SEC clarifies new rules for mutual funds, sets new deadline for compliance

SEC stated that all the fund managers of collective investment schemes are to comply with the new rules.

The Security and Exchange Commission (SEC) has sought to clarify the new rules and guidelines for Collective Investment Schemes (CIS) otherwise known as mutual funds. This is the sequel to an earlier publication of new rules relating to the collective investment schemes in December 2019. 

In the new rule, SEC stated that all the fund managers of collective investment schemes are required to comply with the provisions of the new rules and file evidence of compliance on or before September 30, 2020. 

This was contained in a circular that was released by the Security and Exchange Commission to the investing public on June 22. 

The apex capital market regulator also pointed out that the application of the new total expense ratio and incentive fee computation takes effect from the beginning of the third quarter of 2020, which is by July 2020.  

According to the circular from SEC, ‘’Sequel to the publication of new Rules relating Collective Investment Schemes in December 2019, the Commission hereby issues the following clarifications to facilitate effective compliance with the new CIS Rules.’’ 

‘’All Fund Managers of Collective Investment Schemes are required to comply with the provisions of the new Rules and file evidence of compliance on or before September 30 2020; 

 ‘’The application of the new total expense ratio and incentive fee computation takes effect from the beginning of Q3,2020, i.e. July 2020; 

’ Incentive fees should not be factored into total expense ratio computation and shall be assessable and payable on an annual basis; 

 ‘’The Fund Managers Association of Nigeria (FMAN) shall submit acceptable benchmarks for Money Market Funds, Balanced Funds and Ethical Funds at the beginning of each year commencing Q3. 2020.’’ 

 Mutual funds usually refer to a financial vehicle made up of a pool of funds collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.