Market liquidity: SEC engages PENCOM, AMCON on Securities Lending

Determined to deepen liquidity in the nation’s bourse, the Securities and Exchange Commission (SEC) is engaging the National Pension Commission (PENCOM) and the Asset Management Corporation of Nigeria (AMCON) on securities lending.

Ms Mary Uduk, SEC acting Director-General, disclosed this at the third quarter post-Capital Market Committee (CMC) meeting news conference on Friday in Lagos.

Uduk said that the commission was engaging PENCOM on modalities which would permit Pension Fund Administrators (PFAs) to participate in Securities Lending.

Securities lending is the act of loaning a stock, derivative or other security to an investor or firm.

Securities lending requires the borrower to put up collateral, whether cash, security or a letter of credit.

“We have been engaging not only PENCOM but all local institutional investors that have substantial holding of equities and the essence of having this securities lending is to actually deepen our market.

“All of us are contributing to our own pension accounts and these PFAs are buying equities.

“What they do is to buy and hold, they don’t sell and they hold it, so the essence of securities lending is now to give room for them to make money and so that the money will now add up to their own contribution fund.

“We have a framework which has been approved and we are encouraging the market to go into self lending by meeting these institutional investors.

“Pension is the highest institutional investor in our market, they will now lend out these securities and when they lend out, it will be credited back to the pension fund account.

“At the end of the contract, they will get their securities back.

“Instead of holding the securities, they are making money out of it; that is the essence.

“So, we are engaging PENCOM to see it as an investment opportunity, and they have bought into the idea.

“We are discussing to see how they can be able to come up with their guideline based on their provision of the Act to allow securitues lending to take place.

“In addition, we are engaging another institutional investor, AMCON.

“It is a holistic approach to have a win win situation in our market,” Uduk said.

On unclaimed dividends, Uduk attributed the development to legacy issues, noting that the Commisison was working toward its elimination.

“Issues of unclaimed dividends are legacy issues; right now, you will not get unclaimed dividends from new issues.

“For an instance, the new issue that have come to the market like MTN or Airtel. There will be probably no unclaimed dividend on them.

“But for those other ones which we are still tackling, part of issue of unclaimed dividend has to do with issue of identity management, which we are doing everything to educate people on.

“We are engaging various stakeholders to be able to get the information we require.

“Items like BVN has been added to help in identity management which the capital market is also taking advantage of.

“The CSCS and the registrars are working together to ensure that more information from legacy shareholders are being collected to help them update the identity of shareholders in the market, thereby getting them to be able to claim their dividends.

“The registrars don’t have direct interface with the shareholders, they interface more with stockbrokers.

“There is a committee comprising of SEC, registrars, stockbrokers, the issuing houses, CSCS and NSE working on that in addition to e-dividend management.

“They came up with a resolution that stockbrokers will update information in respect of their clients to address the legacy issues.

“Before 2008, a lot of Nigerians bought shares in the capital market and when they were buying those shares we didn’t have BVN that time, and some of them didn’t provide account numbers.

“It was agreed that brokers would now update information in respect of their clients.

“The information has to do with account number, BVN, either email address or GSM number.

“The information would be transmitted to CSCS, and it will also update their own information in its system and send it to the registrars.

“There will be no transaction in respect of any account that information is not updated.

“There will be zero tolerance because the brokers would be given a time frame to update the information,” Uduk said.