By Aduragbemi Omiyale
The Securities and Exchange Commission (SEC) said it has commenced the implementation of a 100 per cent custody requirement in the Collective Investment Schemes (CIS) sector.
In an interview in Abuja recently, the Director-General of the agency, Mr Lamido Yuguda, explained that this move was taken to further protect investors and deepen the capital market.
The custody requirement covers all funds and portfolios being managed by registered fund/portfolio managers, and to guard against any shock, all clients’ assets managed under discretionary and non-discretionary mandates are to be held under the independent custodial agreement and custodial banks. This is in addition to CIS (mutual funds) authorized for public offering.
According to Mr Yuguda, taking full custody of investors’ funds in the CIS sector will ensure that any investor that invests in the capital market would be confident that his investments are secure.
He said this is a good thing for the market and an area that can bring about a lot of growth in the market because it offers a very good opportunity to save.
“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 bust, 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 have 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,” he explained.
The SEC DG said the commission was also looking at the market closely to see how it can bring out regulations that will help investors protect their investments.
“We have a fintech division in the commission that was set up purposely to understand these new types of investment structures and to collaborate with fintech firms that wish to register as capital market operators and offer services to the investing public. This is a developing area, and we intend to issue new regulations from time to time,” he added.
Adedapo Adesanya 
Modupe Gbadeyanka