All Collective Investment Schemes in Nigeria Must Meet 100% Custody Requirements

The Securities and Exchange Commission (SEC) announced that all Collective Investment Schemes in Nigeria must meet 100% custody requirements and commenced policies to implement the rules.

This was disclosed in a statement by the Director-General of the SEC, Mr Lamido Yuguda in Lagos on Sunday.

The SEC said the custody requirement must cover all funds and portfolios being managed by registered Fund/Portfolio Managers, adding that clients who are managed under discretionary and non-discretionary mandates were to be held under independent custodial agreement, including, Mutual Funds authorised for public offering.

What the SEC boss said

Yuguda 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 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.”

He said that the introduction of total custody in that sector will lead to a massive uptake of these kinds of products, adding that the SEC has released regulations recently in this area for the different types of fund managers, and that the sector is now becoming increasingly attractive to investors and is also receiving the attention of the commission.

Yuguda also stated that with the new 100% custody requirement in the CIS sector, investors in the capital markets will be confident that their investments are safe, which will lead to growth in the sector, including other policies to protect investors, which the SEC is working on.

“We have a Fintech division in the commission that was set up purposefully 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,” he added.

“This is a developing area, and we intend to issue new regulations from time to time,” he said.