We have Zero Tolerance for Illegal Operators- SEC

September 3, 2021/SEC Nigeria

Ponzi schemes are springing up every day. What is the Commission doing to stem the tide?

L-R, Executive Commissioner Operations, Securities and Exchange Commission Mr Dayo Obisan, Director General SEC Mr Lamido Yuguda and Executive Commissioner Legal and Enforcement SEC Mr Reginald Karawusa during the 2nd 2021 Virtual Capital Market Committee Meeting Press briefing in Abuja. Image Credit: SEC Nigeria

It is a big problem for our economy, every year, every month, every day many of our citizens lose  substantial amounts of money to Ponzi schemes’ operators. The Commission has adopted a variety of measures, including putting up the list of authorized capital market operators on our website, so that any interested investor will check on our website to confirm whether or not the scheme they intend to invest in is truly a registered operator by the SEC. Unfortunately, many of the Ponzi schemes’ operators once they give the mouth-watering  promises, they entice so many valuable investors and in the end money is actually lost and these investors start running to our offices to complain. Actually, they can just check our website. Two minutes is enough for you to ascertain whether or not this investment firm that promises hefty returns is actually registered by the SEC.

So, we have engaged a number of regulators and also a number of media platforms to ensure that the message is actually delivered to the public that any returns or promises that look so generous should be suspected and people should check with the commission before going ahead to invest in them.

The Commission is sustaining its campaign against illegal operators in the capital market, especially those promoting Ponzi schemes, and has adopted multi-level engagements with media platforms and regulators of publicity agencies in order to curb the activities of these illegal operators. While we continue our activities to resolve the complaints that have been forwarded to the Commission through the official channels, it is important to reiterate to the investing public to be wary of unscrupulous schemes that promise unrealistic returns on investment. This is a continuous fight, we are not resting on our oars on this and we also urge the media to help in disseminating this information.  I am sure some of us know some persons, maybe a relation or a friend, that have lost money to Ponzi schemes in recent times.

So, I think we all owe ourselves a duty to our friends and relations to make sure that we do whatever we can to join this fight and to educate and enlighten them that these Ponzi schemes are truly cancerous to our society and all hands should be on deck to fight these cancer-spreading fraudsters.

 We will like to use this opportunity to reiterate our commitment towards zero tolerance for market infractions. We urge every capital market operator to operate within the market functions approved for it by the Commission. The Commission will not hesitate to deal decisively with any operator who carries out any activities outside the function(s) approved for it by the Commission. No capital market can grow without discipline and strict adherence to laid down rules and regulations. 

What efforts has the Commission made in deepening the commodities trading ecosystem?

The Commission is encouraging investments in the commodities space and we are collaborating with the Standard Organization of Nigeria,  the National Insurance Commission, the Federal Ministry of Trade and Investment and Federal Ministry of Mines and Steel Development, amongst other strategic partners,  in this drive. So, all of these engagements are with a view to encouraging investments in this massive area where Nigeria has a comparative advantage over many other countries. 

As part of measures to deepen the commodities ecosystem, the Commission held engagements with the National Insurance Commission (NAICOM) towards de-risking and insuring certain commodity assets, which we believe will attract more investments within the space, particularly from the Pensions industry. A technical committee, comprising representatives of the Commission, Standards Organization of Nigeria (SON), AFEX, Lagos Commodities and Futures Exchange (LCFE) & Nigerian Commodities Exchange (NCX)was also constituted to deliver agro-based standards within three months.

To develop an effective price discovery mechanism for the commodities ecosystem, the Commission has equally solicited the support of the National Bureau of Statistics (NBS). A technical committee has been constituted for this purpose with the mandate of developing modalities for this exercise.

Again, for agro-based commodities to be traded, you will need the standards and these standards will be developed by different agencies but principally by the Standard Organization of Nigeria (SON). So, we are working with the organization on this and a committee has been set up and they will be working hard to ensure that we have this standard ready within the next 3 months.

Can we have an update on the current figure of mandated accounts?

From the inception of the e-dividend portal which was in 2016 to July 2021, the total number of mandated and approved accounts so far is 1,144,970. This is as of July 2021. The COVID -19 pandemic  from last year adversely affected the registration exercise.

People are still concerned about the unclaimed dividends in Nigeria. You said the SEC has come up with a number of things and at the end of 2019, we understood that the total value of unclaimed dividends stood at N158.14 billion. Now after this 2nd CMC meeting 2021, we would like you to give us the real figure of unclaimed dividends because recently Lafarge Africa published the list of unclaimed dividends of over 300,000 shareholders. This is rather worrisome. We would like to know how the commission is tracking unclaimed dividends in the capital market and how the affected investors are being traced or communicated to claim their dividends.

Thank you. I share your concern on unclaimed dividends and truly and with the example you gave on Lafarge it is a sad example for a single company to have over 300,000 shareholders with unclaimed dividends.

The truth of the matter is that we have problems with identity management in the Nigerian capital market and this is one of the things that the Commission has been trying to resolve with the effort that the Commission has made just recently, to set up a high powered committee to look at this issue. In June 2021 the Commission constituted a Committee on Identity Management for the Nigerian capital market. The committee is chaired by Mr. Aigboje Aig-Imoukhuede is expected to harmonize various databases of investors, and facilitate data accuracy in the market. We are optimistic that the outcome of the committee’s assignment would address the challenges of identity management and help resolve some of the issues we face in the areas of unclaimed dividends, direct cash settlement and multiple subscriptions. There are people who have bought shares under false names before which we refer to multiple subscriptions problems. The truth is there is a problem with the process and there is a problem with us as a people, because if you are buying securities using your own wealth, then why would you use another person’s name that may not be traceable. Most of the things became an issue after the introduction of BVN, because BVN is tied to only one name. If you have another name that you were using before then no account will be opened for you and those accounts cannot be accepted by your bankers. Only God knows now how many bank accounts at the bank cannot be connected to BVN simply because they cannot be traceable to the owners.

 It would interest the public to note that the Commission has recently extended the due date for renewal of registration. Consequently, the registration portal has been reopened until August 31, 2021. This is to enable operators that are yet to update their information with the Commission do so before the end of the new deadline.  So, to answer your question, I can give you the most recent figure for unclaimed dividends and the answer to your question is that the figure is around N170 billion.

As part of measures to increase the number of mandated investors on the e-DMMS and reduce the quantum of unclaimed dividends, members of the CMC adopted the following measures: Automation for mandating to e-DMMS;  Increase monitoring of adherence to procedures; Increase awareness campaigns on the initiative; A training session to be organized by the Central Securities Clearing System (CSCS); who will be supported by the e-DMMS technical committee, institute of Capital Market Registrars (ICMR) and Association of Securities Dealing Houses of Nigeria (ASHON); and Conduct of a study to determine the suitability of the CSCS to process dividends of investors in unlisted companies. 

With reference to your last CMC press briefing, you mentioned that it was the CMOs that were frustrating the e-dividend mandate and the Commission is going to sanction anybody found wanting. We need an update on that and how many people have been sanctioned, if any? 

We have actually engaged with the industry stakeholders to see where the issues are and part of the problem some of the operators had is the banking information that was given by investors before they can actually be linked to the e-dividend mandate management system. Secondly, there is a problem that registration of investors in the past was manually done and we have investigated the issue with several operators. We have engaged the Institute of Capital Market Registrars to understand what the problem is. However, we have not at the moment sanctioned any capital market operator because we have gone to see what kind of challenges they have and we found out they are only having certain types of issues, mainly technical challenges.

The answer is that we have understood the problem better and we are working with the Institute to resolve this and also the identity management committee that we have just recently setup is actually looking at all these issues.

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