SEC Launches 100% Custody Requirement in Mutual Funds


Darasimi Adebisi

In an effort to further protect investors and deepen the capital market, the Securities and Exchange Commission (SEC) has announced that it has started implementing a 100% custody requirement in the corporate sector. collective investment.

SEC chief executive Mr. Lamido Yuguda, who revealed this during an interview in Abuja, said that although this is a natural operational requirement of the CIS, the SEC has new measures to enforcement and emphasis on compliance which has been on the books but has not been implemented until now.

He said: “The custody requirement covers all funds and portfolios managed by registered fund managers / portfolios. Thus, all of the Client’s assets managed under discretionary and non-discretionary mandates must be held under an independent depository agreement and Custodian Banks. This is in addition to the mutual funds authorized for the public offering.

“For example, we have the collective enterprise sector where you have the fund managers. We have a dichotomy between public funds, which are publicly traded funds, and you can see the unique values ​​on the stock exchange and in the newspapers on a daily basis. There are also private agreements, which are investment agreements between fund managers and specific investors / ”

He added: “A lot of these funds in private money management mandates are in our custody. Until now, the investment manager was not only responsible for managing the investments of the fund, but also kept the securities and cash as whole units of that investment. The risk is that if the investment manager goes bankrupt, the investor loses, which is not acceptable in financial markets around the world.

“I think that with the introduction of total custody in this industry, we will probably see a massive adoption of this type of product. We recently published regulations in this area for the different types of fund managers, and I think this is an area that is becoming more and more attractive to investors and is also receiving the attention of the committee. “

He said that the SEC having a 100% custodial arrangement in the collective investment industry, “Any investor investing in the capital market should be sure that their investments are secure, adding that this is a good thing. for the market and an area that can bring on a lot of growth in the market because it offers a very good opportunity to save.

The SEC CEO said the commission is also looking closely at the market to see how it can put regulations in place that will help investors protect their investments.

“We have a FinTech division within the commission that was created purposely to understand these new types of investment structures and to work with FinTech companies who wish to register as capital market operators and offer services to the investing public. This is a developing area, and we intend to publish new regulations from time to time, ”he said.

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