‘We need to demonstrate that there is a lot of value in listing’
Lamido Yuguda, Director General, Securities and Exchange Commission (SEC) spoke to journalists during the first virtual Capital Market Committee (CMC) meeting held recently. Iheanyi Nwachukwu brings you excerpts from the DGS responses to questions.
Can you outline your strategies in dealing with issues of unclaimed dividends?
On unclaimed dividend, this is something that we are actually looking at very carefully. This problem is in two folds. One is that we have the existing stock of unclaimed dividends, and the second is to prevent the accumulation of the unclaimed dividend in the future. Now we have the e-dividend and the mandate at the moment which substantially takes care of the accumulation of the unclaimed dividends in the future.
Even though it is not working perfectly but substantially it has reduced the accumulation of unclaimed dividends. But the task now is to work with the registrars, to make it easy for shareholders on boarded onto the system. Although there have been some complains in the capital market that the shareholders are finding it difficult to key in and most probably the registrars are not working really quick enough to get investors on boarded but we are going to tackle these issues.
Now the existing stock of unclaimed dividends, some of these have been returned to the companies and a little percentage is still with the registrars. These are issues that we are also looking at and we will come out to the market very soon with a statement. This is all for now.
On Know Your Customer (KYC), using the stockbrokers the KYC for identity management, this is an issue that is quite broad, we listened to Nigerian Stock Exchange (NSE) and Central Securities Clearing System (CSCS) and the kind of work they are doing, we need to look at the entire issue. But this is something that is really at the fore front, as we have been discussing it, we have the National Identity Number, the BVN, all capital market transactions start off from a bank account and end in a bank account and so on. On the issue of information the stockbrokers have on their clients, it is something that we will also need to look at.
A lot has been done and more will still need to be done, the stockbrokers and even within the stockbroking community –the Association of Stockbroking Houses – working with the CSCS and the Registrars, we are all working together to get this issue resolved.
There is a backlog, the first thing or one of the key important things is to make sure it doesn’t keep accumulating and everybody has a part to play, clients should give their details including the bank account number, so that the registrars can promptly credit them.
On the issue of backlog, as you are well aware the Commission directed to a good extent the registrars complied, by making repeated publications, having information readily available on the website of the offices, encouraging clients even with multiple subscriptions, because am aware in the time past the Commission had to give like two extensions, allowing multiple subscriptions to be unified so that all these things can be captured. I won’t dwell on the issue but it is a consented effort and we will continue to make sure that the unclaimed dividends issue gets reduced.
Whether it is the issue of unclaimed dividend or the issue of multiple application, all the issues are around identity management, and the Commission is really working to see that the issue of identity management is resolved in the Commission, there is a committee that has been setup, which is working with other stakeholders, to come up with a single form to be used by all the capital market operators and once that is done, the issue of unclaimed dividend will be an issue of the past. We already have an existing issue of unclaimed dividend, that is the legacy issue and that is where there is a problem.
The legacy issue is also connected with this issue of multiple subscriptions and there are a lot of investors who used different accounts and some of them cannot even remember the name they used in applying for shares is the issue. The other issue is in respect of the new issue, so what the Commission has done is that the Commission has given the directives to all stockbroking firms to get their clients update information in respect to BVN and account number.
During the boom in the capital market there was no BVN but now there is BVN which the Commission is also trying to use for identity management. The Commission has directed all stockbroking houses to get their client to update their information in respect to BVN and account number. The information will be sent to CSCS, CSCS will send same information to the registrars and the registrars will use in payment of dividend.
What is the SEC doing to support the market during this pandemic?
COVID-19 presents real economic crisis, not only for Nigeria but all over the world. This is because we have seen massive drop in output, we have seen a collapse in the price of oil; we have seen essentially a halt in economic activities in many, many respects. Now what can we do?
First is to make sure that the capital market and the SEC continues to work. The SEC has been open for business throughout the pandemic and also the major operators in the capital market have been working remotely, so we have not really had a stop in the capital market activities. What can we now do? The thing is that even before the pandemic the capital market really needed a kind of revamp. We need to attract more investors into the market, and we also need to attract more issuers to the capital market. Now what do you do to attract more investors? You need to demonstrate to investors their investments are very secured and long term the returns are really worth their investments, but we will be able to generate returns that are above the inflation and you can only do this when you invest in the stock market because you cannot have these kind of returns except when you invest in the market.
For the issuers also, we have seen a lot of issues coming to the market, but we know that there have been a few cases of companies that have been delisted from the market, we need to demonstrate to issuers that there is a lot of value in an issuer listing in the market and also listing securities periodically in the market.
We are going to continue to attract investors by making sure that the market is a fair play and instruments traded in the market are fairly valued and in the end investor is actually going to gain by having their money in this market. For issuers, we are going to make sure that the benefits of listing in the market far outweigh walking to a bank to borrow money. On the issues of pension funds, pension has been accumulating funds at a very fast rate and essentially these funds are compulsorily deducted from the salaries and wages of workers.
Pension Funds Administrators ( PFAS) are supposed to invest significant a significant amount of their portfolio in the capital market but that is really not happening at the moment. Pension funds are very much underweighted to what actual allocation to the Capital market should be, the capital market needs to understand that there is this pool of money waiting to be invested in the market, but what is stopping pension funds from investing in the capital market?
We need to have that evaluation and that dialogue with that important class of investors so that we can attract as much of the pension funds as possible. If we achieve that, we will see that even with the pandemic, the capital market will really soar in Nigeria. Right now if you look at the number of CIS accounts, with less than 400,000 CIS accounts for a country that has a population of almost 200 million, that tells you that there is really a lot of potential. It is really left for the capital market to show that there is value in this investment and also there is protection for the investor.
What does the SEC hope to do regarding various issues of infractions?
Yes, we have a number of cases that we have inherited. We have been working right from the first day to resolve all cases of infractions. Really, our aim is to have as little as possible the infractions in the market. We intend to work with all Self-regulatory Organisations (SROS) and all the various Capital Market Operators (CMOS) to make sure that infractions are reduced to the barest minimum. Where they happen, we have a very strong resolve to really fight infractions to mete out sanctions as appropriate as quickly as possible.
We have a number of cases that we are looking at, we are reviewing each case in a case-by-case basis, and we are working to make sure that these cases are resolved in the shortest possible time. However, make no mistake about it; we have a zero tolerance for market infractions. We need a capital market that is actually very fair; fair to investors, a market that is not really tilted or biased one way or the other or in favour of any market operator that seeks to make a gain at the expense of investors. We have a fiduciary duty to the people that we serve and it is only by doing that they will know that this market is for them. If you look at the statistics the average age of the client is over 50 years.