Operators laud SEC on Custody for Mutual Funds

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Capital Market Operators have commended the Securities and Exchange Commission (SEC) on its directive that clients’ funds for Mutual Trust should be domiciled with the custodian of the asset for optimal safety.

The commission had early this year issued new rules that clients’ fund for collective investment should be held in safe and secure custody or electronically administered.

The commission has re-affirmed its commitment towards full implementation of the new rule to ensure that a client’s asset does not co-mingle with that of the asset management company.

Market operators lauded the commission for the rule, describing it as a necessary step to check abuse of clients’ funds and ensure accountability for both parties.

Commenting on the rule, the Managing Director, Futureview Asset Management Company, Ughochi Nnodi explained that the move would enhance investor protection and promote transparency in the market.

“The primary aim of this rule is to protect investors. Protection of investors’ funds begins from averting commingling as the funds and investments will be held by a Custodian and not by the Fund Manager. It makes the management of mutual funds seamless and highly professional. It is part of the commission’s regulatory oversight. The Commission should be commended for this strategic decision.”, says Nnodi.

Corroborating her, another stockbroker noted that the capital market thrived in investor trust, saying clear separation of clients’ assets from that of the fund managers enthrones transparency.

“The Nominee Company shall have no authority to demand for board membership of companies or to exercise any voting rights attached to shares registered in the Nominee company’s name unless instructed to do so by its clients.

“No person or entity shall operate any product that pools investors’ monies, including discretionary or non-discretionary portfolios/funds except such person or entity is registered as a fund/portfolio manager.

“No fund and portfolio manager shall advertise, market or attract investors to the existence of any product, discretionary or non-discretionary other than registered collective investment schemes.

“Every fund or portfolio manager shall submit quarterly returns and annual reports in respect of all products, discretionary or non-discretionary portfolios/funds, in a form as determined by the Commission, ”SEC said in a statement.

Infringement of the rule by fund managers will attract penalties of not less than N500,000, additional N10,000 daily and risk of suspension among others.

SOURCE: THISDAY

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