July 03, 2009 16:11 GMT
If the Nigerian Capital Market (NCM) can introduce a new process applicable to retail individual investors referred to as Application Support by Blocked Amount (ASBA), it could led to saving investors the trouble of non-receipt of return money.
This process was recently introduced in India by the Securities Exchange Board of India (SEBI), to check the trouble of non-receipt of return money by investors who took part in Initial Public Offers (IPOs) and other fund raising exercise in securities.
Under this process, the bid amount is blocked in the investor’s account at the time of bidding.
Also if and when an allotment is made against the investor’s application to the extent of money due on the shares allotted, the investors account will be debited and the money remitted to the company.
The implication of this process is that when an investor opens an account with a self certified syndicate banker (SCSB) registered with the Exchange. This bank or banks may act as Issuing Houses and such facility extended to them.
If for instance, the investor wants shares worth a N100, 000 in an Initial Public Offer (IPO), if the company allots only 30 percent (30%) of its shares to that investor, it is only the amount worth that (30%) that would be debited and the money remitted to the company in which investment is sought through an Offer.
Following this development, the bid amount remains in the investor’s account earning interest during the whole process period.
This process simply implies that an investor’s account would be debited only to the extent of shares allotted, if any amount remains, it will be unblocked, subsequently, there will be no return money and its attendant problems as in the case of so many Nigerian Offers.
It is also suggested that the Stock Exchange may register more Banks as and when they undergo the self certification process.
Also the ASBA system may help create liquidity in the Capital Market; this can be made possible because all the unblocked funds due to unalloted shares will be in the investors’ account and such idle funds apart from yielding interest can be channeled to the Market for other investments purposes.
As earlier reported by Proshare NI and published on its website April 15 2009, one case of the problem of return money was PSL Limited, Member of the Nigerian Stock Exchange (NSE) paying a N100, 000 compensation to an investor for obtaining a N1,106,721.33 return money.
A Skye Bank Plc cheque number 10007548 with account number 1770003988 and account name PSL Limited; dated January 29 2009 was made available to Proshare NI in Lagos Nigeria by a party name (withheld) to the settlement of the case resulting to the N100,000 compensation by PSL.
In this case, one Ebulue Kamsy on the Zenith Bank Plc 2007 Public Offer (PO) had accused PSL After about 10 months of the offer and confirmation of its oversubscription that PSL had collected the return money of N1, 106,721.33 on warrant No. 003005014465 accrued to him.
“The warrant was presented to Oceanic Bank for clearance, but the cheque was returned. It was stated that the cheque was a duplicate; meaning that the same cheque had earlier been cleared.
On further enquiry, it was revealed that PSL had earlier collected the warrant and cashed the money through Skye Bank Plc account” Kamsy affirmed.
However, as at the time of writing this piece, Proshare NI could not confirm if the Block Amount has started working well in India; where it was recently introduced.