor, KELECHI MGBOJI, the Managing Director and Chief Executive Officer of FBN Registrar, Bayo Olugbemi, insisted that it is not possible for anyone to corner the funds.
However, Olugbemi – who doubles as the President of the Institute of Capital Market Registrars (ICMR) – admitted that there are interceptions of dividend warrants by fraudsters who use unscrupulous banks to clear cheques which is partly why banks stopped clearing third party cheques and warrants.
Unclaimed dividend pool rising or dropping
Bayo Olugbemi
I will look at it from two angles: the absolute figure, what it is now compared to what it was before. In terms of figure, it has gone up but in terms of percentage it has dropped by over six times.
About 10 years ago, the average value was about N7 billion or N8 billion but that was about 25 per cent of total dividend declared by quoted companies. Today, it is about N60 billion but that is 5 per cent of total dividend declared by all the quoted companies. I stand to be corrected.
It is just about 5 per cent because we keep statistics and do comparison which we submit to the SEC quarterly.
However, with the kind of infrastructure challenge we have, there is bound to be problem. Addressing system in Nigeria is still poor. Also apathy on the part of shareholders to do e-dividend.
What has made the money to come down is the e-dividend we are marketing like no man’s business. It is free of charge, you don’t pay anything. All you need do as a shareholder is get your e-dividend form from your registrar and take it to your bank, and after your bank stamps it you bring it to them to implement.
The beauty of it is that you get your dividend the same day it is paid. But when you have to send warrants out, six months down the line many may not get theirs.
For different shareholders in the diaspora who used our office address for their address for dividends, when the dividends come in I collect them. Before the past two years, I would give the warrants to their brokers to clear and buy more shares.
But now, banks do not allow third party clearing any more. So, the dividends are there until the owners in the diaspora come home and clear them.
Because of frauds in the banking industry, most banks do not allow third party clearing again. This implies that if the cheque is in individual name, they will not allow it in the account of another name.
That has also increased the quantum of unclaimed dividend because a lot of people who are not in Nigeria who bought shares before and entrusted them in the hands of their stockbrokers to manage cannot readily be available to clear their dividends.
A lot of shareholders, because of the amount of money involved is not huge in some cases, abandon it with the feeling that it is not worth my while to send N5, 000 or N10,000 to my bank. Over time, no matter how little, the various amounts add up to a large volume.
Unclaimed dividend and SEC directive
This dividend is cleared on daily basis. We need to be careful how we handle it. Some of the dividends are returned to the originating companies after about 15 months or 12 years. After 12 years it becomes statue barred but after 15 months, the companies can take part of it back on request; the law allows that.
The dividend account must be there; you cannot take everything. If you take everything it means that when shareholders come for it they will see nothing to claim. That is one issue that is in the burner now as the SEC said every kobo should be sent back to the companies. If we do, how will shareholders be paid? We have some dividend warrant that are already issued out which shareholders revalidate when they come we pay them.
Unclaimed dividends not hijacked
There is interception. We have seen cases where warrants and registrars items were stolen at the post office. They were cleared through some unscrupulous banks, especially micro finance banks, mortgage banks. They pass it on to their banks that clear for them. That was the reason banks stopped third party clearing. But they still do it on behalf of other banks which have not been clearing because they think the bank they are clearing for could have done know-your-customer (KYC) due diligence properly.
These dividends are marked ‘account payee only. Not negotiable.’ What this means is that dividend warrant should be paid to my account in my name and not your account in my name. If any bank clears them fraudulently, they have no choice but to pay back. Even if the bank has indemnity bond, it must pay the registrar first and thereafter sort it out.
Every dividend warrant cleared is traceable. When we discover the fraud, in most cases after shareholders come to complain, we make sure the defaulting bank pays. In some cases we report them to the CBN (Central Bank of Nigeria) where the defaulter is proving to be difficult. And they are compelled to pay back.
If that is what they mean by unclaimed dividend hijacked by a cabal, yes. Just like in any other sector, fraud in the capital market manifests in different dimensions.
The solution lies with the use of biometrics. If it is done quickly and the Bankers Committee ensures that banks’ customers are captured, we will be left with few cases to contend with.
SEC’s unclaimed Dividends Trust Fund, to be or not to be
That is wrong. This money belongs to shareholders. What efforts are we making to locate the shareholders? You know what it means to put the money in a fund to be managed by a commission. It will now become a drain pipe where some people will get fat at the expense of others.
There is nothing in the so-called Unclaimed Dividend Trust Fund Bill that shows how to get shareholders to claim their money.
Asking us to return all the money to companies means shareholders will start going to companies, and that will be more cumbersome. Most of the companies don’t have the capacity to do registrars business. That is why they are not given registrars licence any more. We are professional registrars, and that is our job.
Recapitalisation of dealing member firms of NSE
Recapitalisation is not for stockbrokers alone. It is for every operator in the capital market. I can speak for registrars. I think it is not bad, especially for the amount that they have set for us. It is good to enable us to invest in IT (information technology) infrastructure fitting for the level of data base we have. We have a larger data base than stockbrokers, and for us to keep that data base with the information we have to invest in IT infrastructure.
Registrars and transaction fees on NSE
It is a battle we have been fighting over the years. A situation where we have participants in the market, including regulators, sharing from fees accruing in the secondary market and one of the major stakeholders does not get remunerated in the market; it is a bad story.
We are the only operator in the market that does not get remunerated adequately from transactions in the secondary market.
In 2008, stakeholders in the capital market came together to review fees charged in the secondary market. It was agreed that part of the fees accruing to the Central Securities Clearing System (CSCS) be ceded to registrars.
I think we are giving them 0.125 per cent. Everybody agreed, but the last day when we were to seal the deal, one of the other trade groups raised an issue about how to collect it. That was how the SEC reneged on the agreement and promised to look at it again.
A situation where N2 billion transactions are made in the market and registrar gets N40; in N1 billion transactions it gets N40; in N100,000 transactions it gets N40 doesn’t augur well for the market, especially considering the kind of effort we put in.
How registrars cope with market decline
We charge by the number of registers we keep. Over time we also have investments that we have made. So, income from our investments over the years and some floats that we receive from here and there. But majorly, if we are to maintain our operations from our core income it would have been a problem.
And some of us are trying to see what we can do outside the traditional registrar business. That is why we are introducing new products, diversifying our operational base. A lot of us have gone into e-products, electronic share registration.
Effectiveness of e-dividend product
It was officially launched last year. Now about 2,000 shareholders have accepted the card. Like every new product, penetrating the market is very slow but by the time it is widely accepted the story will be different. Whether a shareholder has an account in the bank or not, it is just like the debit (ATM) card, once he subscribes to it with N600, when dividend is paid by any company that we are registrars to, the shareholder can cash it with the card from any bank. We are considering a buy-in from other registrars by way of collaborations and share services.
With the card, the shareholder can withdraw from ATM, spend at POS or even do some internet buying. First Bank is our service provider.
Expanding scope of e-dividend prepaid card
We can make the card more encompassing so that shareholders on the register of other registrar companies can also subscribe to it. But we will have to engage other registrars to buy in to the card product.
The ICMR has set up a committee to look into areas where we can do share services so that everybody gains from it. It costs less and pays everybody. At the end of the day, if any dividend is paid through our card from another registrar, a percentage of the commission that accrues to you. We are working on that now and it may materialise by early 2015.
What he would like to be remembered for
I would like to be remembered as the young man who came and changed the way registrar business was run in the country. With the help of God, we have moved registrars from what it used to be 15 years ago to what it is today.
When we took over as the MD of FBN Registrars, it was a dying company. But by the grace of God and the effort of my colleagues, the board, and management of the company we have changed the fortunes of the company.
So, I want to be remembered as the person who God has used to revolutionise registrars industry in the country.
