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Recovering Investments Of Deceased Investors In Capital Market

To simplify the process of share transmission from the deceased investors to their beneficiaries, the Securities and Exchange Commission (SEC) is making moves to engage relevant stakeholders, a process that will also address the continuous growth in unclaimed dividends. OLUSHOLA BELLO writes.
Unlike the popular market, where buying and selling take place, the capital market is strictly for investors who are willing to invest in the listed equities on the floor of the Nigerian Stock Exchange (NSE).
Each country has it Stock Exchange which serves as a platform for wholesale and retail investors to invest in shares of listed companies with the aim of being shareholders of those listed entities.
To this end, the Nigerian Stock Exchange (NSE) was established in 1960 and was then known as the Lagos Stock Exchange.
In 1977, its name was changed from the Lagos Stock Exchange to the Nigerian Stock Exchange (NSE).  From inception, the Nigerian capital market has continued to grow, with lots of retail investors now in the market.
As at February 25, 2019, NSE has 169 listed companies with a total market capitalisation of over N12.194 trillion, as all listings are included in the NSE All Shares index. In terms of market capitalisation, the country’s Exchange is the third largest stock exchange in Africa.
However, over time, there has been a challenge in the transfer of shares of deceased investors to their next of kin.
To make the process efficient and less cumbersome, Nigerian capital market regulator, Securities and Exchange Commission (SEC) has engaged the probate registry and sensitise it with a view to providing solutions to the cumbersome process of transmitting shares.
The Challenge
A lot of shareholders have died without adequately handing over their investment portfolios to any relative. In fact, in many instances, relatives of the shareholder may not even be aware of such investment. The worse case is when the late shareholder did not keep records of such investment and the relative only knew when they begin to receive dividend warrants posted to that late shareholder.
When a person passes away, the transfer of stock ownership will depend on the provisions made by the deceased before their passing. If a married person who held stocks jointly with a spouse dies, then the surviving spouse typically becomes the sole owner of those stocks. However, the process is different if the decedent held stocks on his or her own.
If a person who holds stocks designates a beneficiary prior to his death, then that beneficiary becomes the owner of the stock once the holder passes. Most legal and financial experts recommend naming a transfer-on-death beneficiary in order to avoid the probate process.
Section 154 of CAMA provides that a personal representative so entitled to the shares of a deceased shareholder may himself validly transfer the shares of a deceased member although he is not a member himself. He also has an option to be registered as member himself or another nominated by him as the transferee of the shares by executing a transfer deed.
The personal representatives of the shareholder shall obtain probate or Letters of Administration from the jurisdiction in which the deceased shareholder was domiciled to deal with his shares in the Company.
He will also apply to the Company notifying it of their intention to either become members of the company or to transfer same to another person. The application will be accompanied by; a copy of the Death Certificate of the deceased shareholder, a copy of the probate or Letters of Administration, original shares certificate of the deceased shareholder and thereafter, a new certificate will be issued to the personal representatives of the deceased.
With SEC making the process simple, next of kin of a deceased shareholder may no longer face cumbersome process in relation to claiming the shares or proceeds from investment of his/her deceased family member.
SEC’s Plans To Simplify Transmission Of Shares
SEC is coming up with rules that would facilitate the transmission of such investments. Transmission of shares occurs when the shares of a deceased shareholder are inherited or bequeathed to an heir or personal representative of the deceased shareholder. It takes place in case of death, insanity or insolvency of a member or, where the member is a company, on its liquidation.
Speaking on this development, the acting director-general of SEC, Ms. Mary Uduk said, SEC has come up with two-pronged approach to address the intractable challenges associated with share transmission, which involves developing rules that will stipulate the time-frame for the transfer as well as the fee structure.
Part of the challenges and drawbacks to investing in equities market, she stressed,has been that of transmission of shares from one investor to another and claiming of investments of a deceased investor by the family members.
The Commission, she said, will engage probate registries around the country as part of the process with a view to enlighten them on the workings of the capital market and reduce the cumbersome process.
“We had meeting with registrars some time ago and a lot of them complained about the problem they had at the probate registries. So, we thought that in the same way that we have been engaging with judges when we have Judges Conference and we enlighten them about the workings of the capital market and importance of it, we want to extend the same gesture to the probate registries around the country so that capital market issues will be attended to as soon as possible”, said SEC acting director.
Shareholders Applaud SEC’s Move
Commending the development, general secretary, Independent Shareholders Association of Nigeria (ISAN), Moses Igbrude, said, the implementation of the rule would deepen the capital market and help reduce unclaimed dividend. He advised that efforts should be made to ensure safety of the process to avoid transferring such shares to wrong people.
Co-founder, Nigeria Shareholders Solidarity Association, Gbadebo Olatokunbo, said: “it is a good development to hear that SEC is now alive to its responsibilities by looking into areas that were disincentive to the investing public and l hope their search light continues to beam on cloudy areas in the capital market.”
The national chairman, New Dimension Shareholders Association,  Mr. Patrick Ajudua, stated that the introduction would consolidate the success story of e-dividend mandate that has contributed to reduction in unclaimed dividend, adding that, what is required is the formulation and amendment of existing laws for smooth implementation of the policy.

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