The Securities and Exchange Commission has revealed that it has brought about N2.36tn in discretionary and non-discretionary funds under custody following updates to the guidelines for Collective Investment Schemes in the country.
Last December, the commission proposed amendments that would address the complaints of players in the Collective Investment Scheme segment of the capital market.
In a notice on its website, the SEC revealed 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 at the media briefing after the first quarter Capital Market Committee meeting on Friday, the Chief Economist at SEC, Dr Okey Umeano, said funds in the discretionary and non-discretionary windows had been brought under custody to enhance investor protection.
Umeano said, “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.
“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 N2.14tn in CIS funds and N2.36tn in discretionary and non-discretionary funds and all in custody.”
Shedding more light, the immediate past Director-General of the SEC, Lamido Yuguda, at the meeting noted that it was standard practice that assets management and custody are separated but that arrangement only applied to the public CIS, not the bilateral arrangements.
With the new rules, all funds were mandated to the custodians.
The former SEC DG said, “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.
“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 speciality in a function to undertake that function. The world over, these functions are separated.
“What happened in our market was that, we separated these functions for the public CIS products, that is the listed CIS products on the exchange but for the discretionary investment portfolios funds, where fund managers manage funds for their clients on a bilateral discretionary basis, they were not custodied, unless an asset manager chooses to do that because of good practice.”
According to Yuguda, what the SEC has done was to mandate all investment management activities in the public CIS space or the bilateral space to be in custody.
He added that investment management must be segregated with the custody part being 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.
According to smartasset.com, for a discretionary investment account, sometimes known as a managed account, the broker has the authority to make individual trades in the investor’s portfolio without seeking approval.
It added that they have the discretion to buy or sell assets on their own, while for a non-discretionary account, the investor has to approve each decision on the account.
Meanwhile, President Bola Tinubu announced a new board for the commission late Friday, removing Yuguda and replacing him with the Managing Director of the Nigerian Capital Market Institute, Emomotimi Agama.
In a statement by the Special Adviser to the President (Media & Publicity), Ajuri Ngelale, the new SEC board is chaired by Mairiga Katuka.
Other members include 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.
The statement partly read, “The President anticipates that all members of the Board of this critical commission will bring to bear their wealth of experience and competence in advancing the commission’s core mandate of developing and regulating a capital market that is dynamic, fair, transparent, and efficient, to bolster investor confidence and contribute immeasurably to the nation’s economic development.”
