Easy ways to recover N52bn unclaimed dividends Several reasons have been adduced for the failure of investors to get their dividends when due, but the process of claiming the funds is no longer as complicated as it was in the past, SIMON EJEMBI writes One day in 2006, Mr. John Adikpe, then an undergraduate, walked into a branch of Zenith Bank to withdraw some cash. Before he left the bank, the official who attended to him convinced him to invest in the bank’s stocks. He didn’t think much about it. “Zenith Bank is my dad’s bank and I go there quite often for one transaction or the other. So, when the man suggested that I buy the shares, and seeing that I had some money I wasn’t planning to use right away, I did.” Two years later, the world found itself in the grips of a financial crisis that sent markets plunging, leaving investors to count losses. And Adikpe lost track of his investment. He knows there has been at least a bonus issue by Zenith Bank since then, but he has no clue about how many shares he currently has, neither does he know the current value of the shares. Also, he has not received any dividend from the bank for more than three years, even though the bank has sustained dividend payment. Adikpe is one of many Nigerians, who have failed to keep proper track of their investments in the equities market. Unlike some, however, he has an idea about why he didn’t get his dividend payments. “I don’t think it is the bank’s fault. It is the postal address I gave them. I have changed it but I have not informed the registrars, who pay the dividend,” he says. The story differs from shareholder to shareholder. For instance, some investors bought shares in once prominent banks like Oceanic Bank International Plc and Intercontinental Bank Plc as well as Enterprise Bank, which have all been acquired by other institutions. An investor, who bought the shares of Oceanic Bank, says although Ecobank Transnational Incorporated, which acquired Oceanic, has sent her a mail detailing the number of the lender’s shares she now has, she has yet to find the time to go and resolve issues regarding the payment of her dividend. Her attitude is the same when it comes to her holdings in other companies as a result of the over N500,000 she invested in equities mostly through public offers in January 2009 – just before the market crashed. She says she has yet to get over the traumatic experience of watching her investment “go to waste.” Whatever dividend the companies have paid, she has not received as she has also changed her address without notifying the respective registrars. “It was so painful,” she says. “Of all the companies that I invested in, it is only International Breweries’ shares that have appreciated in price. I only went back to invest in the market this year after it went up again.” Discouraged by huge the losses suffered as a result of the crisis, several investors are not be bothered about the status of their holdings in equity. The Chief Executive Officer Enterprise Stockbrokers Plc, Mr. Rotimi Fakayejo, says there are many more people in this category. He, however, says that in a country where the majority of the people live below the poverty line, it is tragic for people to ignore their benefits. Fakayejo, who explains that the level of unclaimed dividends has decreased significantly due to changes in the market, says another scenario involves investors who have died but their beneficiaries or next of kin have not come forward. He notes that a lot of investors are discouraged by the belief that the process of resolving the issues is as complicated as it was way back when several shareholders did not even have bank accounts and the cost of accessing the registrars was considered too high. These, and other issues, led to a pile up of unclaimed dividends, regardless of efforts by the regulators and operators of the capital market to distribute the funds to investors. The total value of unclaimed dividend as of June this year is N52bn, according to the Chief Executive Officer, Institute of Capital Market Registrars, Dr. Walter Ogogo. Not all of the blame for the pile up of unclaimed dividend lies with the investors, however. At the second quarterly meeting of the Capital Market Committee in Lagos, stakeholders admitted that issues such as the refusal of several banks to make the payment of dividends into savings accounts was an obstacle. They agreed to work on the problem and engage in more investor education, which is desperately needed in the face of the low financial education in the country. The Director-General, Securities and Exchange Commission, Ms. Arunma Oteh, says the support of the Central Bank of Nigeria is vital to eradicating unclaimed dividends, just as the conclusion of the share dematerialisation process. She calls on the CBN to get all the banks to allow retail investors to receive their dividends via their savings accounts in addition to the current accounts. “We know some banks already do this. But we hope that the central bank will get to a point where it can direct all banks to allow this to happen. It is very critical even as we tackle the unclaimed dividend issue,” Oteh says. The SEC DG explains that the dematerialisation of share certificate will also go a long way in tackling the problem of unclaimed dividends. Dematerialisation is the process of converting paper certificates into an electronic format, after which official records of the shareholders of all listed companies will be held and maintained by the Central Securities Clearing System. While efforts are being made to improve the situation, away from the debate over who is at fault and what should or should not be done, Ogogo says investors can still access their dividends without undue hassles. “The process of claiming dividends is simple and straightforward, but it involves people coming forward,” he explains. “It is only when issues are brought to our notice that we know. But the process of getting the dividend is simple. If anybody comes to us to change his address, it is a straightforward thing,” he adds. But what exactly does a shareholder do upon the realisation that his or her dividend warrant has not been received? Resolving the unclaimed dividend issue The Managing Director, Prominence Securities, a dealing member of the Nigerian Stock Exchange, Mrs. Modupe Dada, says upon the discovery that the dividend has not been received, the investor has two options. One is to write a letter to the registrar authorising the stockbroker to collect the dividend on the shareholders’ behalf. In writing the letter of authorisation, the investor must ensure that the signature on the letter matches the signature on the registrar’s files. “What is most important to the registrar is that the person giving the instruction is the same person who signed for those shares to be bought in the first case,” she says. When that is done, the registrars will either issue new dividend warrants or revalidate the old ones. According to Dada, the process of revalidating a dividend warrant can be as short as a week or months, depending on the registrar. Ogogo says it takes six months for a registrar to issue new dividend warrants because they have to ensure that the initial warrant, which may have been lost in transit or sent to the wrong address, is no longer valid. This, he adds, is because there has been cases where two warrants have been used, leading to multiple payments. The other option, especially for shareholders who are retirees and have the time, is to go to the registrars on their own. “It means they will go to each of the registrars, identify themselves and will be required to sign, and that is it. So, it can be done,” Dada says. “Many retired people who are not doing anything have the time and they do it. They set out and they actually take it as a job to put things right and go from registrar to registrar, and they are attended to. You don’t have to use a broker,” she explains. Aged shareholders Ogogo, who acknowledges that some shareholders may be too old to visit the registrars, explains that such investors can opt to write to the registrars instead. “Even if you cannot come to the office of the registrars, all you have to do is to write a letter to the registrars, and provided your signature is okay, they will work on your request,” he says. Holdings in merged, acquired companies According to Ogogo, investors who have holdings in companies that have been acquired by others, or those that have merged with other firms can also easily verify the status of their shares, reconcile the numbers and resolve issues regarding the payment of their dividends. He explains that just like the other scenarios, it involves going to the registrars of the merged entities or that of the company which acquired the firm in which they have shares. For instance, in the case of Enterprise Bank, which was acquired recently by Heritage Bank, investors in the former will have to approach the registrars for Heritage Bank, provide evidence that they have holdings in the acquired lender and the registrars will attend to them. Deceased shareholders As Fakeyejo notes, a contributory factor to the accumulation of unclaimed dividends is the failure of the relatives of deceased shareholders to come forward. Should they want to do so, Ogogo says the process of transferring the ownership of the shares and payment of the dividend is straight forward as well. “It is a simple process. When a shareholder dies, his legal representatives will normally write to say, ‘Look, this person is dead and we want to take possession of his or her shares,’” he says. According to him, an individual who inherits the shares of a deceased shareholder has to go to the probate registry to get a letter of administration if the investor died without leaving a will. If he died with a will, then what they have to get is a probate letter. He adds, “Apart from that letter of administration or letter of probate, a banker’s confirmation of the signatures of the persons whose names appear on the letter of administration will be required. “This involves going to the bank to request a confirmation of signature addressed to the registrar in question. The registrars will also require a death certificate to confirm that the investor is dead.” How long can an unclaimed dividend remain active? According to the Companies and Allied Matters Act, a dividend becomes statute-barred after 12 years. Ogogo explains that, in that case, everything in that dividend account automatically reverts back to the company. “The law says the shareholders or investors cannot sue on those dividends again. So, it is implied that they have almost forfeited it,” he says. The ICMR boss, however, observes that this does not in all instances mean that the investor can no longer request payment of the dividend. “Experience has shown that there are some accounts that are statute barred, but the individuals suddenly show up and they are paid,” he notes. Stressing that that is not guaranteed, he says, “We know that there are a few cases were companies just allow some registrars to maintain those (dividend) accounts because they don’t want to bother themselves with it. So, people can still come in to collect their money.” Electronic dividend payment Troubled by the menace of unclaimed dividend, which the President, ICMR, Mr. Bayo Olugbemi, says is up to 24 per cent of dividend paid some years back, and the outcry by investors, SEC, in collaboration with other stakeholders, introduced the electronic dividend payment system. It is meant to address several challenges in the dividend payment process, including situations whereby dividend warrants get lost in transit, by allowing the direct payment of dividends into the shareholders’ accounts. A major challenge is the issue of wrong addresses and the complications of changing the residential addresses every now and then, considering that many Nigerians do not own their own homes and are forced to move frequently. It is a problem that Dada believes the e-dividend system will solve. “By adopting the e-dividend payment system, there will be no need to post your dividend warrant to you; you get it in the bank straight. It doesn’t go stale and it doesn’t go missing; you won’t have cheques that bounce or are wrongly drafted and all of that,” she says. According to Ogogo, e-dividend payment also protects the investor against fraud. He describes the process of applying for e-dividend payment as very simple. “You go to the registrar, fill an e-dividend or e-mandate form as a way of telling the registrar that, ‘Look, this is where I maintain my (bank) account and subsequently, this is the account you should be paying my dividend into. I don’t need physical dividend warrant.’ “In order to adopt that message without any other question, we will ask the investor to go to his bank to stamp the form and sign as a way of confirming that what he is claiming is correct.” Ogogo says once that is done, the shareholder’s directive will be adopted and the investor will start receiving his or her dividends through the account. That is regardless of changes in his addresses, among other things. The National Coordinator, Independent Shareholders Association of Nigeria, Mr. Sunny Nwosu, says in an exclusive interview that the introduction of e-dividend payment is really working. He explains that it has led to a major reduction in the level of unclaimed dividends. In June, Olugbemi told journalists ahead of the ICMR annual conference in Lagos that, indeed, the efforts of regulators and registrars, including the introduction of e-dividend payment, had led to a reduction in unclaimed dividends to 5.05 per cent of total dividends declared in the last 10 years. “Some years back, the percentage of unclaimed dividends was around 24 per cent. But we have reduced it to below 20 per cent, 10 per cent and 5.05 per cent as of last December. We are still doing more to bring it further down,” he had said. Despite its positives, Ogogo says only 30 to 40 per cent of investors have adopted e-dividend payment. The rest are exposed to several of the challenges highlighted above and are likely to have theirs add to the pile of unclaimed dividends in the future. According to Nwosu, while investors who have adopted e-dividend payment get paid instantly, those who have not may wait for months. “When you are hooked up to e-transactions, the day of dividend payment, the money will go to your bankaccount. If you are not hooked up, you will have to wait for the e-dividend payment to be sorted out before you are paid,” he explains. The trio of Nwosu, Ogogo, and Dada all agree that there is the need for more enlightenment. Nwosu says, “Since it is not compulsory to convert to e-dividend, we need to educate people about it. “I can assure you that as far as I and the association are concerned, e-transaction is the best thing to happen to the capital market in this country.” On his part, Ogogo says, “We are looking at a situation when most people are aware of the advantages of the e-dividend payment system and they will adopt it. Nobody will want his dividend warrant to get stuck somewhere or be open to fraud.” Complaints For investors, who are aggrieved at the attitude of the registrars or whose complaints are not properly addressed, the President, Association of Stockbroking Houses of Nigeria, Mr. Emeka Madubuike, says there are structures in place to resolve their issues. He says, “If there is any shareholder who is not being attended to, the first thing is for the shareholder to get in touch with the management of that company to make a complaint. “If within a reasonable time he doesn’t get the desired attention, the platform of the Institute of Capital Market Registrars is there; he can escalate the matter to the institute, which is like a trade group, by complaining to the registrar or CEO. If that still doesn’t yield any fruit, then the shareholder can get to the Securities and Exchange Commission.” According to him, a reasonable time is from 10 days upwards. Madubuike, however, stresses that considering that the problem of unclaimed dividends is a major issue for capital market stakeholders, it is unlikely that the registrars will fail to attend to investors who have problems. “The registrars are as concerned as every other stakeholder and are working for the purpose of ensuring that the amount of unclaimed dividend is reduced,” he says. Long-term view Ogogo, who insists that capital market investment is long-term, has a message for people, who feel that the dividends paid are negligible and have not bothered to claim them. “Little drops make an ocean. Collect what rightfully belongs to you,” he advises. Copyright PUNCH.All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH. 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Posted on: Fri, 26 Dec 2014 00:45:15 +0000
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