SEC Blames Non-Existent Identities, Multiple Subscriptions For Huge Unclaimed Dividend

The Securities & Exchange Commission (SEC) says findings show that a major cause of the bloated unclaimed dividend in the nation’s capital market was the fraudulent activities of investors who used non-existent identities, especially during the sale of Federal Government stake in the then state-owned corporations.
It would be recalled that in a bid to ensure equal distribution of equity stakes in those corporation among Nigeria’s component units, the government often set a maximum number of shares individuals could subscribe to in the companies whose shares were being offered for sale. Most of the companies, former Nigerian subsidiaries of foreign firms like British Petroleum (later African Petroleum and now Forte Oil) were acquired following the Indigenization Decree of 1977 of the then Gen Olusegun Obasanjo military government.
Such fraudulent subscribers, the commission added in a statement on Wednesday, made multiple subscriptions to public offers, which stakeholders at the last Capital Market Committee meeting (CMC) unanimously agreed “was in every consideration, illegal.”
Moreso, the commission which noting that the recommendation has been approved, given that “the wrongful acts were carried out, by the perpetrators, under false pretence” following which they may forfeit their investment.
The commission in a circular said the nation’s “Capital Market CANNOT and should not be seen to reward the wrongful acts/illegality of the perpetrators. This was with a view to ensuring the global sustainability of the Nigerian Capital Market’s Integrity and Reputation.
“The report describes two groups of investors involved in multiple subscriptions. The first group (Group A) of investors actually existed but joggled their names in different forms to enable them purchase more than the permitted units of shares on offer. While, the second group (Group B) was the class of investors that did not actually exist but used fictitious names for the purpose of purchasing more than the permitted number of shares during public offers. The report agreed that both groups had fraudulent intentions and their actions were collectively illegal.
Consequently, the CMC approved, according to a statement by Naif Abdulsalam, Head Corporate Communications of SEC: “That Group ‘A’ above should be considered for a level of forbearance by giving them a grace period up to 1st September, 2017 within which to come forward and expressly prove their individual identities, subject to highest KYC criteria, to be defined by the SEC. Those owners, whose identities are established, would then be allowed to consolidate their accounts. After the expiration of the timeframe, unclaimed dividends, traceable to this category that have not been identified and consolidated, along with their securities shall be transferred to the Nigerian Capital Market Development Fund to be managed transparently in a separate basket under clear guidelines;
ii) That since category ‘B’ refers to those securities with non-existent owners, the unclaimed dividends and related securities of this category cannot be ascribed to anyone. Therefore, both the unclaimed dividends and securities shall be transferred to the Nigerian Capital Market Development Fund referred to in (i) above;
iii) That, going forward, anybody who engages in the wrongful act of Multiple Subscriptions for the same Public Offer, shall be prosecuted;
iv) That the Market shall put in place adequate processes, leveraging on technology, towards detecting and identifying such cases of Multiple Subscriptions, in the future;
Consequently, all investor with cases of multiple subscriptions under Group (A) that are considered for forbearance should by this circular approach stockbrokers or registrars
The SEC had in a January statement said over N30bn had been paid to investors in the nation’s capital market from the backlog of unclaimed dividends, just as it promised to continue underwriting the cost of the electronic dividend enrolment until June 30, 2017, so as to further reduce the unclaimed dividends profile and curb its growth.

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