Chairman, Western ICON Shareholders Association of Nigeria, Mr. Segun Owolabi, in this interview with Financial Vanguard spoke on move by the Securities and Exchange Commission, SEC to stop physical share certificates this year as well as its implications for the market, among others.
THE Securities and Exchange Commission, SEC has stated that it will stop recognising share certificates in the Nigerian capital market in the first half of 2017, what is your view?
Yes, I am in support of the move by the Commission to stop physical share certificates. Elimination of share certificate will go a long way to hasten transactions on the stock market. I am happy to hear that the Central Securities Clearing System, CSCS, has reached 100 per cent of dematerialisation of share certificates in the Nigerian capital market. It has been a journey that started over 10 years ago, so SEC and the CSCS should be commended for the achievement.
Do you think the elimination of share certificates will stop unauthorised sale of shares by operators?
I think it will reduce unauthorised sale of shares in our market. The electronic share certificates will, to a large extent, reduce fraudulent practice in the system. If shares are in electronic form the operators will not find it easy to trade shares that the owners did not authorise its sale. All the shares will be on the owners account and not that of the stock broking firm.
Unauthorised sale of shares has, to some extent, been reduced since the inception of CSCS because, it has mechanism in place to ensure that accounts are domiciled in the investor’s account, and through trading alert when transaction occur in investor’s account, trade alert will be triggered so that the investor will be aware of what has happened.
What are the benefits of dematerialisation of share certificates?
The system of issuing share certificates has posed a myriad of problems such as delays in issuance and dispatch of certificates, delays in verification of share certificates, loss, theft and forgeries of certificates. Therefore, the benefits of dematerialisation includes to improve the customers experience within the capital market, improve the velocity of trading, improve security of shareholding (avoid loss of paper based certificates) and better turnaround timelines for settlement between the purchase of a security and the selling of a securities.
Do you advocate for electronic system of public offer and do you think it can address the issue of inadequate allotment of public offering.
No, I do not subscribe to the electronic public offering. This is because our market is not yet matured. It will shut off illiterate investors in the market. We are not yet ripe for it at the moment. May be in the future when our market becomes sophisticated and participants become more enlightened then electronic public offering can come into force.
What would happen to your fellow shareholders who fail to dematerialise their share certificates?
The issue of dematerialisation requires that shareholders present their physical share certificates to the registrars, who in turn will put it into the CSCS system. This implies that, whatever certificates that is with an investors prior to the dematerialisation exercise, the certificate will be useless. Besides, registrars are also with the records of share certificates, so if investors do not return his her own copy, the registrar will just present its record to the CSCS.