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The Securities and Exchange Commission (SEC) has disclosed that it has brought approximately N2.36 trillion in discretionary and non-discretionary funds under custody following recent updates to the guidelines for Collective Investment Schemes (CIS) in Nigeria.
Last December, the commission proposed amendments to address concerns raised by stakeholders in the Collective Investment Scheme segment of the capital market.
In a notice published on its website, the SEC outlined the new amendments to its regulations titled ‘Exposure Of New And Sundry Amendments To The Rules And Regulations Of The Commission’.
Providing an update on the proposed guidelines during a media briefing after the first quarter Capital Market Committee meeting, Dr. Okey Umeano, the Chief Economist at SEC, emphasized the importance of prioritizing data protection during solution development to enhance investor protection.
Umeano stated, “On the CIS efforts, we have made. We asked that all CIS funds be put in custody. Before that update we did to the rules, only the ones we called Collective Investment Schemes were put in custody. The funds that were in discretionary and non-discretionary products were not in custody. To further protect investors in that part of the market, we asked that all the funds be put in custody.”
He continued, “And we followed up with an inspection to ensure compliance. We are pleased to report that today, at the end of the first quarter, we had N2.14 trillion in CIS funds and N2.36 trillion in discretionary and non-discretionary funds and all in custody.”
Shedding more light on the matter, the immediate past Director-General of the SEC, Lamido Yuguda, noted that the separation of assets management and custody is standard practice, but the arrangement only applied to public CIS, not bilateral arrangements.
With the new rules, all funds are mandated to be placed with custodians.
Yuguda explained, “Usually in fund management, you have two important activities, one is the application of the skills of the fund manager to obtain good investment returns for their customers and you have the actual custody of the securities that have been purchased through these investment management processes.”
He added, “So, typically, when you have one single entity doing both, you are at risk should that entity collapse. When you segregate the safe custody of the asset from the investment management function, you find that it is a much better process as you have given persons who have specialty in a function to undertake that function. The world over, these functions are separated.”
According to Yuguda, the SEC has mandated all investment management activities in the public CIS space or the bilateral space to be in custody, with investment management segregated from custody, handled by a duly licensed custodian.
“The object of this is to improve trust, to ensure that investors’ assets are protected and also to give the market a boost,” he stated.
Meanwhile, President Bola Tinubu announced a new board for the commission late Friday, replacing Yuguda with the Managing Director of the Nigerian Capital Market Institute, Emomotimi Agama.
The new SEC board, chaired by Mairiga Katuka, includes Frana Chukwuogor, Executive Commissioner (Legal and Enforcement); Bola Ajomale, Executive Commissioner (Operations); Mrs. Samiya Hassan Usman, Executive Commissioner (Corporate Services); Mr. Lekan Belo, Non-Executive Commissioner, and the Managing Director of APT Securities and stockbroker, Garba Kurfia, who was appointed a Non-Executive Commissioner.
In a statement by the Special Adviser to the President (Media & Publicity), Ajuri Ngelale, it was emphasized that the President expects all members of the new board to utilize their experience and competence to advance the commission’s core mandate of developing and regulating a dynamic, fair, transparent, and efficient capital market to bolster investor confidence and contribute to the nation’s economic development.
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