“Investors should
be educated to complete separate forms for each shareholder account number, as
upload of e-Dividend Mandate Forms shall be on the basis of individual
shareholder number and company of investment indicated by the investor on the
physical e-Dividend Mandate Form.”
The above was contained in a circular issued by the Securities and
Exchange Commission (SEC) to all registrars on the Electronic Dividend Mandate
Management System (e-DMMS) portal.
The portal was the product of collaboration between SEC and the Central
Bank of Nigeria (CBN) to address the persistent rise in unclaimed dividend in
the country. Though SEC had introduced electronic dividend some years ago to
address this problem, the trend had remained the same, as only few investors
embraced e-dividend.
E-dividend was good, but the process was discouraging to investors. A
critical aspect of the e-dividend mandate procedure was the verification of
investors signature and account details. To do this, the investors have to
obtain a banker’s confirmation of signature letter to the registrar. The main
challenge was that, an investor with shares in different companies, with
different registrars, would need separate Bankers Confirmation letter addressed
to each registrar. This definitely is tedious and time consuming. To compound
this, the banks charge about N1000 for each of such letter. Thus investors,
especially those with small shareholdings, were discouraged from enrolling for
the e-dividend.
Thus the e-DMMS portal was introduced to address these challenges. But
as it is, the objective of this laudable initiative may not be achieved. The
most imminent threat to the e-DMMS is lack of education and awareness. As
indicated above, SEC indicated the need for investors to be
educated, but it was silent about who should or who would educate them. Is it
the registrars or the banks, or even SEC itself? Nobody knows.
Given that the e-DMMS is primarily a capital market issue, and a
solution to an industry problem, SEC or the Capital Market Committee, led by
SEC should be responsible for the education of investors. Experience has shown
that without regulatory leadership, capital market operators especially
registrars are usually not committed to industry-wide initiatives like the
e-DMMS. They may agree with the regulator, but when they consider the cost of
promoting such initiative as we as the infrastructure they have to set up to
implement it, they would foot drag about educating investors.
Implementing the e-DMMs as mandated by SEC and CBN implies registrars
and banks, incurring significant expenses to equip their branches to access and
operate the portal. Thus they cannot be trusted to promote or educate
investors.
Secondly, the circular issued by SEC on September 22nd on the
e-DMMS by Sec is technical for the average retail investor, with gaps and
issues that require clarifications that can only be adequately provided by the
regulators. In addition to this are certain aspects of the process which were
covered by the circular.
Thus, if the SEC is really committed to the success of e-DMMS and really
want see a massive adoption by investors, it would have to do more than the
issuing circulars to registrars over the initiative.
Source: Vanguard Business-By Babajide Komolafe
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