SEC opens window for foreign collective investment scheme

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The financial market is being liberalised further with the creating of in-roads for the marketing of foreign collective investment schemes in the country. This is as contained in the amended Investment and Securities Act, soon to be gazetted.

 

As a way of formalising the collective investment scheme and bring it under the regulation of the Securities and Exchange Commission, the Act, was also amended among other things with a provision that \"in addition to unit trust schemes, a collective investment scheme could be constituted by way of open-ended investment company and Real Estate Investment Company or trust.\"

 

It is also contained under the new Act that \"a foreign collective investment scheme could be marketed in Nigeria provided that the necessary approvals are sought and received from the Commission.\"

 

Collective investment schemes are regular contributions or thrift savings by small investors which aggregates into a bulk sum for investment in high-yield securities.

 

The scheme is very popular in Nigeria and particularly among the rural dwellers. Over time, there have been calls for the formalisation of the scheme and its regulation by the appropriate authorities.

 

The idea is that, there are large volumes of funds that circulate among the small income earners who operate small scale enterprises, such that by formalising the scheme and regulating their operations, the money will be brought into the formal sector and help capital formation.

 

While the Act permits the marketing of foreign collective investment schemes, it is however not clear as to whether the investment will be managed locally or will be managed in the country where the scheme originates.

 

Analysts are of the opinion that if the fund is managed outside the country it will result in capital flight even when the local market is in dire need of funds.

 

But given the stance of the government in terms of a commitment to attract as much foreign investment as possible it is believed that SEC will come up with a modality that will ensure that such collective investment scheme that originates outside the country and managed locally to boost the capital base. - BusinessDay

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