April 1, 2019/SEC
How many people have mandated for the e-dividend and how many mandated accounts do we have. What is the quantum of unclaimed dividends?
About one year ago, the SEC stopped the free registration exercise, specifically 31st of March 2018. At that time, 2.2m investors had mandated. It is interesting to observe that just because the free registration stopped, members of the pubic appear not to come forward again. As at the CMC Meeting, only about 2.7m investors had mandated their accounts.
There is a strategy that is going to be reviewed and developed by the market in concert with the banks and registrars to entice investors. The fee for every approved mandate is N150 but investors are not going to be asked to pay the amount before they are registered. If you have 120 accounts, you just mandate them company by company and the only thing you will pay per company is N150 even if you have dividend of up to N200, 000. It is just a processing fee for maintaining the portal and investors are not to be asked to pay at the point. Please encourage them to proceed to their banks and register.
We believe that by the time we are giving report next, we would have improved.
Unclaimed dividend in the market is being tackled in minimum of two solid approaches. One of them is e-dividend. For every account that is mandated all accrued dividends is automatically paid. Then there is the use of regularization of multiple accounts. We discovered that while dividend is growing and it is increasing unclaimed dividends, the pace is not as satisfactory as when we observe that multiple accounts which have not been claimed for many years are still being paid dividends. Those people that have multiple accounts can only lay claim on dividends in one account, all the others will keep warehousing dividends as long as they are not regularized.
We want to see how far the registrars can go in regularizing the multiple accounts so that we can have a specific figure for the unclaimed dividends.
We have a provision in CAMA that if unclaimed dividends stay for a specified time, those dividends should be returned to the paying company and that is what the Commission is doing. Now any unclaimed dividends which is 15 months and above us returned to the paying company. That way the shareholders also benefit as those money could be invested by the company and result in more interest for the shareholders.
The Q1 CMC just held, what were some of the resolutions at the meeting?
Recently you gave a directive on fidelity bond, what is the level of compliance?
Fidelity bond is one of the requirements for all market operators, they have to file fidelity bonds every year. It runs from January to December of every calendar year. We observed that some people were not complying hence we issued a circular. In that circular, the management gave a reprieve of 45 days. We have started compiling the list of those that have not filed, those that filed after the date that we gave as the deadline. All of those persons will be sanctioned according to the provisions of the law.
The gambling industry is doing very well, is the SEC looking at introducing a product that will allow youths to invest money as is done in some advanced countries?
We presently do not have any laws on gambling, but we have mutual funds and it covers every asset in the capital market. Whether it is money market, insurance, capital market, real estate, infrastructure among others. The youths can invest in these, rather than leave your money in savings account you can invest in mutual funds. It runs like savings account and after three months you can withdraw your money same way as you do with the banks. We don’t have to go and gamble, you need to let them know that there are so many products in the capital market that they can invest in rather than going to gamble and losing their money.
We have various products that are very attractive where they can invest their money. We have commenced investor education and enlightenment for Nigerians to understand the benefit of these funds which gives more interest that saving money in bank account.
What’s the update on margin loans so we don’t have the kind of abuses we saw prior to 2008? What is the discussion with CBN so that processes are not abused?
Actually when there were such abuses, we did not have a comprehensive margin loans laws but now we have specific rules.
After the meltdown, the SEC and the CBN came up with a rule on margin loans and it was after that we came up with a comprehensive rules on margin loans. But after the issuance of the rules, we discovered that there was almost zero activities on margin loans. That is why the market suggested that it appears the rules were too stringent and suggested the need to look at the rules again with possibility of amending it. Due to our experience of the past we excluded banking shares from the list of margin loans bjt we also found out that in other jurisdictions you can give loans to buy bank shares. Due to that we now started engaging with CBN, the engagement is still going on and we believe that at the end of the day we will be able to amend our rules.
What is the update on MTN?
MTN might be in the market but it depends on the aspect of the market. We all know that a company cannot come to the market unless they are a public company and as we speak, MTN have not yet completed the process. There is a process to coming to the market, first you have to be a public company, and you need to have your shares registered with the Commission.
However I do know MTN had issues with the Nigerian government and they have been trying to sort it out. I think they have sorted out one aspect of that. I don’t think the other part has been sorted out and because they have committed to coming to the market, they have decided to come through listing by Introduction. I know that they are working hard towards that, they have visited the Commission to explain that and they also assured us that after the Listing by Introduction, once they are able to sort out the other issues the can no come fully.
Right now, there is no formal application from them, but people need to understand that there are many processes for coming to the market. It can be either through Listing by Introduction of Initial Public Offering. When they file their application we will be able to give you the right information.
Derivatives and ETFs. Have there been training for those that will drive the process of course?
Derivatives is a very good product ot be in the market. As we speak, the Rule on Derivatives will be ready soon and we have been building capacity in-house in partnership with South Korea. We have a Knowledge Sharing programme with them, they have been to the country twice now and our staff are scheduled to travel to their country for more training. Even their ambassador has been to the Commission and all of that is part of building capacity and training the staffs.
Even in the market the NSE is doing a lot in the area as well as the FMDQ who are taking some people to India this month on capacity building. All stakeholders including the CBN have been joining hands together to ensure that we get it right.
What is the position of SEC in regulating crypto currencies?
In the last CMC we talked about it and inaugurated a Committee in respect of FinTech. The committee was charged with coming up with a FinTech Road map on the capital market community and we also informed you that we now have a dedicated Division in the Commission on that.
The Committee is working assiduously to decide what regulations we can make in this area. The commission has the mandate to protect investors. We know that crypto assets are volatile unlike ordinary assets. Since January 2017, we have been asking investors to be vigilant when it comes to that area. We don’t want to get in the way on innovation. Regulators across the globe are paying attention to what is happening in this sphere.
On the one hand they want to protect investors and on the other hand they want to support innovation. On all fronts the SEC is looking at development in the FinTech space.
There is also ongoing collaboration led by the CBN, there is an inter-agency committee on virtual currencies on which the SEC is working with other market operators. In no distant time, the SEC will come up with regulations on crypto currencies.
We are embarking of investor education so that investors understand what its all about.
The market has been down for over three weeks after the elections. Does it mean investors do not have confidence in the market?
Market depends on several factors, some are global and others are domestic. Some are industrial and some are also in terms of the company’s performance. You can see sectors that are doing better, you can also see specific sectors that are doing well. Around election, its possible people have different expectations some want to keep their money, some sell their shares to vie for political office, but as elections are over we expect that some of those people that withdrew prior to elections will come back to the market. Around elections in the history of Nigeria, we will see that there is usually a lull in the market. The statistics are not that bad, the day after the elections the market actually moved up and around sub national elections we saw that market came down a bit.
There was a time we did 42 percent and there was also a time we did -17 percent, there would always be sentiments. What is very important about the market is that in the long run even though you have fluctuations, do you have something that is looking upwards? The stock exchange index started in 1984 with 100, today we are in over 30,000. There will definitely be ups and downs, but the market
How strong has the market been and what has been the Contribution of the market to the economy?
In terms of the contribution of the market to the economy we can look at it in terms of capitalization ratio as well as how many new issuances were made in the market. We know capitalization ratio has increased it should be about 21 to 22 percent when you talk about equities and bonds. Last year, we were able to make more corporate bond issuance than the previous year. In 2017 we did about 23 billion and in 2018 we did about 323 billion. Going forward, we are hoping to do better.
Given the fact that we are working to reduce transaction cost as well as time to market, we also advice sub nationals to come to the market so that we can have new issuances in the market. We have seen quite a number of activities in the bond segment recently and we are hoping that we will see more in the equities segment too. Not just private placement and Rights Issue, we also hope we will see more of Initial Public Offerings.
Let me first of all congratulate you on the maiden awards for the Committees in the capital market, is there plan to sustain it?
My only regret is that the award took this long to hold. The reason being that the regulator cannot work on its own, we require the support of the capital market operators who are one of the most important stakeholders in the market.
I have been in this market for a while and I know that capital market operators are key stakeholders to the development and growth in the market. They have been there over the years. They are helping as much as they can to ensure the market in revived and they are doing that in partnership with the SEC.
If we did not have their cooperation and partnership it would have been difficult. And a lot of the time they work with us pro bono.
We set up these committees after the launch of the 10 year capital market master plan. A lot of them work in the various committees pro bono. Sometimes they have to travel and they do so at their expense. They bring their experiences to bear in the work that they do and we thought that it was important to let them know that we appreciate all that they do. We thought it was important to let them know that we appreciate what they do and we think it is the beginning of such partnership in the market.