Know your Responsibilities

CAPITAL MARKET OPERATORS: KNOW YOUR RESPONSIBILITIES

A. RULE 3: FILLING OF MATERIALS WITH THE COMMISSION

(6) (b) Time for processing: An application for any form of registration by an applicant shall lapse if the applicant fails or neglects to comply with the registration requirements within twelve(12) months of filing the application.

B. RULE 14: APPOINTMENT OF COMPLIANCE OFFICER

1)Every market operator shall appoint a Compliance Officer who shall possess requisite knowledge of relevant capital market regulations and who shall be responsible for monitoring and ensuring compliance with the Act, rules and regulations, notifications,guidelines, instructions etc. issued by the Commission or the Federal Government;

(2) The Compliance Officer shall be registered by the market operator with the Commission as a sponsored individual by filing Form S.E.C. 2 as contained in schedule III of these rules and regulations;

(3) The Compliance Officer shall immediately and independently report to the Commission any non- compliance observed by him;

(4)The Compliance Officer shall be responsible for educating other members of staff on compliance related issues;

(5) The Compliance Officer shall on an annual basis attend at least two trainings organized by institutions recognized by SEC.

C. RULE 19 (4); (i) Where an applicant refuses or neglects to respond to a deficiency letter for a period of up to 6 months, such applicant shall be required to re-start the registration process

(ii) The registration of a registered Sponsored Individuals who resigns or whose appointment is terminated and has not transferred his registration to another registered Capital Market Operator within a period of twelve (12) months, shall cease to exist

RULE 19 (6) (7) SPONSORED INDIVIDUALS AND COMPLIANCE OFFICERS
(6) All sponsored individuals and compliance officers proposed by an applicant shall be employees of that applicant.

(7) Companies registered/seeking registration to carry out multiple functions shall sponsor the total number of individuals prescribed for each function.

E. RULE 20: QUALIFICATION OF SPONSORED INDIVIDUALS AND COMPLIANCE OFFICER

(1) Sponsored individuals and compliance officers are required to have any of the following qualifications and job experience:

(a)a first or higher degree or its equivalent in a relevant field including banking, finance, accounting, business management, law, economics and company secretarial studies with a minimum of four (4) years relevant post-qualification experience (excluding the National Youth Service Corps year); or

(b)a first or higher degree or its equivalent in a non-relevant field including science- oriented courses, the Arts, etc., with a minimum of six(6) years relevant post- qualification experience (excluding the National Youth Service Corps year); or

(c)a West African School Certificate (W.A.S.C.)/S.S.C.E., General Certificate of Education (G.C.E.) or Higher School Certificate or its equivalent with a minimum of fifteen (15) years relevant post-qualification experience.

(2) Where the sponsored individual and compliance officer intends to be registered as a registrar, such officer must in addition to (1) above have any of the following qualifications and job experience:

(a)a legal practitioner with a minimum of five(5) years post-call experience;

(b)a first degree or its equivalent with a minimum of seven(7) years relevant working experience in a registrar’s establishment registered by the Commission;

(c)a school certificate holder with a minimum of fifteen (15) years working experience in a registrar’s establishment duly recognized by the Commission.

(3) Where the individual is sponsored by a rating agency such officer shall comply with rule 114(4) (g).

(4) Where an individual is sponsored by a sub-broker, such a person shall be an Associate Member of the Chartered Institute of Stockbrokers (CIS) or have any of the qualifications specified in (1) above or such other professional qualifications as acceptable to the Commission.[SECRR(A) August, 2009]

(5) All sponsored individuals and compliance officers are required to forward copies of their credentials with their applications for registration while the originals are to be presented for sighting during the registration interviews.

(6) All sponsored individuals and compliance officers are required on an annual basis to file with the Commission evidence of attendance of at least one training organized by institutions recognized by the Commission.

F. RULE 21: APPROVAL OF APPOINTMENT OF DIRECTORS OF CAPITAL MARKET OPERATORS

(1) Executive directors of market operators shall be approved by the Commission prior to their appointment;

(2) A director of a market operator shall have the minimum qualifications as specified in rule 20 of these rules and regulations.

G. RULE 23: AMENDMENT TO APPLICATION

(1) Whenever any information contained in any application for registration or in any amendment thereto or in any of the documents submitted therewith becomes inaccurate for any reason, the registrant shall file an amendment on Form S.E.C. 7 as contained in schedule III to these rules and regulations correcting the information within ten (10) working days of the occurrence of the event;

(2) The filing of any amendment to an application for registration by a registrant pursuant to sub-rule (1) of this rule, which registration has not become effective, shall postpone the effective date of the registration until the 30th day following the date on which the amendment is filed whichever last occurs, unless the Commission takes affirmative action to accelerate, deny or postpone the registration;

(3) Every amendment filed pursuant to sub rule (1) of this rule by a securities exchange shall constitute a report.

H. RULE 27 FIDELITY BOND:

Every registered CMO whether a Corporate body or consultants shall provide and maintain a Bond or Professional Indemnity Insurance Policy which shall be issued by an Insurance Company acceptable to the Commission against theft/stealing, fraud, defalcation, or dishonesty covering each Officer, employee and sponsored individual of the CMO.

Where such a corporate body/company is an insurance company, the fidelity bond shall be issued by another insurance company

The Commission also in a 2013 circular requested all Capital Market Operators to affect their fidelity insurance bond from January 1 to December 31 of every year

I. RULE 33: WITHDRAWAL FROM REGISTRATION

(1) (a) A notice of withdrawal from registration as a market operator or from a registered function pursuant to the Act shall be filed on Form S.E.C. 8 as provided in schedule III to these rules and regulations.

(b) Notice of withdrawal from registration of securities shall be filed on Form S.E.C. 8A as provided in schedule III to these rules and regulations.

(2) Except as hereinafter provided, a notice to withdraw from registration shall become effective on the 60th day after filing thereof with the Commission or within such shorter period of time as the Commission may determine;

(3) Notwithstanding the provisions of sub rule (2) above, a notice of withdrawal from registration filed after a registration certificate has been issued shall not become effective, until the original certificate of registration is returned to the Commission for cancellation;

(4) If prior to the effective date of a notice of withdrawal from registration, the Commission has initiated proceedings to suspend or revoke the registration or to impose terms or conditions upon such withdrawal, the notice of withdrawal shall not become effective except at such time and upon such terms and conditions as the Commission may deem necessary in the public interest or for the protection of investors;

(5) The market operator shall:-

(a)File with the Commission, a list of all its clients with the outstanding liabilities written against their names;

(b) File evidence of satisfactory discharge of its obligation to clients; the Commission reserves the right to verify the information;

(d)File information about the market operator taking over its operations;

e)File a sworn statement of indemnity, in favor of the market operator taking over its operations;

(f)File a copy of the agreement between it and the market operator taking over its operations;

(g)File a copy of the public notice of the withdrawal, which shall be published in two (2)national daily newspapers.

J. RULE 34. Suspension/Cancellation of Registration

(1) The Commission may suspend or cancel the registration granted to a market operator for any registered function where the market operator contravenes any of the provisions of the Act, the rules and regulations, the code of conduct for capital market operators or fails to do any of the following:

(a)Furnish any information relating to its activities as required by the Commission or furnishes information which is false and misleading in any material particular;

(b)Submit periodic returns or reports as required by the Commission;

(c)Co-operate in any inquiry or inspection conducted by the Commission;

(d)Update its systems and procedures as recommended by the Commission;

(e)Resolve the complaints of clients or fails to give a satisfactory reply to the Commission in this regard.

(2) The Commission may cancel the registration granted a market operator where it is found:

(a) guilty of fraud or has been convicted of an offense involving moral turpitude; or

(b) guilty of repeated defaults.

(3) Effect of Suspension and cancellation of registration

(a) From the date of the suspension of registration, the market operator shall cease to carry on any capital market activity and shall be subject to the directives of the Commission with regard to any records, documents or securities that may be in its custody or control relating to its activities as a market operator.

(b) From the date of cancellation of registration, the market operator shall, with immediate effect, cease to carry on any capital market activity as a market operator and shall be subject to the directives of the Commission with regard to the transfer of any records, documents or securities that may be in its custody or control relating to its activities as a market operator.

(c)Where the registration of a market operator is suspended or withdrawn by the Commission, the registration of its sponsored individual also stands suspended or withdrawn.

(4) Publication of Order of Suspension or Cancellation.

The Commission shall publish the order of suspension or cancellation of registration in at least two national daily newspapers.

K. RULE 35. Change of Status of Registrant

(1) Where any sponsored individual resigns or for any other reason leaves the employment of a sponsoring corporate body, the corporate body shall notify the Commission in writing within five (5) working days from the date of his leaving the employment.

(2) The corporate body shall within thirty (30) days replace the sponsored individual who has left its employment with another officer by filing Form S.E.C.

2A accompanied by:-

(a) completed Form S.E.C. 2 from the new officer being sponsored;

(b) a copy of the letter of resignation from its previous sponsored individual;

(d)letter of acceptance of resignation from the company:

Provided that where the company still has the required minimum number of sponsored officers, it may not replace the officer who left its service.

(3) The officer in sub rule (2)(a) above shall comply with the requirements of rules 19 and 20.

(4) Where a registered sponsored individual intends to transfer to another registered corporate body, the following shall be complied with by the affected sponsored individual:

(a) where the registration of a market operator is suspended or withdrawn by the Commission, the registration of its sponsored officer also stands suspended or withdrawn;

(b) where a sponsored officer resigns his employment in the sponsoring company, he may transfer his registration to another registered corporate body by complying with the following:

(i)notify the Commission in writing within five (5) working days from the date he resigns from his previous employment,

(ii) file Form S.E.C. 2B within fourteen (14) days of assumption of duty with the new operator accompanied by a copy of letter of employment issued by the present employer and a copy of letter of acceptance of resignation from the previous employer,

(iii)file completed Form S.E.C. 2 as a sponsored individual by the present employer:

Provided that where the individual has been out of capital market operations for three (3) years or more, he shall file a fresh application for registration with the Commission;

(c)where an employee of a capital market operator resigns or is dismissed on grounds of fraudulent or manipulative acts, the capital market operator shall notify the Commission in writing within two (2) working days from the date of the employee’s resignation or dismissal.

5 Re-validation of registration

(a)Where a capital market operator’s registration is suspended and it complies with the terms and conditions of the suspension order after the expiration of the registration,the market operator shall file an application to re-validate the registration upon the fulfillment of the following requirements:

(i)compliance with the terms and conditions of the order of suspension;

(ii)where restitution was ordered, a written confirmation from the aggrieved party, of compliance by the market operator, shall be filed by the affected Market operator with the Commission. The Commission reserves the right to verify the authenticity of the written confirmation mentioned herein;

(iii)sworn undertaking not to commit the breach that gave rise to the suspension;

(iv)file an application for re-validation of registration as provided for in this rule;

(c) Where the suspended market operator is unable or failed to comply with the terms and conditions of the suspension order within a period of twelve (12) months, its registration shall become void. The market operator shall file a fresh application for registration.

(6) Reinstatement of suspended registration

The following conditions are imposed for reinstatement of a suspended registration:

(a) Where a capital market operator’s registration is suspended and it complies with the terms and conditions of such suspension order while its registration is still valid, then the registration of the market operator shall be reinstated within fourteen (14) days upon the fulfillment of the following requirements:

(i)Compliance with the terms and conditions of the order of suspension;

(ii)where restitution was ordered, a written confirmation from the aggrieved party, of compliance by the market operator, shall be filed by the affected operator with the Commission. The Commission reserves the right to verify the authenticity of the written confirmation mentioned herein;

(iii)sworn undertaking not to commit the breach that gave rise to the suspension;

(b)Where the suspended market operator is unable or failed to comply with the terms and conditions of the suspension order within a period of twelve (12) months, it’s registration shall become void. The market operator shall file a fresh application for registration.

(c) Where a registered sponsored individual’s or compliance officer’s registration is suspended and the terms and conditions of the suspension order have been complied with the registration of the sponsored individual or compliance officer shall be reinstated.

(7) Any person who fails to comply with the provisions of this regulation shall be liable to a late filing fee of N500 for every day that the default subsists and shall have its registration summarily suspended if the period of default exceeds ninety (90) days.

L. RULE 36: APPROVAL OF BRANCH OFFICES OF CAPITAL MARKET OPERATORS

Every capital market operator shall seek and obtain the approval of the Commission before the establishment of a new branch. Where an operator intends to close any of its branch offices, it shall give not less than thirty (30)days’ notice of its intention giving reasons for the closure.

M. RULE 37: MANAGEMENT OF BRANCH OFFICES OF CAPITAL MARKET OPERATORS

All branch offices of a capital market operator shall be managed by a sponsored individual.

PART C: REGULATION OF CAPITAL MARKET OPERATORS

N. RULE 45; REGISTRABLE FUNCTIONS

(1) The following are capital market operators:

a. issuing houses/merchant bankers;

b. underwriters;

c. broker/dealers;

d. sub-brokers;

e. receiving bankers;

f. registrars;

g. trustees;

h. investment advisers (corporate and individuals);

i. fund/portfolio managers;

j. rating agencies;

k. market makers

l. custodian

m. any other function the Commission may determine from time to time.

(2) Only corporate bodies are qualified to file applications for the following functions:

a. broker/dealer;

b. underwriter;

c. issuing house;

d. registrar

e. trustee;

f. fund/portfolio manager;

g. rating agency

h. market makers

i. receiving bankers

Provided that where an existing entity intends to perform the functions of a registrar, it shallincorporate a separate body for that purpose.

(3) Managers of an authorized collective investment scheme shall not engage in the performance of any other function.

M. RULE 51: REPORTS TO BE FILED

(1) Every market operator whether active or not shall file with the Commission reports listed in schedule IV of these rules and regulations:-

(a) Quarterly returns shall be filed within thirty (30) days after the end of the quarter.

(b)Annual accounts certified by an auditor and prepared on a calendar or fiscal year basis, shall be filed not later than six(6) months after the end of the accounting year.

(c)Where a market operator fails to file quarterly returns twice in a year and nine (9) months after the annual accounts becomes due ,the market operator shall be referred for further enforcement action.

Provided that an operator who was not active during a reporting period shall file a nilreturn supported by affidavit.

(2)Upon the discovery of the theft or loss of any security, a capital market operator shall report to the Commission, the exchange to which it is a member, and the registrar. Such reports shall be made within forty eight (48) hours of the discovery and shall state the following information if applicable:-

(a) name of issuer;

(b) type of security;

(d) maturity date;

(e) denomination;

(f) interest rate;

(g) certificate number;

(h) name in which registered;

(i) date of discovery.

O. RULE 52; RECOGNITION OF EXPERTS

The Commission shall not recognize as a qualified expert any person who is not duly recognized and entitled to practice as such under the laws of Nigeria or any person who is barred by the Commission, for the protection of investors, from acting as such in connection with any investment and securities business.

O. SECTION 307OF ISA 2007: Change of name of capital market operators, managers, portfolio or collective investment scheme and change of shareholding or directors

(1) A capital market operator may not without the prior approval in writing of the Commission-

(a ) change the name under which it is registered under this Act or change its shareholding or directors;

(b) use or refer to itself by a name other than the name under which it is so registered or a literal translation thereof;

(2) Any change-

(a) in the name of a capital market operator, manager, portfolio or scheme; or

(b) of shareholding or directors, shall not be effective without the prior approval in writing of the Commission.

Change of name of capital market operators,managers,portfolio or collective Investment scheme and change of shareholding directors.