Ms. Mary Uduk is the Acting Director General of the Securities and Exchange Commission (SEC). In this interview shortly after the Nigerian Capital Market Committee (CMC) third quarter’s meeting in Lagos, she spoke on the outcome of the meeting and on various issues affecting the sector. Excerpts:
The CMC just held its last meeting for the year, what were the highlights of the meeting?
At the meeting, the various technical committees provided updates on their activities and I would like to provide you with some of the highlights.
In the presentation made by the Commodities Trading Ecosystem Committee, we were informed about the ongoing collaboration with the Standards Organization of Nigeria to review applicable standards as well as the schedule of a capacity building session for personnel of the Federal Ministries of Finance, Budget & Planning, Trade & Investment and Agriculture. The Committee is also having engagements with relevant corporates and state governments to secure their buy-in on current initiatives in the ecosystem. Going forward, the Committee is proposing to meet with the Nigeria Sovereign Investment Authority (NSIA) on the status of the Nigerian Commodities Exchange (NCX) and work with the Nigerian Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) to develop some agricultural-based financial instruments.
The Multiple Subscription Committee presented the status of its ongoing engagement with the Central Bank of Nigeria (CBN) and Committee of Heads of Banking Operation to display multiple accounts regularization banners in the banking halls all over the country. The Committee also reported that CMOs have commenced the filing of report on regularized accounts with the Commission, on a quarterly basis. Given the relevance of this exercise and the need to create more awareness, the Committee requested for an extension of the deadline of multiple accounts regularization.
Also, the presentation by the e-Dividend Committee showed that the number of shareholders enrolled on the e-DMMS platform has increased to 2,820,065 at the end of the 3rd Quarter of 2019. Further updates were given concerning the ongoing efforts at integrating the Direct Cash Settlement (DCS) and the e-DMMS mandate forms, as well as the engagement with the CBN on the inclusion of e-DMMS charges among allowable bank charges.
Also, the Non-interest Finance Committee presented the importance of granting the PFAs the permission to invest a given percentage of a willing contributor’s Retirement Savings Accounts in Non-Interest capital market products. Updates were equally given on the progress made in the collaboration with the Debt Management Office (DMO) to develop a short term non-interest instrument.
The meeting received further updates from the presentation of the report of the Market Liquidity Technical Committee, as well as the final report of the Block Chain and Virtual Assets Committee.
We had extensive discussions on these Technical Committees’ presentations and comments were also received on the presentations of Self-Regulatory Organizations (SROs) and the Observer Groups.
What were some of the resolutions reached?
The directed Registrars to discontinue the practice of requesting for confirmation of bank signature during the E-DMMS process.
Also CMOs are to display awareness campaign banners of e-DMMS at their offices and Venue of Annual General Meetings (AGM). Capital market operators should also work with the Commission to share awareness information on their social media platforms.
SEC is to review the request from the Association of Stockbroking Houses of Nigeria (ASHON) for extension of time for compliance on the transfer of complete investor data among operators such as Brokers, Registrars and CSCS. Upon completion, the position of the Commission will be communicated to the relevant parties.
The Commission is to also engage the National Pension Commission (PENCOM) on modalities which would permit Pension Fund Administrators (PFAs) to participate in Securities Lending.
The Commission was also mandated to develop rules and regulations on warehouse receipts within the current legal framework.
Are there new strategies by the SEC to tackle the issue unclaimed dividends?
Issue of unclaimed dividends are legacy issues. They happened way back in the past. Right now you will not get unclaimed dividends from new issues. Part of the problem of unclaimed dividend has to do with identity management which we are doing all we can to educate the public on and engaging the various stakeholders to be able to get a lot of the information that we require. Since then, items like BVN has been added to help in identity management. The capital market is also taking advantage of it. The CSCS and the registrars are working together to ensure that more information from the legacy shareholders are being collected to be able to update their information and get them to be able to claim their dividends.
Of recent, there has been a lot of engagements with shareholders on this issue. The registrars don’t have direct interface with shareholders, they deal directly with stockbrokers. But there is a committee comprising of SEC, the registrars, the stockbrokers, the issuing houses, the CSCS and NSE working on that in addition to the e-dividend management. The committee has come up with a resolution which was adopted at the last CMC meeting. Part of the resolutions is that stock brokers will update information in respect of their client.
They are legacy issues, remember that before 2008, we had a lot of Nigerians who bought shares in the capital market and at that time we did not have BVN numbers. Even some of them did not provide their account numbers. What was agreed was that we would update information of such shareholders. That information will be transmitted to the CSCS who will update their own information and send them to the registrars.
Which means we will not address the legacy issues by the time brokers update that information. What was also agreed was that there will be no transaction in respect of any account that information is not updated. We also talked on the issue of compliance and enforcement which has to do with conduct of capital market operators. It was agreed that there will be zero tolerance and the brokers will be given a time frame. We hope that by the time that information is updated, the issue of unclaimed dividends will be resolved.
Also going forward, the Commission has approved the rule in respect of electronic offering and we believe that by the time we commence that, it will address that. Before you can complete the application, the system will validate your account number, the system will not accept incomplete application. We believe that in addition to the e-dividend mandate, these other initiatives that the Commission is doing with other stakeholders will address the issue of unclaimed dividends.
What is the commission doing to attract retail investors?
We have various initiatives in place all geared towards attracting retail investors to the market. We are interacting with them in a lot of ways like the social media, educational materials, excursions to the Commission, enlightenment campaigns among others. We are also interacting with them through the new curriculum that we are coming up with for Capital Market Studies in secondary schools.
Of recent, we interacted with the army, even for us it was an eye opener. They came out in their numbers and we intend to do more. We have a department in the Commission where students from all over the country come to the Commission for interactions.
We try to engage all sectors of the country; we believe that we need to develop this market. That is why we have both short term and long term plans. What we are doing with the universities are research based conferences, issues that will be very key to the market are brought to the fore. We just completed one with the University of Lagos and other universities have indicated their interest in such programmes too. People are aware that there are safety nets in the capital market when you invest in funds because your risks are diversified. For all the northern states, we look at ethical funds and we are doing to do roundtable discussions there in collaboration with the state governors.
In the coming months, we will see a high growth in the capital market with all these sensitizations.
The shareholders’ associations can be a force for good, and we recognise their importance. But we want to see them play positive roles in good corporate governance of the companies that they invest in. we want to see more positive contributions from them.
What is the Commission doing to curb delisting?
Issue around delisting we look at it from two perspectives: voluntary delisting and regulatory delisting. What are we doing as regulators to influence and encourage more listings in the market? We had a committee and that committee has made recommendations and we are at implementation stage now. What we are doing is to look at how to encourage listing based on sector approach. What one sector needs, may be different from what another sector needs. We are engaging with them and have itemised issues and now implementing. We are trying to see that we encourage listing via incentives.
We are also trying to address the issue of time to market so that they are not discouraged as they are converging to come to the market, so that they are able to raise the funding within the shortest time possible. We are still having engagements with them, we are getting more companies listing, you are aware of all the listings we have had this year.
Can you throw more light on modalities for securities lending?
We have a committee which has been engaging all institutional investors that have substantial holding of equities. The essence of having this securities lending is to actually deepen our market. All of us are contributing to our pensions accounts and these are being investing in equities. What they do is to buy and hold, they don’t sell. So the essence of securities lending is to give room for them to make money so that the profit can then be added to what contributors would get. We have a framework which has been approved and we are encouraging them to go into securities lending. They are being encouraged to lend out these securities, they make money out of it. We are encouraging the market players to go into securities lending by meeting these institutional investors, Pencom is the largest local institutional player in our market. They will lend out these securities and make money out of it, at the end of the contract, they get their money back. Instead of holding on to their securities, they are making money out of it.
We are engaging Pencom and discussing to see how they can come up with their guidelines for it to happen. Another institutional investor we are engaging is AMCON, all these are being done to deepen our market.