Why Unclaimed Dividend Bill can't benefit investors –Ogogo, CEO, Institute of Capital Market Registrars

Walker Ogogo
Despite the concerted efforts to stem the rising tide of unclaimed dividends in the country, the issue proved to be a sore thumb that won't heal. Even as the problem seems to be an over-ripe boil whose lancing is long overdue, experts still find it difficult to swallow the proposition of the latest effort, the Unclaimed Dividend Bill, before the National Assembly.

According to Dr Walker Ogogo, the Registrar/Chief Executive Officer of Institute of Capital Market Registrars, the bill is not an innovation that will bring improvement to the wellbeing of the investors.Why? One may be tempted to ask.

He explains: 'it is not meant to protect investments, it is not in the interest of the public. Sponsors of the proposed bill are trying to reap where they did not sow.'

Ogogo, who holds a doctorate degree in Corporate Leadership and Governance, also talks about the recapitalization of the stockbroking houses.

To him, recapitalization is advisable for operators in the capital market; registrars, stockbroking houses, issuing houses, etc.

He added: 'This is because it will make the players much more effective; it makes them to be able to acquire the necessary IT infrastructure; it makes to be able to put a number of things in place and hire the best of hands so that they can perform strategically and much more effectively. So, that is ok for the system.' Explaining why the operators opposed it in 2008 when it was introduced, he said 'the issue came up because then the capital base was moved up to N1 billion. It does not have to be up to be N1 billion. So, the authorities can decide to bring it down a little bit.'

As to how much is recommendable limit, he said 'recapitalization issue is such that you must look at all the factors in totality before you make recommendation. If not, it will look unprofessional. So, the best way to look at it is to sit down and consider what the operators need in order to be able to perform effectively. What and what does a stockbroker needs to be able to perform effectively so that they will not be tempted to indulge in selling other people's shares without a mandate; so that they will not be operating fraudulently.

What do the issuing houses need to be able to perform effectively to the benefit of the system? By the time they look at the factors very well, and without being sentimental, without witch-hunting any group of operators, you have set the parameters. That is how to go about it. It is difficult to do it the way regulators attempted to do it in 2008 which is why operators opposed it.'

He also commented on other burning issues in the capital market and the economy generally.

New Vs old banking model
The new banking model, for me, means that banks should hands off their subsidiaries. But there is the holding company idea which has worked in some other jurisdictions. If it could work in other jurisdictions, it can work here too.It makes the subsidiaries self reliant; they will no longer be getting directives from their parent company any how. And that is what the authorities are trying to avoid. It may begin to work out well but what I quarrel with is policy inconsistency in the system.

Policies are made, cancelled and remade, amended and so on and so forth. The frequency is not good because people are investing money. You are saying that, for instance, First Bank should hands off First Registrar, First Trustee, etc. But First Bank invested in these subsidiaries. So, it is not easy for the board to now decide what to do. These things, as good as they are, they are all models; it depends on how you implement a particular model. No model is bad and no model is perfect.

A model that is working well in the US can also work well here but with some peculiarities, with some amendments because we are not in the same situation politically, economically, culturally, even socially. So, these days in management , you don't transplant what is happening in India elsewhere. No, it doesn't work that way. You must consider the culture. The definition of what is good in the US may not be the standard of what is good in China and vice versa. And of course, you must consider the religious background of the countries. So, no system or model is perfect.

The universal banking system is a good one if it is well implemented. But now that we are doing away with them, it is a bad idea. But the implementation should be rigorously followed to the letter. And of course, transparency, corporate governance issues must be addressed very well so that no CEO will have an overbearing power, uncontrollable power in any organization. As long as a CEO has that kind of power, bring 20 people in the board, they cannot do anything. Whatever he decides is what will happen; and so corporate governance principles must properly apply and be practised in all honesty; and then it will work.

Expected crises
Well, for every change, there will be apprehensions, fears. Some are genuine fears and some are fears based on ignorance because they don't know how the system will be implemented. Again, it goes to show that those going to be affected by the change should be properly enlightened on what the changes are all about. There could be lay offs. However, I expect that there is going to be management buy outs. If the subsidiaries know that they are doing good business, they can look for investors to buy out the business.

It is already happening with some organizations in our industry. Some investors are already queuing in for some of these subsidiaries because they want to take advantage of the development. So, there could be management buyouts and of course it will create better opportunities because some of these subsidiaries have not been able to implement the ideas in their minds before now because of their parent company policy. Now, they can go full blown and implement their ideas, do extra businesses and do much better than before. It is going to work well for them and of course nobody should be afraid. The only permanent thing in life is change and when change is coming we should prepare our mind for it and then strategically position ourselves for it.

Unclaimed dividend bill
I have strongly expressed the hope that the controversial unclaimed dividend and abandoned property bill will not see the light of day. What gave me that assurance is the fact that the issues at stake are very clear. The House Committee on Capital Market decided to do a public hearing to test the pulse of the operators and all the stakeholders on how they feel about the proposed bill.

Of course, on the day of the public hearing, every one that made presentation – the Institute of Capital Market Registrars, which I represent; the Chartered Institute of Stockbrokers (CIS), representing stockbrokers; Issuing Houses Associations; Association of Stockbroking Houses of Nigeria (ASHON), shareholders' associations, Union Bank of Nigeria Plc, and several other stakeholders that came, all spoke against the bill because the bill is not an innovation that will bring improvement to the wellbeing of the investors; it is not meant to protect the investors' investments, it is not in the interest of the public.

Sponsors of the proposed bill are trying to reap where they did not sow. So, I believe that the House Committee that set up the public hearing should listen to the voice of the operators; the voice of all the investors and organizations that came. In unison , we had all spoken that the proposed bill should not see the light of the day. That is why I am convinced that If they do any thing other than that, it will be a big surprise because operators have said no to it, stakeholders have said no to it, the investing public have said no to it. So, I believe that the bill is not going to see the light of the day.

I find it difficult to assume that the legislators will do anything otherwise. By the time the Chairman of the Senate Committee on Capital Market, Hon. Ganiyu Solomon, was there and he listened to my presentations and one or two other presentations too and his statement was that he 'now know the minds of stakeholders on this proposed bill and that when the bill comes to the Senate, they know what to do about it.' If legislators at lower house defy apparent objection of stakeholders and pass the bill, then it means that something is wrong somewhere. But at the upper house we sincerely hope that the opposition will be much more vehement than what happened in the lower house.

Origin of the bill
All I know is that in the last administration before the present one, a similar bill called the Unclaimed Dividend Trust Fund Bill came up. There was a large public hearing that was organized by the entire house. The speaker was there in person and the bill was rejected. This time when the bill came up, we did not easily hear about it. Our institute was not written. They only wrote some of the banks which in turn wrote some of the registrars which are subsidiaries of their organizations. It was those registrars that contacted the Institute and then we swung into action.

So, we do not know who the sponsors of the current bill are but whoever they are, the truth is that they do not understand what unclaimed dividend means. They do not understand what abandoned property means. After the Nigeria civil war, the issue of abandoned property came up in the country and if the sponsors of the proposed bill had known the problem the matter created in the country then, they won't have mentioned abandoned property at all. They do not even understand what dormant accounts means in the banks.

Dormant accounts are tagged dormant for security purposes until the rightful owners come. And here they are proposing a fund where the dormant monies, unclaimed dividends, etc will be put and from there they can buy cars, pay salaries, and apply civil service rules. And how many organizations operating with civil service rules are succeeding in recent times? Even the PHCN is being privatized. So why should anybody consider going into bureaucracy again because the word 'civil service' is another word for bureaucracy. So, I think the bill will fail.

Single registry
Well the single registry idea was only mooted in the newspapers attributed to one of the directors of CBN who represented the CBN governor at a workshop in Benin. And I personally spoke to the SEC DG and she categorically told me that there is no plan whatsoever for SEC and CBN to collaborate to establish a single registry outfit. She explained that there was nothing like that. And at one of the CMC meetings, she categorically mentioned it openly that there is nothing like that in the making.

She explained that such plan once came up in the minds of the authorities before she came into office but that since she assumed office, nobody has ever mentioned any thing like that. And that SEC is not thinking about any thing like that because the registrars are very relevant in the scheme of things. In Nigeria, she noted, the capital market is a peculiar one and one cannot do without the registrars, stockbrokers, and the issuing houses. So, we are all key operators; there is no plan to establish a single registry, she said, because it is not practicable here.

The worst that can happen is that perhaps the number of registrars will be reduced when SEC starts introducing recapitalization and things like that. This means that if a new capital base is going to be N500 million, the registrar company that cannot raise capital up to that level will want to merge with another one. In that case if the number as it were now is 32 or more, they will come down to about 10, 15 or thereabout. But for a single registry in the capital market, it is impracticable.

Recapitalisation
Recapitalisation is advisable for operators in the capital market, registrars, stockbroking houses, issuing houses, etc. This is because it will make the players much more effective; it makes them to be able to acquire the necessary IT infrastructure; it makes to be able to put a number of things in place and hire the best of hands so that they can perform strategically and much more effectively. So, that is ok for the system.

Operators opposed it in 2008 when the issue came up because then the capital base was moved up to N1 billion. It does not have to be up to be N1 billion. So, the authorities can decide to bring it down a little bit.

As to how much is recommendable limit, it is difficult to ascertain on the spur of the moment. Recapitalization issue is such that you must look at all the factors in totality before you make recommendation. if not it will look unprofessional. So, the best way to look at it is to sit down and consider what the operators need to be able to perform effectively. What and what does a stockbroker need to be able to perform effectively so that they will not be tempted to indulge in selling other people's shares without a mandate; so that they will not be operating fraudulently.

What do the issuing houses need to be able to perform effectively to the benefit of the system? By the time they look at the factors very well, and without being sentimental, without witch-hunting any group of operators, you have set the parameters. That is how to go about it. It is difficult to do it the way regulators attempted to do it in 2008 which is why operators opposed it. For instance, SEC then had proposed N500 million as recapitalization base for Registrars; N1 billion for stockbroking houses; and for market makers, they also gave them an unrealistic recapitalization base. They kicked against it because perhaps they had considered some factors and they felt it was not realistic. So operators ought to come up with what they feel is realistic and then the authorities should listen. All said I think recapitalization is not a bad idea.

Repositioning
Repositioning is in the minds of onlookers; the investors. If an investor comes to a registrar outfit and sees that certain things have changed, the place is now looking better, in the mind of the investor, they are doing well. That does not mean that in their balance sheet, a lot of money is showing up there in assests. So, repositioning is a thing of the mind. It is just like those in marketing, when they want to create an image of themselves in the minds of the buying public, they do a number of things- promotions, packaging, etc.

There are a number of factors when you talk about repositioning, but I tell you when the chips are down, the capital base is what you fall back on. So, that is the starting point. If you are not well capitalized, what is the strength? You will start using the money of investors to fund your business. But if you are well capitalised which means that you have enough money to put things in place. And when investors' money come you use them for the purpose for which you obtained them. And naturally, other things will begin to fall in place. When you are well capitalized you pay your tax well; when you are well capitalized you w3ill not involve in any sharp practices that can ruin your business; so every thing will naturally fall in place. So, it is one of the important factors that we will have to consider.

Stock market and AMCON
The issue on whether AMCON is coming or not is one of the factors. When you talk about the market coming up, a number of factors are involved. Let us not forget that the crises rocking the NSE are still there. Before the bill of AMCON was passed, the shareholders vehemently upheld it. But the argument was not because AMCON would not work or that it had not worked somewhere else. The argument showed that they do not fully understand what AMCON is all about. So for now, the level of activity aimed at educating the investing public on the activities of AMCON is low. So people still don't consider AMCON a saviour, or as one of the designs of CBN and the authorities to stop the prices falling in the market.

So as long as that understanding is not there for investors, the confidence level will not come up the way we expect. So I suggest there should be enlightenment on what AMCON is all about. AMCON is coming on the wings of CBN. The CBN should spearhead the education. AMCON is now a corporate entity, so they should also do so much about it. And of course, SEC has started doing something. At the last CMC meeting, the MD of AMCON was invited to address the audience to explain a few things about their operations and what they are about to do. So, we expect more of this kind of thing to enlighten not just we the operators, also we expect them to enlighten the investing public. Because we are talking that the investor confidence has hit the lowest ebb.

It is just trying to come up. And whatever we do to improve on the investor confidence level, then the investors must know that you are being genuine, that you have them in mind. But if they suspect that you are trying to trick, they will not be forthcoming. And that means that when new offers are coming, you will not see them putting their money there. They will rather go for some other things, or the companies they have already known very well. But if new ones are coming they say no. so, that is the position, enlightenment is very key to it all.

NSE Executive recruitment
I am satisfied with the process because SEC is honest about the process. There is no perfect system anywhere. It is what we make out of it. It is in the wisdom of SEC that they took the action when they did in the interest of the market. And so, they put in place that process that will bring about the CEO of the Exchange. And many of our colleagues applied. So the screening has been done. Whatever comes out of that process will be acceptable to the market. Now all eyes are on the Exchange; nobody can afford to toy with the outcome. Transparency and credibility must be entrenched.

The speculation that the three finalists have divided the NSE Council is not unexpected, though I am not aware of that. The finalists are Nigerians, and as such they are from one geopolitical area or another. And the Council members are from some geopolitical areas of the country too. Sentiments are likely to come into play. But the fact remains that these three have met the requirements of the job and out of the three finalists, Council is expected to choose one of them. Of course, sentiments will always come in. Even in normal board meetings such things do come up; it is not unexpected. What I know will happen is that the three of them that have been shortlisted for CEO is qualified to man that position.

As to whether it is right to have engaged any of the old staffers, my take is that it is right for strategic reason; there must be continuity because policies can not be formulated in one day or month. No matter how experienced a staff is in another organization, the time the person is coming into a new organization, he is new. All he needs to do is that he will face the challenges of the new organization drawing from the past experience. I tell you they need those experienced hands that have been on the job to guide them while they now bring their experience to bear. And with the two coming together, they will succeed. There is need for continuity.

Agenda
The incoming CEO should look at the rebound of the market; create a fair playing ground for all operators; relax some of the rules of listing requirements so that many organizations out there can come and list their shares on the Exchange without problems. The new CEO should see how they can make sure that information management is properly handled. Those are the critical issues because the market is information driven. The market relies on transparency, corporate governance. So those principles, if they are entrenched in their operations, of course, the sky is the limit for the market. I do not want the Stock Exchange to believe that it is the only platform that can handle transactions on shares in this country.

Another platform can spring up any time any where. It is in the process of monopolizing the market that they indulge themselves in so many unethical practices. The best comes out in every individual or organisation when there is competition. We should not shy away from the possibility of multiple exchanges and prepare for it by improving services continuously. So that if the investing public is sure that NSE is the best way to go, they will continue to patronize it.

Demutualisation
Let SEC also look at the entire structure that NSE has put in place that they are calling demutualization process. If they look at it and see that it is good for this market, they should approve it to enable the Exchange go ahead in the interest of the market. We want to move away from that time when the NSE can make any pronouncement or do any thing and get away with it. The apex regulator of the capital market is SEC and SEC alone should look at the demutualization programme and assess it properly. If they need to get consultants to assess the programme, let them do it and possibly adjust it for the benefit of the market. It is good because it is what is currently obtainable in the world over.

NASS probe of SEC
I believe that if the National Assembly is looking at the books of SEC, it means that there are allegations somewhere. If there are allegations, let them look at the figures and prove them right or wrong. It is a democracy, that is why we have three arms of government: executive, legislature and the judiciary, with each performing its different roles for proper functioning of the system.

We have capital market committee of the house and we have senate committee on capital market. They are performing oversight functions over the capital market. So, if there are allegations against the authorities, either SEC or NSE, they can wade into it and see whether it is true or not. If there is no substance in the allegation, they should be able to make a public pronouncement to that effect.

But anybody that says SEC should not be probed, he is not doing good to the market. If there are allegations, let them prove them. If we say no it is not good to probe SEC it means that somebody is hiding something somewhere. We want investors in the market to know that we don't have anything to hide; SEC is not hiding anything; NSE is not hiding anything; the operations are transparent. If the investors see us in that light, then of course, the market will come up without any further delay and where we are going we will get there.

2011 budget
My feeling about the budget is that we have started trivializing trillions just as we have trivialized millions and billions. We are making nonsense of trillions of naira. How many trillions are we budgeting? I feel it is on the high side. The CBN governor made a statement that the kind of democracy we are running is too expensive and the statement was corroborated by the Finance Minister.

The recurrent expenditure is on the high side. Those basic issues should be seriously addressed. I don't have the facts and figures. I am not in the budget office but the budget office only collates the figures from different ministries, departments and parastatals and then do some kind of extrapolation and they come up with a budget. But I tell you, the figures are on the high side. It is good that they are coming up with this idea of allocation to education, the power sector. They are quite ok but I think the issue of recurrent expenditure should be properly addressed.

And I think the best to make sure that it is properly addressed is by making sure that they have experts in various fields to study this budget either on the auspices of the National Assembly which will be deliberating on the budget or any other because now that it is submitted , it is in their hands to approve it or propose amendments to it. Since the approval or rejection of it is in their hands, let the various committees get the services of experts to critically look at the budget and see how some of the figures can be reviewed downwards so that we do not owe too much debt financing any of these inefficiencies.

If the issues of recurrent expenditure are honestly addressed, the budget figures will not be as much as what have been proposed but the issues have not been addressed and the figures are still there.