BY BABAJIDE KOMOLAFE
The above question has to be resolved and resolved quickly, so as to eliminate or reduce to the barest minimum, the suffering shareholders experience in their quest to verify and dematerialise share certificates.
The resolution of this question was a major issue in the IST Ruling on the case of Eze A. Eze (Applicant) against Fidelity Securities (1st respondent) , Fidelity Bank (2nd respondent), Securities and Exchange Commission (3rd respondent), and First Registrar (4th respondent).
Fidelity Securities argued that, “there was no time frame for the verification of the Applicants share certificate and the applicant did not, at the time he was giving out his share certificate for verification, agree on any time frame within which it could be verified”.
First Registrar also argued that there is no law in Nigeria that stipulated a time frame for the dematerialisation and verification of shares, and that all the law requires is for the verification to be done within reasonable time (all things being equal)
The implication of the above is that share verification can take eternity. And that is the general attitude among stockbrokers and registrars. As a result shareholders that seek to verify their shares suffer, others who are discouraged by the stress and delay, keep their share certificates at home, and in the process, some certificates are lost. By extension, this undermines the volume of shares that should be in the CSCS depository, and that could be traded.
Hence the volume of trading on the NSE is undermined. Unfortunately the SEC and NSE are yet to discover this link. When they do, they will surely read the riot act to brokers and registrars or the issue of share verification. But the argument of Fidelity Securities, and First Registrar, did not hold water before the Tribunal.
The Tribunal averred, “Ordinarily, verification and dematerialisation of share certificates should not take more than two weeks. But this is where there are no irregularities alike what happened in the instant case.
The procedure set out by this Tribunal in Molten Trust Ltd & Anor Vs SEC (supra) is the standard procedure if there are no irregularities.”
The implication of this statement is that if you submit your share certificate for verification and dematerialisation, if after three weeks, it is not you’re affected, and no case of irregularity is brought to your attention, the broker and registrar are liable for negligence of duty.
You can drag them to the IST to claim damages for negligence. But to ensure a favourable ruling at the Tribunal, you must have the necessary weapons. These weapons will be discussed in the next edition next week.