Rising Unclaimed Dividends; A Tale of Idle Investors’ Funds

December 3, 2021/CSL Research

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Based on news reports, the Director-General of the Securities and Exchange Commission (SEC), Mr Lamido Yuguda, expressed dissatisfaction with the process associated with the release of unclaimed dividends to shareholders by capital market registrars and listed companies. According to the DG, some of the capital market operators have adopted several tricks to frustrate shareholders from enjoying the benefits of the e-Dividend Mandate Management System (E-DMMS) platform. He spoke against the practice of making selective payments and distribution of dividends to shareholders. He noted that failure to desist from such actions by the market operators will attract sanctions and penalties.

The issue of unclaimed dividends in the Nigerian capital market has been on the radar for over a decade, with several efforts to ensure that dividends are claimed. In 2015, the Securities and Exchange Commission (SEC) issued circular directing company registrars to remit to the paying companies; unclaimed dividends held up to 15months. Similarly, the Companies and Allied Matters Act (CAMA) 1990 (revised 2020) provides that companies should publish the list of unclaimed dividends with the names of all intended beneficiaries. In 2015, the SEC had introduced the electronic dividend payment platform to enable an automated deposit of dividends to investors’ bank accounts to help mitigate the incidences of unclaimed dividends. After which, unclaimed dividends could be ploughed back for investment purposes. However, unclaimed dividends have been on the rise. As of the end of 2020, the total value of unclaimed dividends stood at N170bn from 158.44bn in 2019 and N120bn in 2018.

More recently, the Finance Act 2020 allowed the federal government to securitize unclaimed dividends and dormant account balances of up to six (6) years in the country. As expected, the policy generated public outrage. In our view, the E-DMMS platform is a key to resolving unclaimed dividends if investors are properly educated. In essence, we laud the implementation of the E-DMMS platform, but we believe there is the need for a more seamless process of reconciling investors’ details, and a network of agents that could take the message of its implementation to places other than Abuja, Port Harcourt, and Lagos. The regulator also needs to enforce sanctions on erring registrars.

 Proshare Nigeria Pvt. Ltd.

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