SEC and CMOs Move to Resolve Differences as 2022 Registration Renewal Deadline Approaches

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Wednesday, January 26, 2022 / 12:30 PM / by Proshare Research / Header Image Credit:  SEC Nigeria

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Following the reminder by the Securities and Exchange Commission (SEC) to all Capital Market Operators (CMOs) to renew their registration for 2022 and the firmness of SEC not to extend the deadline of the registration beyond January 31st, 2022. The affected CMOs and trade group requested for a meeting with SEC and at the end of the meeting the following decisions were made;


The outcomes of the meeting can be categorized on three (3) broad categories;

  1. Annual Registration Renewal
  2. AML/FTR Penalty; and
  3. Supervisory Charges on Asset Managers


Annual Registration Renewal

  1. SEC was clear that the re-introduction of Annual Registration Renewal is now a policy of the commission.
  2. In response to the trade groups letter of January 11th, 2022 to the SEC, the 2021 renewal fee will be retained in 2022 while SEC will take into consideration the issues raised in the letter to determine the fee payable in 2023.
  3. Deadline for payment remains 31st January 2022.


Anti-Money Laundering/FTR Penalty

  1. Penalties imposed on those that submitted either to NFIU or SEC waived.
  2. No waiver to those that failed to submit to either.


Supervisory Charges on Asset Managers

SEC met with Fund Managers Association of Nigeria (FMAN) and the outcome of the meeting with FMAN is that 0.005% will be charged on NAV effective from January 1st 2021 to December 20th, 2021 and 0.2% of NAV effective from 21st December 2021 to 31st December 2021. 0.2% supervisory fee continues in 2022.


Subsequent to the decisions reached at the recently held meeting, which are stated above, industry observers noted the followings.


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The Need for Broader Engagement

While the role of the Securities and Exchange Commission is well appreciated in the area of regulations and development of the capital market, there is need for broader engagement with the relevant trade groups and associations from the Chartered Institute of Stockbroker, CIS to the Association of Securities Dealing Houses of Nigeria, ASHON to explore ways of resolving the concerns around the deadline of January 31, 2022 for renewing the licenses of CMOs.


This is premised on the following issues;


Impact of the Pandemic-Induced Recession

Nigeria recovered from the pandemic-induced recession last year but the effects on businesses still linger and f0r capital market operators, it is the challenge of survival and sustainability in their activities.


A review of the cost of the renewal of the license of the CMOs is something that the Securities and Exchange Commission should consider as it takes into consideration the socio-economic challenges in the country.


At the moment despite having over 200 CMOs in operation, the capital market participation of investors in Nigeria is still about 2% of the nation's population which is not good for the country.


This is why some constructive engagement with the trade groups around the fees will be apt at this point between the regulator and operators.


The Need for an Extension of the Deadline

While it is important for the Securities and Exchange Commission to carry out its mandate of enforcement and effective regulation of market activities in Nigeria, an extension of the deadline for the CMOs from the initial date of January 31st, 2022 by a quarter which is March 31, 2022 could be a much better option to engage and provide ample time for the operators to meet up with the timeline.


Recall that a circular was issued on December 16, 2021 for CMOs on the need to renew their license and the timeline for meeting up may have been too short for them.


An extension should help CMOs to explore mergers and other innovative ways to scale their operations in the capital market.


The goal is to deepen market activities, woo more investors, deepen awareness on the value of the capital market and strengthen standard operating procedures.


Revisiting the SEC Mandate

The SEC Nigeria mandate as clearly stipulated is to regulate and develop the Nigerian capital market, which is why the current revenue drive by the apex regulator could clash with the strategy to promote a vibrant and dynamic market ecosystem.


It is important that the SEC Act should be revisited and possibly amended to ensure that it serves as an effective regulatory body working directly with the Presidency, not under the Ministry of Finance, Budget and National Planning.


SEC Nigeria can generate funds from fines as it drives it supervision roles effectively alongside its oversight functions. Also the "Whistleblowing" policy of Federal Government should have SEC as a key component to ensure that whistleblowers in the capital market are encouraged and also rewarded like it is obtainable in the United States of America.


The National Assembly Committees on Capital Markets should work out modalities for reviewing the SEC Nigeria Act to make it efficient and free from the hackles of being classified as a "Revenue Generating Agency" of government.

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