By Peter Egwuatu

The Securities and Exchange Commission, SEC, is considering the regulation of fintech operations in the capital market in order to protect investors’ interest.

SEC’s Director General, Mr Lamido Yugudu, disclosed this in an interview, stressing that, “The Commission is 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.

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It will be recalled that the Commission recently announced that it has commenced the implementation of 100 per cent custody requirement in the Collective Investment Schemes, CIS, sector.

The Custody requirement covers all Funds and Portfolios being managed by registered Fund/ Portfolio Managers. So all Client’s assets managed under discretionary and non discretionary mandates are to be held under independent Custodial agreement and Custodial Banks. 

This is in addition to CIS (Mutual Funds) authorized for public offering.

Yuguda said although it is a natural operational requirement of CIS the SEC is having some new enforcement and insistence on the compliance that has been in the books but have not been implemented before now.

He said: “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.”


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