REQUIREMENTS TO OBTAIN FUND MANAGEMENT/TRUSTEE OPERATIONAL LICENSE. – By Oluwatoyin Obe

Before deciding the license required, it is necessary to understand the objectives of both a Fund Management Company and a Trustee Company.

Fund Management: This involves a Fund Manager who can either be an individual or company responsible for implementing a fund’s investment strategy and managing its trading activities. Fund Managers take charge of all activities relating to the day-to-day operation of investment funds. Securities and Exchange Commission (SEC) issues the for fund management; while

A Trust Company: involves a Trustee who can either be a person or firm that holds or administers property or assets for the benefit of a third party. A Trust Company acts as a fiduciary, agent, or trustee on behalf of a person or business for a trust; that is for the benefit of others and is typically tasked with the administration, management, and the eventual transfer of assets to beneficiaries. 

The Securities and Exchange Commission (SEC) regulates the activities of both Fund Management and Trustee Companies, though such companies must first be registered with the Corporate Affairs Commission (CAC). To obtain either a Fund Management or Trustee license application must be made to the Securities and Exchange Commission.

The requirements to obtain a fund management or Trustee operational license are similar though there are some differences as stated below:

1. Minimum Paid-Up Capital and Fidelity Insurance Bond

For a Fund Management Company, the required Minimum Paid-up Capital is N150,000,000 (One Hundred and Fifty Million Naira) (i.e. Bank balances, fixed asset or Investment in quoted Securities).

A Fund Management Company is also required to have a Current Fidelity Insurance Bond covering at least 20% of the minimum paid-up capital as stipulated by the Commission’s Rules and Regulations.

However, a Trustee Company is required to have a Minimum Paid up Capital of N300,000,000 (Three Hundred Million Naira) (i.e. Bank balances, fixed asset or Investment in quoted Securities); and Current Fidelity Insurance Bond covering at least 10% of the minimum paid-up capital as stipulated by the Commission’s Rules and Regulations.

Other Payments to be made and submitted with the application for either a fund management or trustee license are:

1. Evidence of Payment of Filing/Application Fee – N50,000 (Fifty Thousand Naira);
2. Evidence of Payment of Processing Fee – N200,000 (Two Hundred Thousand Naira);
3. Evidence of Payment of Registration Fee – N500,000 (Five Hundred Thousand Naira);
4. Evidence of Payment of Sponsored Individual Fee – N50,000 (Fifty Thousand Naira) for each sponsored individual.
5. Forms:

For a Fund Management license, a duly executed Form SEC 3 is required for the Company; while a duly executed Form SEC 4A is required for a Trustee Company.

The following forms apply for both Fund Management and Trustee license:

1. Form SEC 2 and 2D – Sponsored Individuals/Compliance Officer (To be completed in duplicates); (Note that every Fund/Portfolio Manager is to have at least three sponsored individuals, one of whom should be a Compliance Officer who shall be responsible for monitoring compliance with the ISA 2007, Rules and Regulations, notifications, guidelines, instructions etc. issued by the Commission or the Federal Government)
2. Form SEC 2 and 2D – Directors of the Company (To be completed in duplicates).
3. Sponsored Individuals and Directors: Both Fund Management and Trusteeship require the following:
4. Minimum of three sponsored Individuals, one of whom shall be a compliance officer;
5. Managing Director of the Company to be among the sponsored individuals;
6. Full postal addresses of immediate previous employers, bankers (with Current Account number) and nominated referees of sponsored individuals;
7. Detailed curriculum vitae of sponsored individuals and Directors which should include details of activities arranged from Secondary School to date with dates; (all gap in employment and educational history should be explained);
8. Copies of credentials of sponsored individuals including secondary school and NYSC discharge certificates; originals will be required for sighting by the SEC;
9. Evidence from the Sponsored Individuals of having the minimum of four years post-graduation experience to perform the Fund/Portfolio Manager or Trusteeship and Compliance Function as stipulated by the Commission`s Rules and Regulations;
10. Police clearance report for each Sponsored Individual. Each sponsored individual is to report at the SEC head office in Abuja or the Lagos zonal office with two recent passport photographs to commence the process;
11. Copy of means Identification of the Directors and the Sponsored Individuals of the Company (International Passport, tax or utility payment documents).

NOTE: In addition to the above, for a Trustee Company, One of the sponsored individuals shall be a lawyer experienced in trusteeship function.

• It is the firm applying for the license that is deemed as the ‘sponsor’ of the individual.

Note the following requirements apply to both Fund Manager and Trustee license:

4. Applicant Company:
5. Profile of the Company should include among others brief history of the company, organizational and shareholding structure, principal officers as well as details of past and current activities;
6. The name(s) and address(es) of the company’s subsidiaries/associated companies, type of business and percentage holding;
7. Evidence of Payment of shares allotted to the shareholders;
8. Operational manual or organizational chart of the company;
9. Business plan;
10. Bank statement of accounts operated by the Company for the last 6 months.
11. Corporate Documents: A copy each of the following, duly certified by the CAC:
12. Certificate of Incorporation;
13. Memorandum and Articles of Association – this should include the power to perform the specified function;
14. CAC Form(s) showing Statement of Share Capital, Return of Allotment, and Particulars of Directors.

Note: the original copy of the certificate is to be presented for sighting by an authorized officer of the SEC.

1. Latest audited accounts or audited statement of affairs of the company. Note that the cash assets ratio shall be 60% liquid assets and 40% fixed and other assets;
2. Sworn undertaking to keep proper records and render returns as may be specified by the Commission from time to time signed by a director or the company secretary (to be notarized);
3. Sworn undertaking to abide by SEC Rules and Regulations and Investments and Securities Act No.29 of 2007 by a director or the company secretary (to be notarized).

ADDITIONAL REQUIREMENTS FOR BOTH FUND MANAGER AND TRUSTEE LICENSE:

1. The Commission may require such other documents as it considers necessary for registration.
2. An application for registration will only be considered as having been filed when all document(s)/information have been completed.
3. Every applicant Company/Firm will be inspected while processing an application for registration.
4. A fair knowledge of the Rules and Regulations of the Commission and Investments & Securities Act No 29 of 2007 and the Capital Market is an essential prerequisite for registration.