The Securities and Exchange Commission, Nigeria has called for comments and input on a proposed new rule on Unclaimed Dividends, especially pertaining to E-Dividends.
In a circular dated 29th June, 2017, the Securities and Exchange Commission announced a June 30, 2017 deadline for the discontinuance of issuance of physical dividend warrants to shareholders of public companies in the Nigerian capital market.
The deadline and discontinuance came at a time the Commission was pushing for Investors to adopt the E-Dividend system by mandating their respective accounts with their Stockbrokers or Registrars of the companies.
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The advantage of the e-Dividend was not only to enable investors collect subsequent dividends electronically but it allows for all accrued dividends to be credited to investors’ bank accounts. This will stem the rising unclaimed dividend in the capital market.
In an Investogist news report on January 7, 2021, “FG goes after Dormant bank account balances and unclaimed dividends“, it was stated that unclaimed dividends and dormant balances in Nigeria amounted to more than N895 billion.
PROPOSED NEW RULE ON UNCLAIMED DIVIDENDS (E-DIVIDEND MANDATE)
- Rules on E-Dividend Mandate:
- These rules shall apply to all unclaimed dividends below 6 years.
- All Registrars shall ensure that all mandated accounts are credited with outstanding unclaimed dividends within 48 hours of receipt of the e-dividend mandate by shareholders.
- Registrars shall forward a status report of all mandated accounts to the Commission on quarterly basis which shall contain amongst others:
- A list of requests by shareholders;
- Number of requests processed;
- Number of successful requests;
- Number of unsuccessful requests with reasons.
- Where a Registrar fails to comply with Rule 1 (b) and (c) of these rules and regulations, such Registrar shall be liable to a penalty of a sum not less than 25% of the unremitted amount and N50,000 for every day the violation continues.
The Commission stated that the justification for the rule is to serve as a deterrent to Registrars and ensure prompt compliance. These rules will also reduce the quantum of unclaimed dividends in the custody of the Registrars as well as discourage Registrars from keeping unclaimed dividends.
2. Reporting of income earned from unclaimed dividend:
- All public companies to whom unclaimed dividends have been transferred, after 15 months but less than 6 years, shall report in their Annual audited account the bank balance (s), investment (s) and the earned income on the unclaimed dividend funds, by way of note to the audited accounts. Provided that the Registrars may also be required to make other reports on unclaimed dividends as may be requested by the Commission from time to time.
- Failure by any public company to make such report shall lead to appropriate sanction, including the forfeiture of the income to the Commission for the year which the company failed to report.
- Any company that fails to make the reports as required by Rule (b) shall be liable to pay the sum of N10 Million as penalty.
The justification from the commission is that it will ensure full compliance by the beneficiary public companies and to determine the contribution of unclaimed dividend funds in the performance of the public companies.
It will be a welcome development for Registrars to report the income earned from unclaimed dividends of shareholders in their custody, the icing on the cake will be an amendment to the rule that mandates registrars to pay a part of this income as interest to the shareholders whose dividends where used to generate the income.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur