Post Views: 258 Nigeria’s Securities & Exchange Commission (SEC), on Wednesday, March 13, 2019, unveiled seven proposed rules as part of its regu...
Nigeria’s Securities & Exchange Commission (SEC), on Wednesday, March 13, 2019, unveiled seven proposed rules as part of its regulatory function of ensuring an orderly market.
The proposed E-Dividend Mandate, one of the draft rules requires registrars to ensure that shareholders who have completed the electronic dividend mandates (mandated shareholder accounts), supplying their bank account numbers are credited with all outstanding dividends within two days.
This rule, when approved is expected to significantly drive down the quantum of unclaimed dividend still in the coffers of registrars, despite regulatory efforts to drastically reduce it.
Non-compliance with provisions of the Rules by any registrar shall attract no less than N1m penalty and an additional sum of N20, 000 for every day the violation persists, in what the commission says is to “serve as a deterrent to registrars for possible violation of the rule.”
Registrars have been accused of deliberately stalling efforts to considerably wipe out the unclaimed dividend menace, including the free e-Dividend mandate whose deadline has been extended for the umpteenth time.
This reporter in line with the SEC’s campaign to reduce unclaimed dividends, which at the last count stood at N100bn, completed the forms and duly submitted to registrars concerned through a stockbroker. Of the four mandates submitted, only Datamax, registrars to GTBank has credited his bank account with the backlog of unclaimed dividend, warrants for which were unpaid into the bank, never received.
The proposed rule, which requires registrars to forward status reports on all mandated shareholders accounts on a quarterly basis, the SEC believes, “will increase the rate of compliance by registrars and help to reduce the quantum of unclaimed dividends.”
The proposed rule also states that where a shareholder provides a Bank Verification Number (BVN), Bankers’ confirmation shall not be required before the accounts are mandated by the registrars.
It is also expected to help “the Commission monitor the level of compliance with the E-Dividend Mandate Management System (eDMMS), besides avoiding unnecessary delay in mandating shareholders’ accounts.”
The commission also proposed a rule requiring registrars to transmit shares of a deceased shareholder within three weeks of receiving the request from the Administrators/Executors, provided Letter of Introduction from the Administrators/Executors, introducing themselves as the legal representatives of the Estate is presented.
Such letter, which shall also indicate the names, addresses, signatures and BVNs of the individual Administrators/Executors, must be accompanied by original Death Certificate from the National Population Commission (NPC) for sighting.
Also to be included for sighting or the certified true copy from a Notary Public is the Original probate letter or Letter of Administration; copy of newspaper advert placed by the Court or Gazette; or any evidence of ownership of the investment. This include: the CSCS statement(s) of the deceased, original share certificates, dividend stub or dividend warrants or bank statement(s) showing receipt of dividend(s) into the account(s) of the deceased.
Where the Administrator/Executor cannot provide these requirements, however, the rule requires the registrar to demand “confirmation through insurance, indemnity or interview.”
For transmission of shares, the rule allows registrars to charge 1% of value and 5% Value Added Tax for share valued at N5m and below; 0.5% for shares more than N5m, subject to a maximum of N200, 000.00, as well as 5% VAT.
To confirm Probate/Letter of Administration, registrars are to charge fees not exceeding N12,000.00; not more than N200 per certificate in the case of dematerialization; same for every request in the case of change of Address, Name and Mandate. Mandating shareholders account for e-Dividend Mandate Management System shall also not attract more than N50 per account; just as update of Signature Capture/Scanning will now go for N200 per signature.
The commission is also proposing a three-working day turnaround time for processing all requests for replacement and update dematerialization; two days for Change of Address/Name/Mandate (with complete documentation).
Update of Signature Capture/Scanning is now to happen within 24 hours; all of which it says is to “ensure standardization and efficiency in the transmission process, thereby minimizing conflict, protecting investors and maintaining the integrity of the market.”
The commission re-exposed its proposed rules on direct cash settlement which first published in January 2018, in what it said was to reflect the new amendments for the information of the public.
It defined Direct Cash Settlement as a process of paying proceeds of trade carried out on behalf of a client into his/her/its designated bank account directly by a clearing and settlement entity.
Client are expected to provide its/his bank account details through its trading member to an approved clearing and settlement entity for purpose of direct cash settlement, who shall provide same, including BVN to an approved clearing and settlement entity for purpose of direct cash settlement.
Settlement of all trade shall be made by direct payment into the client’s account within the clearing and settlement entity’s stipulated settlement cycle and where a client does not provide account details, the dealing member shall not execute any sell trade on behalf of the client.
Should a dealing member execute a sale trade without account details of the client, the clearing and settlement entity is to ensure that such trade is cancelled before the settlement day.
However, “where the client opts out, the trading member shall notify the clearing and settlement entity prior to the settlement day of the trade Where a client opts out, the dealing member shall notify the clearing and settlement entity not less than three business days prior to executing any sale trade on behalf of the client.
While violation of the rule by an Exchange, Clearing House or Trading member, shall attract N1m penalty, in addition to any other sanction the Commission may impose, while a clearing and settlement entity shall be liable to a penalty of not less than N10m in addition to any other sanction which the Commission may impose.
In addition, any stockbroking firm that settles a client’s trade outside the client’s account shall be liable to a fine of not less than three times the value of the amount settled, just as the erring stockbroker shall be liable to a penalty of not less than N1m and a fine of not less than three times the value of the amount settled, in addition to any other sanction the Commission may impose.