In a bid to further protect investors, reduce exposure to investment managers, and deepen the capital market, the Securities and Exchange Commission (SEC) said it has commenced the implementation of 100% custody requirement in the Collective Investment Schemes (Mutual Funds) sector.
Speaking during an interview in Abuja, Director-General of the commission, Lamido Yuguda said the move is to ensure confidence that investments in the Nigerian capital market are secure. This, he noted, is a good thing for the market and an area capable of engendering growth in the market, because it offers a very good opportunity to save.
The custody requirement covers all funds and portfolios managed by registered Fund/ Portfolio Managers, following which all client assets under discretionary and non discretionary mandates must now be held under independent Custodial agreement and Custodial Banks.
For example, he continued, “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,” he stressed.
The SEC DG said the commission is also looking at the market closely for other areas in need of necessary regulations to enhance the protection of investments.
Also, he said the commission has a fintech division “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.
