Mr. Gboyega Babalola is the managing director and chief executive officer, Sterling Registrars Limited. He has wide experience in shares registration business, spanning 25 years. With a B.Sc from the University of Lagos and MBA from ESUT Business School, he has served at different top positions at Union Registrars Limited where he cut his teeth in the industry as early as 1984, and City Securities Limited before his appointment as pioneer managing director of NAL Registrars Limited in 2000, now Sterling Registrars Limited. An astute administrator, he has brought his expertise, incredible drive and energy to bear on his roles at Sterling Registrars, a subsidiary of Sterling Bank Plc.
In recognition of his untainted integrity and professional expertise, he was conferred with the prestigious Dr. Kwame Nkrumah outstanding merit award on the April 30, 2004 in Accra Ghana. To some extent, it won’t be an overstatement to say that he is an encyclopaedia of shares registration business as well as capital market analysis.
He revealed that a clique of fraudsters has, in recent times, formed a network, specializing in interception of dividend and return money warrants, a development he said posed a major challenge to all registrars.
According to him, the fraudsters open bank accounts with the intercepted dividend/return money warrants and claim them fraudulently without the banks knowing it or knowing it too late in the day. And the situation is made worse, owing to pressure on staffers of banks to meet target expectations of their employers thereby making some of them to compromise due diligence of knowing your client (KYC) before opening of an account. Babalola, who is the Chief Executive of the week, spoke also on other issues. Excerpts:
Developments in the industry
Because of the awareness over the years, the business has experienced a burst. About a decade ago, you can say specifically the number of players in the capital market. But now, we have lost count as so many players are now involved in the equities business before the market was eventually hit by hard times.
You know there is no way any business can cope without robust and sophisticated information technology. So, I must confess that things are now being done differently from what it used to be with the introduction and application of a very robust information technology to ease our operations.
There are many transactions now via information technology, e-dividend, e-bonus, e-reconstruction. This is to tell you that it is no longer business as usual. If you don’t have a very good system and dedicated staff that can deliver, I doubt if that company can remain in business because it is now a different ball game, entirely. With the evolvement of e-transaction, the business will become much easier as more and more shareholders comply with the e-dividend and e-bonus transaction.
Our greatest challenge
Before now, the major challenge had been a situation where shareholders would change contact addresses without notifying registrars, so as to update their records. But the greatest challenge recently is interception of dividend and return money warrants. It is becoming messy. It is not connected with change of contact address. It is a different challenge on its own.
Now, there is a clique of fraudsters out there that specialized in intercepting dividend warrants, return money warrants, open bank account with them and claim them fraudulently without the banks knowing it or knowing it too late in the day.
The situation is getting messier by the day as it is further made worse by pressure on staffers of banks to meet target expectations of their employers, making some of them to compromise due diligence of knowing your client (KYC) before opening of account.
If you confronted some bank staffers, they will tell you it is because of the pressure of meeting their target that they have opened accounts without due diligence. I can’t understand why the very first and second transactions in a new account are deposits of dividend warrant. Does that not call for questioning?
This development is a major challenge that is facing all registrars but our appeal is to the banks. They should make sure their staffers exhaust due diligence of knowing your customers (KYC) before opening any account. They should not say because they are under pressure to meet targets, therefore, whosoever comes to open an account they go ahead to open the accounts without the necessary due diligence. It is unacceptable.
Improvements in the industry
Many improvements have been recorded and more really need to be done in the industry especially in the area of e-transactions. The major complaints registrars receive border on non-receipt of certificates, dividends and bonuses. But with the e-business technology, all these complaints can be taken care of once and for all. When Sterling Bank did reconstruction of shares, more than 60 percent of shareholders’ accounts were credited electronically with the e-reconstruction shares. Instead of sending share certificates to them, their accounts were credited electronically. What that means is that we were spared of the complaints of those 60 percent as far as the receipt of the shares certificates was concerned because the shares were already in their accounts. If all shareholders can be on the Central Securities Clearing System (CSCS) in such a way that we can credit them with their dividend and whatsoever electronically, the complaints would have been 90 percent solved because those are the bulk of complaints being received by registrars.
Again, we are trying to take our services very close to the people. That is why you see us using our branch offices of the bank as our registrar branches, so that we can bring our services very close to shareholders. Other registrars are also doing it. This means that if you are in Kaduna and you have a complaint, you don’t have to come to Lagos. All you need to do is walk into any of our bank’s branches there and they relate on-line with somebody here in the head office in Lagos office and the problem is solved.
These are some of the improvements that are being brought into the industry to make life much easier for shareholders.
What to do with unclaimed dividend
The amount of unclaimed dividend stands above N9 billion. The money belongs to some people. And, of course, before any dividend becomes status barred, it is after 12 years. So, even before 12 years, you can make claims to this instrument. Because of the need to add value to what ever amount that is outstanding, at least, SEC is working in this regard to see how prudently the unclaimed dividend can be managed in such a way that it will be to the benefit of the shareholders and even the company. So, if eventually they are not claimed at the end of the day, it has to go back to the company to form part of their working capital which, of course, will now enable that company to do better business and then pay better dividend.
To bring an end to cases of unclaimed dividend, SEC is working hard to ensure shareholders’ compliance with e-dividend and e-bonus and the level of compliance has been very commendable. Awareness campaign in this regard is still ongoing in the form of seminars and workshops for investors to let people know the importance of imbibing the e-dividend and e-bonus arrangement. So, the response has been very positive, shareholders are buying into it.
Stock market and investor confidence
The stock market is down, no doubt about that, but some people are still making money, in the sense that investors, especially speculators, are playing short and taking profit within the shortest possible time. They buy stocks at N2.00 today and as soon as the price gets to N2.20, they offload and take profit. So profit-takers are responsible for the protracted downward trend in the market. Any time the market goes up and comes down, investors are taking profit. Nobody is prepared to wait for a long time as it used to be because of the fear of price crash.
Unfortunately, those of us that have the courage to play in this market, we don’t have the fund. Some of us still believe that the market at this level has bottomed out because at this rock bottom prices, we believe that there are some companies on the stock exchange with strong fundamentals, such that come rain come shine, they will deliver good dividends and good bonuses. So, one can confidently take position in such stocks taking advantage of the current low prices. Those of us who can buy the stocks do not have the funds, and those who have the funds have lost courage; the confidence is no longer there. But with some good pronouncement coming from the CBN governor, saying that no banks would go down, I think that is the kind of pronouncements we expect from our regulators to restore confidence, so that the market will begin to rebound as time goes on.
On the nomination of Arunma Oteh as new SEC DG
I want to believe that she can deliver. What we are looking forward to is someone that can bring many innovations and changes to the market for the betterment of all stakeholders and the country in general.
I read on the newspapers that Aruma Oteh is being sponsored by the Minister of Finance. And we all know that the minister, himself, is a well respected professional as far as the industry and the portfolio he is currently handling are concerned. He is well groomed. And it is even confirmed that he has known the lady for quite a long time and she is also very experienced and very fast in her chosen career. So, I believe that the regulators have made a right choice; they know what to take into consideration as far as the appointment of the SEC DG is concerned.
I think a common front has emerged to steer the hub of the nation’s economy towards achieving some credibility. With the Central Bank of Nigeria (CBN), Securities and Exchange Commission (SEC) in safe hands, the regulatory framework, institutions and leadership may now assume some credibility if they worked harmoniously to implement a policy of total disclosure in financial auditing.
The complaints are usually that I haven’t seen my share certificates and then return money warrants in respect of public offer or new issue. These are usually the same complaints but I must say to some extent, this has greatly reduced because we make sure that once a shareholder changes address, the new address is effected in our records immediately. Again, the courier companies we employ to handle our dispatches are licensed. At any point in time, you can keep a tab on them to know what they have done and if they have effectively carried out the service farmed to them. But more importantly, the e-dividend and e-bonus will go a long way in solving the unclaimed dividend, unclaimed certificates and interception of dividend warrants, and many of them. I must say that shareholders are already imbibing the e-dividend and e-bonus arrangement.
Critical issues incoming SEC DG must address
I think the most important thing now is restoring confidence. Confidence has to be built back into that market. To do this, I expect the new SEC DG to come up with some positive pronouncements and policy changes that will make people say yes there is light at the end of the tunnel; that from policy pronouncements coming from the new SEC DG, we can believe that positive changes are beginning to take place in the stock market.
She has to meet with some stakeholders in this business-stockbrokers, issuing houses, registrars -she has to meet with them to know what critical issues there are in the market and how to go about addressing them.
Again, the market witnessed some abuses in the past. You and I are aware of proliferation of private placements about a year ago. Companies that you don’t know from anywhere, they would just come to the market and said they were offering private placements. And because the regulators said they were not interested in private placements which is a primary market, private placements were not regulated, some people took advantage of that and began to offer anything in the market. And unsuspecting investors too put in their money and before you know it, that was the end of the money.
So, I would rather want SEC not to hands off completely as far as private placement is concerned because investors’ money is involved there. So, let them come up with policies and guidelines regulating the private placement market. We are talking about foreign investors, but how do they come into the market when things are not properly done here? It is important that we do the right things right before we begin to canvass for foreign investors.
The year-end of some quoted companies is December, but you will not hear anything from them until the next December, yet they are listed on the floor of the Exchange and people do not know what their problems are but activities continue on their shares. At the end of the day, investors’ funds go down the drains. So, I expect some policy changes, some regulatory framework that will make everybody be on his or her toes, and investors will realise tha,t at least, things are being done in a transparent manner.
Look at what First Bank did. They provided N26 billion in their last financial statement to tell investors and shareholders how they really are. That is to say that yes we have made some losses, and we are declaring it. It is not a crime to make a loss but it is a crime not to declare it; it is a crime to falsify your financials because you are misleading innocent investing public. That is the new gospel the new CBN governor is preaching. If we continue in this way, there will be much sanity in the market and that will go a long way to boost investor’s confidence in this market both locally and internationally.
Again, another important issue is the kind of pronouncement coming out from our regulators. If the DG of SEC says something now, before you know it, it spreads round. So, they should be careful about the kind of pronouncements they make. They should not make such pronouncements that could make foreign investors feel that their destiny is not in their hands. We are all aware that sometime last year, it was in the national dailies that some quoted companies were making their share prices. What that tells anybody is that no investor would come to play in a market where prices are being manipulated. Even if prices are actually being manipulated, it should not be for the consumption of the public because the outside world will get to know. What our respected SEC DG at that time should have done was to deal quietly with those companies involved in the manipulations. Having that as captions on the pages of newspapers meant that foreign investors would take their money off the market, and as soon as that happens the market would begin to go down.
So, the incoming SEC DG has to be very careful about the comments she makes about the capital market because her comments, based on her position and the way we do things here, will leave a serious impact on the market.
It is also very important to make sure that quoted companies come up with their financials as at when do. Let investors know what they are doing and make informed decisions.
Banks and the future of the capital market
As long as the CBN governor has assured that no bank would go down, what that tells me is that he believes in the banks. And this is somebody coming from risk management background. For somebody of his status to make that pronouncement, I think it should be respected, and that is enough confidence. This is the kind of positive pronouncement we expect from our regulators. What this implies is that in order not to be termed a liar, every thing possible, every policy, framework, guideline that will be required to ensure that no bank goes down would be put in place. That is the kind of pronouncements we expect from SEC because that will go a long way to restoring investor’s confidence to the market and the economy generally.
You cannot do business without the banks, and as he has reassured that no banks would go down that is enough to boost activities in the capital market. We know that so much money of the banks is locked up in the market in terms of margin facility. But there is great hope for the banks recovering the margin facilities and they are also working on the necessary framework and strategy to apply to ensure that the monies do not go down the drains. When you begin to see activities in the market going up, it is because of that singular pronouncement and other positive actions taken to improve on full disclosure requirements.
Economy and the trio of Mukhtar, Sanusi, and Oteh
Before you set up a team, you take cognisance of the composition of that team; those you want to be members of the team. If you got it wrong in your selection of the members of that team, then it is bound to fail from the outset. But at the time you are setting up your team, and this team because of the spirit of oneness, there is harmony and confidence, there is respect of ideas among them, you realise that you can work together as one towards achievement of the overall goal.
The existing relationship among the trio of finance minister, central bank governor, and the nominated SEC DG, is a great advantage. I think a common front has emerged to address some of the problems of the economy. There is no way you can work respectfully with others whom you believe in their capability or experience, in fact a winning team, without achieving good result. Regardless of where anybody may come from, what is more important is who can deliver. That is my belief. If we need 11 persons from the North to represent Nigeria in our national football team and they deliver, so be it. All we want is result, not federal character and where the team members are coming from. The country has gone beyond that. Let us begin to recognise achievers, those who can deliver and de-emphasise the issue of federal character.
I believe in the team. I respect them. They have held several top level positions before in their various fields of endeavours. But only time will tell better.
Our operations as registrar
We are the ultimate custodian of all the activities in the capital market. That you have gone to a stockbroker, bought your shares and at the end of the day, it is my duty as registrar to keep records of all those shares you have bought or sold. So, primary and secondary market transactions, the registrars is still the broker. What we do is to service or maintain the registers of quoted companies that are in our purview. As it is, I have 18 companies in our purview and my duty is to make sure that I service the shareholders of the companies. How do I service them? I change, update addresses of their shareholders. If they are married, I update my register. If they are going for annual general meeting, I send the annual report to them. If there is dividend and bonus, I sent them to them. In the discharge of those services, you relate with other parties.
That is where the stockbrokers, issuing houses, companies in a public offer, and the regulators we are expected to make quarterly returns to them as far as the companies that we manage are concerned. In fact, my role as registrar is to service and maintain shareholders and register of the companies under my purview.
As a matter of fact, I have come a long way and this company has been in existence since year 2000. I started the company nine years ago. And the calibre of staff I have here are tested well-experienced professionals who at any point in time can deliver. Having said that, I must say that we are one of the leading registrars in the industry. And the experience I have garnered over the years I have brought into play in the job and the quality of staff I have here are among the best in the industry. This, you can confirm any where in terms of professionalism and service delivery.
Impact of meltdown on registrars
The meltdown has made an impact on us but not as bad as stockbroking houses’. Before the crisis started, we had eight good mandates to play the role of registrars. But because of the meltdown, no company is coming again to raise funds in the market. It means that the offers are suspended. The implication is that the income we would have earned from the transactions is no more realizable.
But to the glory of God, we have up to 18 companies that we service as registrars and they pay us maintenance/service fees. The income from the existing accounts is keeping us going unlike stockbroking firms that depend on commission from transactions.
To the glory of God, we have not pruned our staff strength and that will never happen because from day one, we have been very cost-conscious here. Again, we have quality, well-tested staff who can deliver. We don’t believe in engaging so many persons. We have not sacked anybody; we have rather promoted despite the meltdown. Our business is still running comfortably and we will continue to watch the area of cost. So, nothing has changed from what it used to be.
By KELECHI MGBOJI
what is the website address for sterling registrars? do you know
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