Fund, Portfolio Managers To Submit Quarterly, Annual Reports- Draft SEC Rule

Nigeria’s Securities & Exchange Commission (SEC), last week published an exposure draft of its proposed rule on regulation of fund management products, which among others, seeks to plug loopholes in the regulation of that segment of the financial services sector.
According to the exposure draft and subject to final approval, among others, “every fund/portfolio manager shall submit quarterly returns and annual reports in respect of such product, discretionary or non-discretionary portfolio/fund, in a form as determined by the commission.”
The proposed rule and regulation, according to the commission is in line with its powers under Section 13(a) of the Investment and Securities Act 2007, which empowers the commission to regulate investments and securities business in Nigeria as defined in the Act.
The Rule, it explained “has become essential to actively monitor the operation of CMO (Capital Market Operators) products including discretionary and non-discretionary funds/portfolios”
This has also become expedient, the commission noted, given that these funds continue to account “for approximately twice the size of CIS (Collective Investment Schemes or Mutual) funds in the investment management sector.”
Furthermore, it said its “inspection of CMO operations have revealed that some of these products mimic the CIS structure (even when they) are erroneously classified as private in-house funds.”
When approved, the rule forbids individuals or entities not registered as fund, or fund managers from operating “any product that pools investors’ monies, including discretionary or non-discretionary portfolios/funds.
Such fund or portfolio manager shall not also “develop and operate any product, discretionary or nondiscretionary portfolio/fund without the Commission’s prior approval or ‘no objection;” just as they are not allowed to advertise, market or attract investors to the existence of such, other than registered collective investment schemes.
The commission proposes that persons or entities that contravenes the rule shall be liable to a penalty of not less than ₦500,000 and another N10,000 for every day the violation continues in respect of each product, discretionary or non-discretionary fund/portfolio under management. The person or entity may also be liable to suspension of registration; withdrawal of registration; disgorgement of proceeds/income from the product, discretionary or nondiscretionary portfolio/fund; and any other sanction the commission deems necessary in the circumstance.