By Goddy Egene
Before the stock meltdown last year, investing in stocks had become very popular. The interest in stock investing and awareness about the stock market increased in 2005 when banks embarked on massive promotion of their offers to raise funds for meeting the N25billion minimum capitalisation.
People, who ordinarily would not have shown interest in stocks, were swayed by the creative adverts and unprecedented promotion embarked upon by the banks to market their offers.
By the end of the banking consolidation, patronage of the stock market by investors grew from an estimated three million shareholders to about 10 million shareholders. But shortly after, some of the investors who put their hard earned money in some of the stocks began to regret ever staking their funds. This development followed the delay in receipt of their share certificates and sometimes dividend warrants.
The situation was worsened during the verification of bank offers by the Central Bank of Nigeria (CBN). During that period, investors waited for more than one year before they could receive their certificates. But this problem was resolved when the CBN discontinued the pre-allotment verification exercise.
Also, in order to further address the issue of delay in the receipt of share certificates, the Securities and Exchange Commission (SEC) went a step further by directing that share certificates must be dispatched not later than 15 working days after the approval of allotment proposals. Besides, SEC also directed that the allotment proposals must be submitted six weeks after the close of an offer. Apart from certificates from public offerings, sometimes, certificates for bonus issues delay in getting to investors.
The Commission last year went a step further by authorising the electronic allotment to avoid issuance of share certificates. This has not really taken off due to the market meltdown, which prevented many companies from issuing shares last year.
In the area of dividend warrants, investors have been telling different tales of frustration.
However, to solve the problem, SEC launched electronic dividend that allow direct payment of dividends into investors’ bank accounts.
Despite all the efforts, complaints about late receipt of share certificates and dividend warrants are very rampant. While regulators continue to explore ways of finding a permanent solution to the problems, experts said that there are strategies investors can employ to successfully manage their share certificates and dividends.
The Managing Director/CEO of First Registrars Limited, Mr. Bayo Olugbemi, said that the first strategy is for shareholders to open the Central Securities Clearing System Limited (CSCS) account. The CSCS account is where all the transactions of investors in the secondary market are a recorded and it is opened through stockbrokers. It also accommodates all the shareholdings of investors. But the investor has to verify the share certificates into the CSCS before it can be captured into the system.
“Once this is done, shareholders should verify all their share certificates into the CSCS account. Also, when applying for new issues, shareholders should indicate this CSCS account number so that their allotments would be made directly. By this, issuance of physical certificates and all the attendants problems would be avoided,” he said.
The Managing Director of Mission Securities Limited, Mr. Mr. Ayo Oguntayo had explained recently that one of best thing that happened to the stock market was the establishment of the CSCS. This, he said, has made investors to take control of the investments monitoring. Hence he advised that all investors should open the CSCS account as a mechanism to safeguard their investments. Apart from keeping records of shareholdings, it assists to guard against certificates delay, theft and other risks associated with share certificates.
The Managing Director/Chief Executive Officer of CSCS, Dr. Onyewuchi Asinobi, had once explained that there are many advantages of having the CSCS account.
“Now that we have introduced online monitoring, investors can have access to their investments anytime from anywhere around the globe. All it takes is for them to register through their stockbrokers. They also have the option of registering directing by visiting our website,” he said.
He said that through the online facility investors can get stock account statements, obtain their stock position regularly; evaluate their portfolio and know those that are performing and those not performing. He said that investors can also monitor the stock prices and certificate deposit details among others.
“Most of all, the CSCS account enables investors to enjoy electronic certificates. This means that if you indicate your CSCS account number when you are filling your public offerings or rights issues forms, the number of shares you applied for and the number allotted to you are credited directly. When this is done, you do not have to wait for any share certificates. While other people without CSCS accounts are waiting for certificates, you can easily trade your shares and take advantage of capital appreciation,” he said.
The second strategy to effectively manage share certificates, Olugbemi said is for investors to always follow up with Registrars on their share certificates. He explained that if for instance, a Registrar said share certificates have been posted, the shareholder should be able to come back and report after certain period of time without receiving the certificate.
“Given the fact some Registrars have very large clientele base, it is always a challenging to follow up and know if complaints by shareholders have been resolved. To help the Registrars, the shareholders should always do a follow up either through telephone calls or e-mails. If this is done, the Registrar will be in a better position to quickly resolve the issue,” he said.
Another problem in the management of share certificates is postage. While investors blame NIPOST for not delivery on time, NIPOST heaps the blame at the door steps of shareholders and Registrars.
But Olugbemi said the best way to resolve the postage problem as regards certificates is for shareholders to promptly notify Registrars once there is any change in their address.
“If you do not notify the Registrars, they will continue to send your correspondences to the address in their record. That is why it is advisable that as soon as you change your address, promptly inform the Registrar and give them your new address,” he said.
The First Registrars boss said it is also advisable to use post office box (P.O. Box) addresses instead of street addresses. Using a P.O. Box address, he said, would make retrieval of unclaimed documents easier.
Regarding dividends, Olugbemi said that the best way out is for investors to embrace electronic dividends (e-dividend). The e-dividend was introduced last year. The Minister of State for Finance, Mr. Remi Babalola, who performed the launching, had said e-payment was pivotal to the development, strengthening and deepening of the country’s capital market, making it more competitive for local and foreign investors.
He therefore, called on investors to have functional bank accounts, with the account information submitted to the respective registrars to facilitate their dividend payments.
The immediate past Director-General of SEC, Mr. Musa Al-Faki, had explained that the e-dividend would reduce the incidences of unclaimed dividends and enhance the ability of the shareholders or their heirs to immediately access and utilise the proceeds of their investments.
He said the innovation will be beneficial to investors, companies and the Nigerian economy as a whole.
Hence, Olugbemi said that shareholders should embrace e-dividend as a tool for the management of their dividends.
“All it requires is to send your bank account details to the Registrars and your dividends are credited directly into your account whenever they are declared and approved for payment. This will take away the problem of lost or expired dividend warrants,” he said.
Apart from e-dividend, he said shareholders should also keep a tab on dividend history of their companies with a view to forecasting the likely period of payment.
“Shareholders can also visit the websites of NSE, Registrars and companies where they have shares to monitor dividend declaration. They can equally sign up for Trade Alert from the CSCS, credit alert from their bankers and electronic notifier of First Registrars, for instance, among others,” he said.
He said that shareholders should make enquiries at Registrars from time to time, read financial journals/columns of daily newspapers and electronic media on daily basis and also make enquiries at the Registrars from time to time.
“Whenever convenient, shareholders should endeavour to attend annual general meetings (AGM) because some of the companies pay dividends at AGM venue. As efforts are being made to tackle these problems, some Registrars have introduced some innovations to make receipts of share certificates and dividends very easy. For instance, at First Registrars, we have developed products such as Online Access, E-Notifier, E-Verification and E-Lodgement among others, Olugbemi said.
Above all, he advised that shareholders should show more interest in where their investments are.