In a bid to further protect investors and deepen the capital market, the Securities & Exchange Commission (SEC) has commenced the implementation of 100 per cent custody requirement in the collective investment schemes (CIS) sector.
The director-general of SEC, Mr. Lamido Yuguda, who said this in Abuja, explained that the custody requirement covers all funds and portfolios being managed by registered fund/ portfolio managers.
He said all clients’ assets managed under discretionary and non-discretionary mandates are to be held under independent custodial agreement and custodial banks. This is in addition to CIS (mutual funds) authorised for public offering.
Yuguda said although it is a natural operational requirement of CIS, the SEC is having new enforcement and insistence on the compliance that has been in the books but have not been implemented before now.
He said, “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 the newspapers daily. There is also private, which is investment agreement between fund managers and specific investors.
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.”
He said with the SEC having 100 per cent custody agreement in the Collective Investment Schemes (CIS) sector, any investor that invests in the capital market should be confident that their investments are secure, 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 is also looking at the market closely to see how it can 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,” he said.