SEC, investors and the e-dividend mandate portal

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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.