Posted by Friday Atufe on
Registrars of publicly-quoted companies have asked the Securities and Exchange Commission (Sec), the apex regulatory .....
Registrars of publicly-quoted companies have asked the Securities and Exchange Commission (Sec), the apex regulatory body of the capital market, to come up with guidelines on the implementation of electronic bonus offers to shareholders.
The registrars contended that lack of guidelines has made difficult the implementation of the directive by Sec to the Nigerian Stock Exchange (NSE) to ensure that quoted companies start electronic issuance of bonuses because there have been no clear cut guidelines on how it should be done.
Sec had in 2004 given approval to the NSE for electronic distribution of bonus shares to shareholders, adding that it would in due course be followed by electronic initial public offers (e-IPOs).
Electronic bonus issue will enable shareholders to receive their bonuses faster and also save costs incurred in printing bonus certificates. Also, it will improve efficiency and confidence in the capital market as the problems associated with issuance of share certificates will be eliminated.
A competent Sec official confirmed that the commission is currently working on the guidelines so that there would be uniform implementation of the scheme in the market.
Since the approval was given some three years ago, the NSE had not been able to fully implement it because of opposition of some stakeholders, especially shareholders on the desirability of the scheme at this stage of development of the local capital market.
The shareholders argued that under the regime of physical presentation of bonus (scrip) share certificates, some of them were not able to receive their own, contending therefore that under an electronic system, it could be worse.
Owing to problems associated with the postal system and inability of shareholders to inform the registrars to their companies about change of addresses, some shareholders are not able to receive share certificates on time, a development which sometimes deny them opportunity to maximize returns on their investments.
Apparently owing to the opposition against its implementation, the NSE, registrars, stockbrokers and Central Securities Clearing System (CSCS) recently agreed that its implementation should be limited to shareholders who were already registered by the CSCS because it is possible to credit their accounts electronically while those who have yet to use the system would be encouraged to do so because electronic distribution of bonus shares is faster, better and safer.
Following the agreement among key stakeholders in the market, the NSE recently began implementation of the e-bonus by using Afribank and Intercontinental Bank as pioneers to pilot the scheme.
Mr. Farooq Oreagba, head, strategy and derivate market of the NSE, said in Atlanta, Georgia in the United States of America (USA) recently that non-issuance of bonus certificates was now possible, adding that Afribank of Nigeria Plc and Intercontinental Bank Plc have successfully concluded e-bonus transfers to their shareholders under the new scheme.
The introduction of e-bonus in the capital market in 2004 became imperative because of the need to allow shareholders to maximize returns on their investments.
Some quoted companies were reluctant to release the share certificates because of anticipation that it might lead to a glut of their shares in the market because some shareholders might want to sell some of their shares to maximize returns on their investments.
This is because before a company announces the declaration of bonus shares, information about such would have filtered into the market. This development usually leads to increase in demand for the shares of such a company as well as appreciation of its share price as demand outstrips supply.
The implementation of the new policy will enhance the use of the facilities of the CSCS as more investors will have to deposit their shares in its custody.