The Director-General of the Securities and Exchange Commission (SEC), Lamido Yuguda, says by third quarter 2022, the e-dividend portal will be up and running thus fast tracking collection of dividends by shareholders. In this interview with journalists, he also spoke on a wide range of issues. BENJAMIN UMUTEME reports.
The Capital Market Committee meeting was recently held. What are some of the highlights from the meeting?
The Nigerian capital market community held its first Capital Market Committee (CMC) meeting for the year recently. The webinar provided a platform for interface amongst capital market stakeholders. Issues germane to the development and orderly conduct of the capital market were extensively discussed. Participants included the Executive Management of the Commission, Heads of Technical Committees and working groups, Heads of market infrastructure and Observer groups. The meeting provided an update on the recent performance of the Nigerian economy and the capital market, including key activities of all the Exchanges. Some of the major milestones achieved from the last CMC meeting that were highlighted include: The successful conclusion of the extensive review of the ISA 2007 with a view to passing the Investments and Securities Bill 2021 into law in 2022; Review of the Nigerian Capital Market Masterplan, which the SEC will in the nearest future invite market stakeholders for the launch of the revised Masterplan; Submission of a Report to the Honorable Minister of Finance, Budget and National Planning on the need to establish a National Savings Strategy as one of the key initiatives to enhance capital formation by mobilizing domestic funds for investment to drive economic growth; and Collaboration with the Standards Organization of Nigeria (SON) to develop and release standards and grading for the trading of Commodities while discussions with the London Bullion Market Association (LBMA) have been initiated to ensure the standardization of Nigerian gold in line with international best practice.
Members were updated on the coming to force of the new transaction fees on trading fixed income securities in the secondary market. With the growth and maturity of the debt market, the Commission introduced a regulatory fee structure on secondary market transactions in debt instruments, which took effect from January 1, 2022.
The expiration of the federal government’s 2011 Companies Income Tax Exemption Order was discussed. The exemption, which expired on January 2, 2022 incentivized issuance and investments in sub-national and corporate bonds.
Another major issue in the market discussed is the floating and marketing of Private bonds by CMOs for states. The Commission informed the market that it has been engaging stakeholders, including the DMO and FMF of the inherent risk in these securities.
Challenges in the Identity Management initiative especially the manual and cumbersome EDDMS process and the fact that some Registrars don’t upgrade their systems to provide self-service function were also deliberated upon. It is hoped that the process will be automated by Q3, 2022.
Can we say the market is expecting automation by the third quarter?
Yes, I said that the automation of this process would be concluded by the end of the third quarter this year. This has actually been ongoing over the last one year and we are expecting and working with NIBSS to ensure that by the end of the third quarter the automation of the EDMMS process would be completed.
Were there any deliberations on the Capital Market Progress Report on Nigeria’s Anti Money Laundering/Counter Financing of Terrorism (AML/CFT) Implementation roadmap to address Mutual Evaluation Report (MER) deficiencies?
Yes, it was also discussed. Members were informed that we had one year observation period to address deficiencies or stand the risk of being publicly placed on the “Grey List” Jurisdictions and subsequently placed on the FATF list of ‘High Risk’ jurisdictions. The SEC encouraged all Capital Market Operators to contribute to the important work of compliance with AML/CFT Regulations. The Commission reassured the market that it will continue to enhance the existing regulatory framework guiding the operations of the market by keeping pace with the evolving changes in market practices, especially with the advent of Financial Technology which has significantly altered the ways and means of transacting business in the capital market.
Unclaimed dividends has always been an issue; many shareholders have various complaints. What is the SEC doing to curb it?
The reason why the number may be going higher is because a lot of investors have not mandated their accounts. Dividends are now distributed electronically, so dividends go directly into the investors account and if everybody mandates their accounts there would be little unclaimed dividends in the system. SEC has invested a lot of resources, has embarked on a number of programmes on investor education to ensure that people mandate their accounts. This process is still pen and can be done with the registrars, forms can be obtained from the banks too and it’s a very simple process. We also have on our website a tool that assists the investors to determine any unclaimed dividends that they have. And I would encourage everyone to take advantage of these tools or to directly speak to the complaints section of the SEC and we would guide that person appropriately. You should remember that unclaimed dividends have now gone into the new Unclaimed Dividends Trust Fund that is managed by the DMO. So there are lots of developments in that area and SEC is now not the only party that has this unclaimed dividend. There are a lot of people who are getting their unclaimed dividends paid to them from the Trust Fund and we will not immediately have the information.
There have been several complaints by Nigerians on methods of loan recovery by some companies. Does SEC have any means to check the activities of these people?
Any investment scheme that is not registered by the Commission is not a bonafide capital market operator. They are unregistered and are Ponzi schemes. They are not licensed by the SEC and we always ask investors to check with the SEC, we have a list of all licensed operators on our site and if you are in doubt call our complaints desk and we would direct you as appropriate.
We know there is a proliferation of Ponzi schemes in Nigeria. Some even claim to have registered with the SEC and they have been existing for some time. Do these companies have capital base before they are allowed to operate?
The SEC does not register any Ponzi scheme, the SEC only registers bonafide operators in the capital market. A Ponzi scheme by definition is an unlicensed, unregistered operator that is taking people’s money mostly with the intent to defraud them, and investors should shun these schemes. The SEC does not register any operator that is a Ponzi. The SEC can register an operator and that operator could in the course of his business begin to show signs of these traits. The SEC has adequate mechanism to deal with this through our monitoring and enforcement mechanisms, so this should not be confused with a Ponzi scheme.
Has the introduction of the electronic dividend system, helped in checking cases of unclaimed dividends?
It has significantly helped to reduce the unclaimed dividend. A lot of people have been able to get back their dividends. You know the Nigerian capital market is a very big market and every year companies declare dividends and Nigerian investors benefit from it. The issues are we have some people who are not coming forward to get their dividends because they have not mandated their accounts, we have cases of multiple subscriptions which the Commission has made a lot of efforts to resolve. I think these are the reasons why we still have unclaimed dividends in the system.
Does the FG still have access to the unclaimed dividends fund?
There is an Unclaimed Dividends Trust Fund at the moment and it has a framework whereby dividends that have not been claimed over a certain period are transferred to this Fund and it will be utilized in line with the investment objectives of that Trust Fund. However, if anybody comes forward at any given time to claim their unclaimed dividends, this fund will be able to repay these dividends without any problems.
