The Securities and Exchange Commission (SEC) Nigeria has commenced the implementation of 100 percent custody requirement in the Collective Investment Schemes (CIS) sector as part of its initiatives to protect investors and deepen the capital market.
Director General of the SEC, Mr. Lamido Yuguda, who gave this hint during in an interview in Abuja, said the Custody requirement covers all funds and portfolios being managed by registered Fund/ Portfolio Managers.
According to him, this therefore requires that all Client’s assets managed under discretionary and non discretionary mandates are to be held under independent Custodial agreement and Custodial Banks in addition to CIS ( Mutual Funds) authorized for public offering.
Yuguda said although it remained a natural operational requirement of CIS, the commission is having some new enforcement and insistence on the compliance that has been in the books but have not been implemented before now.
He explained: “For example, we have the collective business sector where you have the fund managers. We have a dichotomy between public funds, which are funds that are publicly traded, and you can see the unique values on the stock exchange and in newspapers daily. There are also private, which are investment agreements between fund managers and specific investors
“A lot of these funds in the privately held fund management mandates are in our custody. The investment manager before now did not only have the investment management responsibility for the fund, but also kept the securities and cash as whole shares in this investment. The risk is that if the investment manager should go bust, then the investor loses and that is not acceptable in financial markets around the world.
“I think with the introduction of total custody in that sector, we are likely to see a massive uptake of these kinds of products. We have released some regulations recently in this area for the different types of fund managers, and I think this is an area that is now becoming increasingly attractive to investors and is also receiving the attention of the commission”, the DG added.
Yuguda further clarified that with the SEC having 100 percent custody agreement in the CIS sector, any investor that invests in the capital market should be confident that their investments remained fully secured, adding that it is a good thing for the market and an area that can bring about a lot of growth in the market because it offers a very good opportunity to save.
The SEC DG said the Commission was also monitoring the market closely to see how it could bring out regulations that will help investors protect their investments.
“We have a fintech division in the commission that was set up purposely to understand these new types of investment structures and to collaborate with fintech firms that wish to register as capital market operators and offer services to the investing public.
“This is a developing area, and we intend to issue new regulations from time to time”, Yuguda added.
