New Rules and Sundry Amendments to the Rules and Regulations of the Commission

New Rules

a. Rules on Specialized Funds/Schemes

Definition of Terms

“Eligible Foreign Jurisdiction (EFJ)” means IOSCO Ordinary Member countries. “Eligible securities/assets” mean: (a) Investments of a CIS as prescribed under the ISA; (b) Other securities registerable by the Commission that do not qualify as eligible investments of a CIS as prescribed by the ISA; (c) Negotiable securities and money market instruments which are tradable and transferable in regulated markets and Exchange of eligible foreign jurisdiction market; (d) Assets of an eligible Foreign jurisdiction market other than in (b) which are deemed liquid and whose selection is supported by a FMDDRR; (e) Unquoted Securities traded on a SEC registered ‘Over the Counter’ Exchange; (f) Derivatives, Commodities and Other assets as may be prescribed or approved by the Commission from time to time.

“Foreign Market Due Diligence Review Report (FMDDRR)” means a Foreign Market Due Diligence Review to be undertaken by the Fund Manager to the Fund or proposed Fund showing the following: a. Risk and return profile of the market in which the security(ies) to be invested in is listed or traded; b. Risk and return profile and other relevant information on the Issuer of the security (ies) to be invested in; c. Risk management strategy of the Fund Manager with regards to the planned investments.

“Qualified Investors” mean: Qualified Institutional Investors, and High Net Worth Investors, as defined under these Rules and Regulations.

1. General Provisions

A Specialized Fund/Scheme shall: a) be subject to registration and authorization by the Commission; b) be offered only to qualified investors; c) be subject to the reporting requirements of a Unit Trust Scheme; d) have a minimum subscription level of not less than N5 million per investor; e) not be publicly listed but may be traded on an Over the Counter (OTC) Exchange.

2. Qualifying Investor Requirement

Investor participation in an authorized Specialized Fund shall be restricted strictly to qualified investors.

3. Investment Activities

i. Investment activities of a Specialized Fund/Scheme shall be in assets that align with the investment objective of the Fund/Scheme as stated in the Fund/Scheme’s constituent documents. ii. A Specialized Fund may invest in eligible assets as prescribed under these Rules. iii. Assets shall be subject to limits of allocation specified in the Fund’s constituent documents. The Fund Manager shall undertake continuous due diligence and risk assessment of such asset on a half-yearly basis.

4. Borrowing Limit

Where borrowing is provided for, the borrowing limit or gearing ratio shall be disclosed in the Fund/Scheme’s constituent documents.

5. Exposure Limits in Derivative Transactions

Permissible exposure limits to counterparties in an OTC derivative transaction shall be clearly set and stated as a percentage of the Fund/Scheme’s gross asset value in the Fund/Scheme’s constituent documents.

6. Risk Diversification

In undertaking asset selection and allocation, the Fund Manager shall ensure appropriate risk diversification giving regards to the investment objective of the Fund/Scheme. The following limitations shall also apply: a) Asset – Not more than 20% of the Fund’s total asset value shall be invested in the securities of the same issuer within a group; b) Jurisdiction – Not more than 20% of the Fund’s total value shall be invested in Eligible Foreign Jurisdictions.

7. Duties and Responsibilities of the Fund Manager of a Specialized Fund/Scheme

i. Investors Due Diligence: The Fund Manager shall, through the administration of a signed questionnaire or profile, ensure that only qualified investors participate in the Scheme; therefore, it shall conduct due diligence on the eligibility of interested investors, failing which it shall bear any liability that may arise from failure to undertake such due diligence. ii. Valuation methodology and Frequency of valuation: The Fund Manager shall exercise due diligence in ensuring that the Fund’s underlying assets are valued in line with internationally acceptable standards relevant to the specific types of assets. The basis and methodology of such valuation shall be disclosed in the Fund/Scheme’s constituent documents and subsequently in valuation reports and pricing of the Fund/Scheme’s net asset value and unit/ share price as well the Fund’s periodic reports to investors.

8. Disclosure Requirements

The constituent documents of a Specialized Fund/Scheme shall include the following minimum information: i. Investment Policy and Objective of the Fund: This shall include the Fund/Scheme’s investment strategy and asset class, justification for investment/ asset choice and any other information that may be required by the Commission. ii. Responsibility statements...

[...Due to length constraints, document continues with forms for ETF registration, Commodity Broker requirements, and Capital Market Holding Company (CMHC) regulations...]

Sundry Amendments

a. AMENDMENT TO RULES ON BOOK BUILDING AND FUND/PORTFOLIO MANAGEMENT OPERATIONS (Definition of Retail Investor and High Net Worth Investor updated.)

b. AMENDMENT TO THE CODE OF CORPORATE GOVERNANCE (Deletion of Clause 1.3(d).)

c. AMENDMENT TO RULE 5(3)- REGULATIONS FOR DEMUTUALIZATION OF SECURITIES EXCHANGES IN NIGERIA (Added 'subject to Rule 7'.)

d. AMENDMENT TO RULE 14(1) - RULES ON APPOINTMENT OF COMPLIANCE OFFICER (Added requirement for Sponsoring firm oversight of sub-brokers.)

e. DELETION OF RULE 19(5)

f. AMENDMENT TO RULES 19 AND 35- REGISTRATION STATUS OF SPONSORED INDIVIDUALS (Added sub-rule (iv) regarding change of employment.)

g. AMENDMENT TO RULE 40(5): RULE ON EARNINGS FORECAST (Public quoted companies shall notify...)

h. AMENDMENT TO RULE 41(4): PUBLICATION OF INTERIM FINANCIAL STATEMENT (Expanded publication rules to website.)

i. AMENDMENT TO RULE 45 (PART C): REGISTRABLE FUNCTIONS (Added 'm. Nominee'.)

j. AMENDMENT TO RULE 51(1)- ON REPORTS TO BE FILED (Added exception for sub-brokers.)

k. AMENDMENT TO RULE 51- REPORTS TO BE FILED/SCHEDULE II (PENALTIES) (Changed timeline for filing annual accounts to three months; sanctioned failure to file.)

l. AMENDMENT TO RULE 57- NET CAPITAL REQUIREMENT (Amended to Net (Liquid) Capital Requirement.)

m. AMENDMENT TO RULE 58: DETERMINATION OF NET (LIQUID) CAPITAL (Updated procedure.)

n. AMENDMENT TO RULE 74- RELATIONSHIP BETWEEN SUB-BROKERS AND BROKER/DEALERS (Renamed to Obligations of a Sub-Broker.)

o. AMENDMENT TO RULE 107(4)- UNCLAIMED RETURN MONIES (Added 'with accrued interest'.)

p. AMENDMENT TO RULE 125- PROHIBITION OF ASSIGNMENT (Added nominee as allowed assignee.)

q. CREATION OF A NEW RULE UNDER PART C13- RIGHT OF INVESTOR TO APPOINT CUSTODIAN (New Rule 126.)

r. AMENDMENT TO RULE 132- USE OF NOMINEES (Added requirement for nominee registration and immediate transfer.)

s. AMENDMENT TO RULE 279(3) (5) (ii): SHELF REGISTRATION (Added supranational agencies.)

t. DELETION OF RULE 421- DEFINITION OF ACQUISITION (MERGERS)

u. AMENDMENT TO SCHEDULE I- REGISTRATION FEES, MINIMUM CAPITAL REQUIREMENTS, SECURITIES AND OTHERS (Created registration fee for Nominee: N500,000.00 and Minimum Capital of N1,000,000,000.00.)

v. AMENDMENT TO SCHEDULE II OF THE COMMISSION’S RULES AND REGULATIONS: INSERTION OF PENALTY FOR DIVERSION/MISAPPLICATION OF ISSUE PROCEEDS (Issuer in default shall pay Monetary Policy Rate +2%.)