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The Securities and Exchange Commission, SEC has issued new rules and updated some of their previous regulations as it pertains to the business of nominee companies, crowdfunding and collective investment schemes, CIS in Nigeria.
For a full review of the SEC rules, visit the 53-page document here. This article underscores only the new rules for nominee companies in Nigeria.
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What is the business of a Nominee Company in Nigeria
According to the document, this is the only business of a Nominee company:
- The business of the Nominee shall be to take the title of property, money or securities in trust for and on behalf of clients as Nominee for, or representative of such clients, to hold and deal with such property, money or securities strictly in accordance with any directions given by the respective clients from time to time to the Nominee Company.
- A Nominee shall not engage in any business or activity except for the business of Nominee companies.
Function of nominee companies:
- Maintain accounts of securities of clients.
- Collecting all rights and benefits on behalf of, or accruing to clients in respect of securities held
- Managing the holding of clients including facilitating the sale, purchase, lending and borrowing securities and settlement of investment obligations based on the clients’ mandates.
- Ensuring compliance with contractual obligations with clients and custodians.
- Maintaining and reconciling records of the services.
- Maintaining sufficient information and record to identify the beneficial owners of securities held by it.
- Providing periodic information to clients and custodians (where securities and other assets are transferred to the nominee company by a custodian).
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Rules that nominee companies must observe
- Registration of a nominee company.
- Requirements for registration of a nominee company which includes providing of government documents and educational credentials to the SEC.
- Code of conduct.
- Payment of a nominee company
- Ownership structure as well as the obligation of the parent company.
Nominee companies deal on securities, money or properties on behalf of a client who they have an agreement with.
The SEC is laying the groundwork for Nominee companies which in this case could be any financial institutions as well as for investors and clients.
A client is a person who enters into an agreement with a nominee company to hold and manage their securities/assets.
The SEC is demanding the use of electronic administration of securities and clarity in the dealings while establishing responsibilities for all parties.
Liabilities in operating a nominee company
The Nominee Company shall not out of its own volition incur any liability of whatsoever nature excluding liabilities arising from acts performed in carrying out its objectives as set out in its Memorandum and Articles of Association.
