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SEC goes tough on fund managers holding client’s funds, securities

The Securities and Exchange Commission (SEC) has warned some fund managers still in the habit of holding on to client’s funds and securities to desist from the act or face the wrath of the apex regulator.

Lamido Yuguda, Director General of the SEC stated this at the post-Capital Market Committee press briefing held in Lagos weekend.

Yuguda noted that holding on to clients’ funds and securities is a clear violation of the Commission’s Consolidated Rule 95 (1-2). Fund Managers were reminded that all funds and securities of clients being managed by their firms must be vested with the custodians.

The SEC DG also drew the attention of Fund Managers to issues that arose from the Commission’s recently concluded inspection of Fund/Portfolio Management operations whereby several Fund Managers managing Discretionary and Non-Discretionary Products and Portfolios were yet to seek a ‘No Objection’ of their products and portfolios from the Commission, which is a violation of the Commission’s Rules, noting that this was also a violation of the Commission’s rules.

The SEC DG disclosed that the meeting also emphasised the increasing importance of Fintech, Sustainable Finance, Financial Inclusion and Non-Interest Finance adding that the Executive Management team of the SEC reiterated its commitment to continue creating awareness, imparting knowledge and engendering public participation in these topical areas.

Speaking further on the outcome of the meeting, Yuguda said, “The market community was reminded of the annual renewal of registration of Capital Market Operators which is aimed at ensuring that only fit and proper persons operate in the Nigerian Capital Market. The portal for renewal of registration for year 2023 will open on 1st January, 2023 and close on 31st January, 2023.

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“Members received updates from the Commodities Ecosystem Implementation Committee, that significant efforts were being made on transitioning the commodities market from spot-based operations to trading in commodity derivatives.

“Furthermore, the Commodities Ecosystem Implementation Committee informed members that it held engagements with Federal ministry of Agriculture and Rural Development (FMARD), Standards Organization of Nigeria (SON), Nigeria Export Promotion Council (NEPC), on the issue of traceability of commodities, which is considered a key building block for Nigerian export promotion.

Yuguda announced that the e-Dividend Committee notified members of efforts to rebuild the E-Dividend Management Mandate System (e-DMMS) platform.

This he said, involves having a centralized submission of E-dividend mandate forms, Application Programming Interface (API) for Banks and Registrars, and a revamped web interface among others.

He expressed appreciation over the recent intervention of the House of Representatives Committee on Capital Markets and Institutions on unclaimed dividends saying “the Committee is investigating the rising value of unclaimed dividend and unremitted withholding tax on dividends. The Commission is ready to provide all the necessary support to the Committee to enable it carry out its assignment”.

“Members of the CMC were reminded to collectively work towards the enactment of the Investments and Securities Bill 2022, which will enhance the performance of the Nigerian Capital Market and align it with global best practices. The Bill seeks to improve the legal and regulatory framework that will accommodate the dynamics of the Market.

“The meeting emphasized the increasing importance of Fintech, Sustainable Finance, Financial Inclusion and Non-Interest Finance. The Executive Management team of the SEC reiterated its commitment to continue creating awareness, imparting knowledge and engendering public participation in these topical areas.

“The Financial Literacy Technical Committee informed members that it made substantial progress on introducing capital market studies (CMS) to secondary and tertiary institutions. It made appealed to the CMC to support its activities financially,” he added.

The DG added that Capital Market Operators were informed of the approval granted by the Honourable Minister of Finance, Budget and National Planning on Non-Interest Finance (taxation) regulation, which has already been gazetted.

“This has important implication for the market towards encouraging new issuances of Non-Interest Capital Market products and services. It is expected that Issuers and Market Operators will take advantage of this by creating more non-interest finance products”.