The Securities and Exchange Commission has commenced the implantation of a 100 percent custody requirement in the Collective Investment Schemes sector.
This was disclosed by the Director-General of the SEC, Mr Lamido Yuguda in Abuja.
The Custody requirement covers all Funds and Portfolios being managed by registered Fund/ Portfolio Managers. So, 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) authorized for public offering
According to Yuguda, although it is a natural operational requirement of CIS the SEC is having some new enforcement and insistence on the compliance that has been in the books but has not been implemented before now.
“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 burst, 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 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.”