SEC Lists Negative Impacts of Unclaimed Dividends on Investments
The Securities and Exchange Commission (SEC) has said the continuous retention of dividends by companies has a great potential of distorting the true financial position of companies and misleading investors and other members of the public.
The apex regulator of the nation’s capital market also said the huge amount of unclaimed dividends could discourage foreign investment as well as discourage members of the public from staking their funds in the market.
The Director, External Relations, SEC, Mr. Henry Adekunle Rolands, stated this at the 2018 Listed Companies Dividend Payment Awards ceremony organised by Third Observers Nigeria Limited in Lagos.
Speaking on ‘Market initiatives being led by SEC towards curbing unclaimed dividends in the Nigerian capital market,’ Rolands said non-receipt of dividends discourages investors in stock market and encourages them to search for alternative investment outlets such as the real sector and money market.
This development, he said, denies public companies the opportunity of cheaper source of finance.
While acknowledging the high level of unclaimed dividends in the market, the SEC chief cited some of their causes.
According to him, a careful assessment of the current practice of printing and mailing dividend warrants as means of paying dividends revealed that, some of the causes of unclaimed dividends are associated with shareholders, while others are associated with registrars, stockbrokers and postal system.
He said causes associated with shareholders include incomplete or wrong mailing addresses when completing application forms, thus making it difficult to deliver dividend warrants; non or late communication to the Registrars, when change of address occurs, thus making the dividends warrant returned when posted; provision of an address in a place that cannot be accessed.
“Also, unclaimed dividends arise where the shareholder is unaware of such declaration of dividends; deceased shareholder without a Will and his/her family did not contact the company’s registrar to supply information that will assist withhold his/her dividends; where the next-of-kin is not provided at all or where the next-of-kin is not aware of the shareholding of the deceased shareholder equally lead to unclaimed dividends,” Rolands said.
On the causes associated with registrars the SEC director cited: wrong adoption of shareholder’s address from the application form due to a mistake in picking of post office number or street number; inadvertent issuance of dividend warrants to the wrong beneficiary; unintentional omission of some shareholders’ names while issuing dividend warrants; late (or non posting at all) of dividend warrants by some Registrars due to manipulative tendency to benefit from the funds before payment; inefficient and poor data management capability of some Registrars, leading to inadequate update of investors’ personal data.