NEW RULES AND AMENDMENTS TO THE RULES AND REGULATIONS OF THE COMMISSION

LEGEND: Additions are underlined; Deletions are struck through; while Justifications are italicized.

A. NEW RULES

1. RULE ON REGULATION OF FUND MANAGEMENT PRODUCTS

(1) No person or entity shall operate any product that pools investors’ monies, including discretionary or non-discretionary portfolios/funds except such person or entity is registered as a fund/portfolio manager. (2) No fund/portfolio manager shall develop and operate any product, discretionary or non-discretionary portfolio/fund without the Commission’s prior approval or ‘no objection’. (3) No fund/portfolio manager shall advertise, market or attract investors to the existence of any product, discretionary or non-discretionary portfolio/fund other than registered collective investment schemes. (4) Every fund/portfolio manager shall submit quarterly returns and annual reports in respect of all products, discretionary or non-discretionary portfolios/funds, in a form as determined by the Commission. (5) Any person or entity that contravenes this rule shall be liable to any one or more of the following sanctions – a. A penalty of not less than ₦500,000 (Five hundred thousand naira) and a further sum of N10,000 (Ten thousand naira) for every day the violation continues in respect of each product, discretionary or non-discretionary fund/portfolio under management; b. Suspension of registration; c. Withdrawal of registration; d. Disgorgement of proceeds/income from the product, discretionary or non-discretionary portfolio/fund; e. Any other sanction the Commission deems fit in the circumstance.

2. RULE ON NOMINEE COMPANIES

1. Definition of Terms Nominee Company: A Nominee for the purpose of this Regulation is a company formed by a bank or other financial institution for the purpose of holding securities and other assets and administering them on behalf of the actual owners under the terms of a custodial or nominee agreement. Holding Company/Parent Company: For the purpose of these rules, means a bank or other eligible financial institution that owns and controls a nominee company. Client: Means a person who has entered into agreement with a nominee company to hold and manage its securities or other assets.

2. Business of Nominee Companies a) The business of the Nominee shall be to take 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. b) A Nominee shall not engage in any business or activity except the business of Nominee companies described above.

3. Functions of Nominee Companies a) Maintaining accounts of securities of clients b) Collecting all rights and benefits on behalf of, or accruing to clients in respect of securities held c) Managing the holding of clients including facilitating sale, purchase, lending and borrowing securities and settlement of investment obligations based on the clients’ mandates d) Ensuring compliance with contractual obligations with clients and custodians e) Maintaining and reconciling records of the services referred to in sub-clauses (i) to (iv) above; f) Maintaining sufficient information and record to identify the beneficial owners of securities held by it. g) Providing periodic information to clients and custodians (where securities and other assets are transferred to the nominee company by a custodian).

4. Dealing with assets of clients The Nominee Company shall deal with the assets that it holds on behalf of clients including custodians as follows: a) Securities i. Securities as defined in the Investments and Securities Act (ISA) 2007 shall be registered in the name of the nominee or in the name of nominee and client ii. Securities shall be stored and held in safe and secure custody or electronically administered and maintained and shall be protected by adequate and appropriate security and administrative systems. iii. The Nominee Company shall collect corporate action entitlements relating to all securities held on behalf of clients, verify the calculations and convey all details to clients iv. The Nominee Company shall have no authority to demand for board membership of companies or to exercise any voting rights attached to shares registered in the Nominee company`s name unless instructed to do so by its clients b) Money The Nominee Company shall: i. open a trust account or accounts for clients with one or more banks. The Account name must reflect that it is a Clients’ Account ii. deposit in the account or accounts opened in terms of the above clause, any money, which is accepted or received by it iii. deal with Funds so deposited in accordance with the directions given to it by its clients from time to time iv. not co-mingle clients’ monies with its own v. not receive or hold clients’ monies except for the purpose of investing in securities under clients’ instructions c) Property i. Immovable property shall be registered in the name of the client with power of attorney in favour of the Nominee Company ii. Immovable property shall be managed and secured in accordance with sound property management practices in relation to the particular property concerned, and shall be maintained in a like manner iii. Movable property received shall be dealt with as if it is the property of the Nominee Company and shall be kept in safe and secure custody and shall be properly maintained if necessary iv. Any title deed, certificate or document pertaining to property shall be dealt with as if it were a marketable security v. The Nominee Company shall collect all rents relating to immovable property and pay all expenses incidental to the maintenance thereof as well as in respect of movable property held on behalf of clients, verify the calculations and timely payment thereof and convey all details to clients

5. Clients’ Records and Accounts The Nominee Company shall: a) maintain a custody account for every client and provide information to such account to the client b) keep and maintain proper books of account and other records necessary to identify assets of each client and to discharge its obligations to its clients c) provide clients with any information reasonably required by the client concerning assets held on his or its behalf d) obtain the written authority of the client prior to receiving or holding any assets on behalf of such client e) report quarterly to its clients on assets held on their behalf and shall include all movements and changes in the holding concerned which occurred since the date on which the holding commenced or immediately prior to the report or as the client requests f) maintain basic information on the securities holders including transaction details and maintain documents in relation to transactions that have been made on behalf of the investors

6. Liabilities 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.

7. Others a) The Nominee Company shall put in place mechanisms to protect the interest of clients and help preserve market integrity b) The Nominee Company shall ensure that its assets are segregated from the assets of clients. c) When a Nominee account is opened with a depository by a Nominee Company, the Nominee shall make a declaration that it is acting as a Nominee for its client, d) The Nominee Company shall keep clients’ assets in such a way as to protect them from foreclosure, appropriation/attachment by creditors or liquidators of the Nominee. e) In the case of a proposed merger/acquisition, of the Nominee Company, it shall notify the clients, who shall reserve the right to appoint another Nominee or elect to remain with the new entity. f) In the event that the registration of a Nominee Company is revoked/suspended, it shall within 24 hours of receiving the Commission’s notification of revocation/suspension inform its clients who shall appoint another Nominee Company within 90 days from the effective date of revocation/suspension, failing which, the Commission shall appoint another Nominee Company to takeover custody of the assets. g) In the event of a decision by the Nominee Company to discontinue business, it shall within 2 working days notify the Commission and its clients. The clients shall appoint another Nominee within 90 days from the date of the notice and the Nominee Company shall transfer assets to the appointed Nominee of the clients within 5 working days. h) A Nominee Company’s decision to discontinue business shall not be effective without complying with the Commission’s Rule on withdrawal of Registration

8. PAYMENT The Nominee Company may demand payment for providing custody and asset administration services including providing information to account holders, rights holders and others, including for providing notifications of change and statements of holdings. However, this does not apply in regard to information to which public authorities are entitled by law or regulations.

9. OWNERSHIP STRUCTURE The Nominee Company shall be wholly or jointly owned by (a) financial institution(s) with a minimum or combined minimum net worth of N30billion.

10. OBLIGATIONS OF THE PARENT COMPANY In consideration of the services to be undertaken from time to time by the Nominee Company, the parent company shall submit a sworn undertaking to the Commission that it: a) is fit and proper to own a Nominee Company for purposes of carrying out functions of Nominee as provided in SEC Rules and Regulations; b) has a non- operating structure which allows for oversight by Executive Management and the Board of Directors of holding company over the business of the Nominee Company; c) has evidence of a documented system of internal controls which ensures that its Nominee Company is effectively run, that the assets of clients are safeguarded and segregated and the records of the Nominee Company accurately reflects the information of clients, their assets and transactions; d) has evidence of appropriately documented procedures to exclude unauthorized access to critical systems, the thorough testing of systems and the continuity of operations of all critical applications of its Nominee Company, including disaster recovery and a business continuity plan; e) has an appropriate documented system of risk management; f) shall pay all expenses of and incidental to the formation of the Nominee Company; g) shall pay all the liquidation expenses of the Nominee Company of whatsoever nature and kind, in the event of the winding up of the Nominee Company; h) shall not dispose of the shares it holds in the Nominee Company to any person without the prior written approval of the Commission and its lead Regulator concerned; i) shall guarantee the due performance of the obligations of the Nominee Company to its clients.

11. REGISTRATION AS A NOMINEE COMPANY All persons not registered by the Commission as Custodians, carrying on the business of Nominee and holding securities including equities, money market and fixed income securities, derivatives etc. except Pension Assets, on behalf of actual owners shall apply to the Commission for registration as a Nominee.

12. REQUIREMENTS FOR REGISTRATION AS A NOMINEE COMPANY An applicant for registration as Nominee Company shall be sponsored by its holding company which shall submit the undertaking required under “Obligations of Holding Company” above along with the under listed documents completed by the Nominee Company, its directors and sponsored individuals: a) Form SEC 3 in duplicate; b) Form SEC 2 and 2D – completed by all Directors and Sponsored Individuals/ Compliance Officer in duplicates; c) Evidence of Required Minimum Paid-up Capital of N1,000.00 (One Thousand Naira only) unimpaired by losses; d) Evidence that the parent company/ shareholders (financial institutions) have a/ combined minimum net worth of N30 billion naira; e) Current Fidelity Bond covering at least 25% of the minimum capital as stipulated by the Commission’s Rules and Regulations; f) Detailed curriculum vitae of sponsored individuals and Directors which should include details of activities from secondary school to date arranged chronologically with dates; (all gaps in employment and educational history should be explained); g) Copies of credentials of sponsored individuals from secondary school to date (including NYSC discharge/ exemption certificates); originals are required for sighting by officers of the Commission; h) Sponsored individuals shall meet the requirements specified in the SEC Rules on Sponsored Individuals and Compliance Officers and Qualifications of Sponsored Individuals and Compliance Officers; i) Police clearance report for each Sponsored Individual: Each sponsored individual is to report at the Commission’s head office or any of its zonal offices with three recent passport photographs to commence the process; j) Copy of means of identification of the Directors and the Sponsored Individuals of the Company (International Passport, Driver’s license or Permanent Voters Card); k) Profile of the Nominee Company which should include among others brief history of the company, organizational and shareholding structure, principal officers as well as details of past and current activities; l) Operational Manual and Organizational chart of the company; m) Business plan; n) A copy of each of the following, duly certified by the Corporate Affairs Commission (CAC); i. Certificate of Incorporation ii. Memorandum and Articles of Association– this should include the power to perform the specified function; o) CAC Form(s) showing Share Capital, Return of Allotment, and Particulars of Directors; p) Latest audited accounts or audited statement of affairs of the company; q) Sworn undertaking to keep proper records and render returns as may be specified by the Commission from time to time signed by a director and company secretary (to be notarized); r) Sworn undertaking to abide by SEC Rules and Regulations and Investments and Securities Act signed by a director and company secretary (to be notarized); s) Evidence of payment of fees as contained in Schedule 1 of SEC Rules and Regulations; t) Any other documents as may be required by the Commission.

13. OTHER REGISTRATION REQUIREMENTS a) A Nominee Company shall have minimum of three sponsored Individuals, one of whom shall be a compliance officer; b) The Managing Director of the Company shall at all times be among the sponsored individuals by complying with the requirements for registration of sponsored individuals; c) A Nominee Company shall have necessary infrastructure, including vaults for safe custody of title documents, agreements etc. and information technology capability required to effectively discharge its functions.

14. CODE OF CONDUCT A Nominee Company shall abide by the Code of Conduct for Capital Market Operators and their Employees as set out in the Commission’s Rules and Regulations. In addition, any person registered by the Commission as Nominee shall: a) not carry out any business except the business of Nominee prescribed in these rules b) not invest in securities c) have a robust risk management procedure and mechanism for compliance with Anti Money Laundering/Combating Financing of Terrorism (AML/CFT) regulations of its parent company d) in the case of merger/acquisition, notify the clients, who shall reserve the right to appoint another Nominee Company or elect to remain with the new entity. e) within 24 hours, in the event that its registration is suspended/revoked, notify all its clients including custodians of the suspension/revocation and their obligation to appoint another Nominee Company within 90 days from the effective date of suspension/revocation. Where any client fails to appoint another Nominee, the Commission shall appoint another Nominee to takeover custody of the assets. f) in the event of a decision by the Nominee Company to discontinue business, notify the Commission and its clients within 24 hours. The Nominee Company shall notify the clients of their obligation to appoint another Nominee within 90 days from the date of the notice and the Nominee Company shall transfer assets to the appointed Nominee of the clients within 5 working days, failing which the Commission shall appoint a Custodian. g) comply with the Commission’s Rules on withdrawal of registration before the decision to discontinue business shall be effective.

15. A Nominee Company shall comply with the Commission’s Rules on internal controls; monitoring, review, evaluation and inspection of systems and controls; separate custody account; agreement with the client; preservation of records and disclaimer of liability.

3. RULE ON GENERAL RULES FOR COLLECTIVE INVESTMENT SCHEMES

1. General Rules for Collective Investment Schemes (CIS) (1) All units/securities of a collective investment scheme shall be registered by the Commission. (2) All units/securities subject to registration by the Commission may be offered through the following methods – (a) offer for subscription; (b) offer for sale; (3) Units/securities of a collective investment scheme may be registered by way of a shelf registration and the following provisions shall be applicable – (a) Definition of Shelf Registration: Shelf Registration is a filing undertaken by issuers intending to access the market in the near future. It permits issuers to disclose certain information in a core disclosure document that is updated on a regular basis; (b) General Requirements: (i) The value of the shelf programme shall not be less than N5 billion (ii) An issuer may issue, offer or purchase, or make an invitation to subscribe for or purchase units under a shelf registration where at the time of the issue, offer or invitation, there is in force a shelf prospectus as updated by a supplementary shelf prospectus, both of which have been registered by the Commission; (c) A shelf prospectus shall be subject to renewal every three years from the date of its issue; (d) A shelf prospectus shall— (i) comply with the general form and contents of a prospectus as set out in these Rules and Regulations; (ii) state that the Shelf Prospectus has been registered by the Commission; (iii)state that the registration of the Shelf Prospectus and Supplementary Shelf Prospectus shall not be taken to be that the Commission endorses or recommends the securities or assumes responsibility for the correctness of any statements made or opinions or reports expressed therein; (iv)contain a statement that no units will be allotted or issued on the basis of the Shelf Prospectus read together with any Supplementary Shelf Prospectus later than three years after the date of the issue of the Shelf Prospectus; (v) if it contains any statement made by an expert or contains what purports to be a copy of or an extract from a report, memorandum or valuation of an expert, state the date on which the statement, report, memorandum or valuation was made and whether or not it was prepared by the expert for incorporation in the Shelf Prospectus; (vi)set out such other information as may be specified by the Commission. (f) A supplementary shelf prospectus shall— (i) state such information as may be specified in these Rules and Regulations on contents of prospectus; (ii) state the offer period which should not be longer than twenty-eight (28) working days from the date of the issue of the Supplementary Prospectus or such longer period as may be allowed by the Commission; (iii)disclose information such as: I. where a matter has arisen and information in respect of that matter would have been required by the Act, these Rules and Regulations or any listing requirements of a recognized securities exchange, to be disclosed in a prospectus if the matter had arisen at the time the Shelf Prospectus was prepared; II. where there has been a significant change affecting a matter disclosed in the Shelf Prospectus; III. where the Shelf Prospectus contains a statement or information that is false or misleading; IV. where the Shelf Prospectus contains a statement or information from which there is a material omission; V. that the Supplementary Shelf Prospectus has been registered by the Commission and that a copy has been lodged with the Securities Exchange where the units/securities are listed. (iii)All shelf documents shall be made accessible to the public at the office/on the website of the Fund Manager/Promoter. (iv)The Fund Manager/Promoter of a shelf prospectus shall pay a filing fee of N50,000 and a vetting fee of N200,000 at the time of placement of documents on the shelf and the appropriate fees for registration of units/securities as provided in these Rules and Regulations at the time of the issuance of the units/securities. (v) In the case of a renewal, the Fund Manager/Promoter of a shelf prospectus shall pay a filing fee of N50,000 and a vetting fee of N200,000.

4. RULE ON ANNUAL SUPERVISION FEES FOR COLLECTIVE INVESTMENT SCHEMES/ Schedule I, Part B, Others

(1) All CIS fund managers shall pay annual supervisory fees of 0.005% of the net asset value of the CIS under management not later than 31st January of every year failing which the fund manager shall be liable to a penalty of N100,000 and a further sum of N5,000 for every day of default. (2) Every fund/portfolio manager shall pay the following annual regulatory fees not later than 31st January - a. 0.25% of the total asset of all discretionary and non-discretionary funds/portfolios (other than CIS) under the management of the fund/portfolio manager targeted at retail investors b. 0.01% of the total asset of all discretionary and non-discretionary funds/portfolios (other than CIS) under the management of the fund/portfolio manager targeted at qualified investors (3) A fund/portfolio manager shall be liable to a penalty of not less than N100,000 and a further sum of N5,000 for every day of default for failure to comply with (2) above.

5. RULE ON PAYMENT OF ADMINISTRATIVE CHARGES FOR REVIEW OF SUPPLEMENTAL DEEDS AND AMENDMENTS TO SUNDRY AGREEMENTS/ Schedule I, Part B, Others

(1) Every proposed alteration to any document submitted with respect to the administration of a scheme shall attract the following processing charges –

NATURE OF ALTERATION	CHARGE
(a) Supplemental trust deed	N100,000
(b) Amended and Restated trust deed	N200,000
(c) Where (b) above involves the merger of two or more funds	N50,000 (additional)
(d) Amendments to any other agreement/document	N100,000
(e) New agreement/document not previously filed during the scheme offer or launch	N100,000
(f) Request for legal opinion or advisory clarifications	Not less than N50,000

(2) Every draft document, amendment or supplemental listed in (1) requiring the Commission’s approval or “No Objection” must be accompanied with evidence of payment of the corresponding administrative charge; (3) Failure to comply with (2) above shall be treated as non-filing. (4) The above charges in (a)-(d) shall not apply to alterations made as a result of new or amendments to the Rules and Regulations or the Act; Provided that were such document also includes additional alterations not as a result of new or amendments to the Rules and Regulations or the Act, the above charges shall apply.

6. RULE ON CROWDFUNDING

PART 1 – GENERAL PROVISIONS

1. Definition of Terms [Definitions provided for Act, AML/CFT, Associated Person, Blind pool, Complex Structures, Control, Crowdfunding, Crowdfunding Portal, Crowdfunding Intermediary, Commodities Investment Platform, Family Member, Funding Round, High Net Worth Investor, Investment-based crowdfunding, Investment Instruments, Investor, Fundraiser, KYC, Material Adverse Change, Minimum Threshold, MSME, Non-Permissible Investment Instrument, Operator, Plain vanilla bonds/debentures, Predecessor, Public Company by Default, Qualified Institutional Investor, Retail Investor, Simple Investment Contract, Sophisticated Investor, Tag-along Rights, Target Plan, Trust Account.]

2. Applicability: These Rules shall apply only to Investment-Based Crowdfunding.

3. Eligibility: Only the following entities shall be eligible to raise funds through a Crowdfunding Portal operated by a registered Crowdfunding Intermediary, in exchange for the issuance of investment instruments; i. MSMEs incorporated as a company in Nigeria with a minimum of two-years operating track record; ii. MSMEs incorporated as a company in Nigeria with less than 2 years operating track record but which has a strong technical partner that possesses a minimum of 2 years operating track record or has a core investor;

4. Exemptions from Certain Provisions of the Act

5. A Fundraiser may offer or sell investment instruments under these Rules without the need for prior registration of the investment instruments pursuant to the Act, provided that: a. The Fundraiser is an entity incorporated in Nigeria, and accredited and/or accepted by a Crowdfunding Intermediary to utilize its portal; b. The aggregate amount of investment instruments that can be offered and sold by the Fundraiser within a 12-month period shall comply with the following limits: i. The maximum amount which may be raised by a Medium enterprise shall not exceed N100Million; ii. The maximum amount which may be raised by a Small enterprise shall not exceed N70Million; iii. The maximum amount which may be raised by a Micro enterprise shall not exceed N50Million

6. The limits set forth above shall not apply to Commodities Investment Platforms, or such other MSMEs as may be designated by the Commission from time to time.

7. The aggregate amount of investments instruments sold to any investor across all Fundraisers in investment-based crowdfunding during the 12-month period shall not exceed the following limits: (i) Retail investors may not invest more than 10% of their net annual income in a calendar year. (ii) Sophisticated, High Net worth and Qualified Institutional Investors are not subject to the limits set forth above.

8. The issuance of investment instruments shall be conducted through a Crowdfunding Portal operated by a registered Crowdfunding Intermediary.

9. For the purpose of calculating the aggregate amount of investment instruments offered and sold by Fundraiser under this Rule, and determining whether a Fundraiser has previously sold investment instruments within a 12-month period, the term Fundraiser as used in this Rule, shall include all entities controlled by or under common control with the Fundraiser and any predecessors of the Fundraiser.

PART 2 - CROWDFUNDING PORTAL REQUIREMENTS 5. General Provisions [Details portal registration requirements and scope.] 6. Registration Requirements [Specifies documentation and capital requirements (N100 million) for registration.] 7. Criteria for Registration [Outlines fit and proper test and operational capabilities.] 8. Revocation of Registration [Outlines grounds for revocation.] 9. Change of Structure or Cessation of Business Operations [Requires Commission approval for changes.] 10. Action by the Commission in the event of Cessation or Suspension [Allows Commission to issue directives.]

PART 3 - OBLIGATIONS OF THE CROWDFUNDING INTERMEDIARY 11. General Obligations [Outlines portal disclosure and verification duties.] 12. Due Diligence [Requires background checks on fundraisers and business viability.] 13. Monitoring and Reporting [Mandates monthly and quarterly reports.] 14. Data Protection and Privacy [Requires safeguards for investor information.] 15. Operation of Trust Account [Mandates appointment of a custodian.] 16. Issue, Publication and acknowledgment of Warning Statements [Requires prominent display of risks.] 17. Compliance [Requires written policies and allows inspections.] 18. Record Keeping [Details records that must be preserved for 7 years.] 19. Use of Manipulative, Deceptive or Other contrivances [Prohibits fraudulent behavior.] 20. Restriction on Cross Ownership [Prohibits 5% control by intermediary personnel without approval.]

PART 4 - PARTICIPANTS FOR CROWDFUNDING 21. Fundraiser [Outlines offering documentation and certification duties.] 22. Investors [Provides for cooling-off and rescission rights.] 23. Obligations of a Crowdfunding Portal [Lists monitoring duties.]

PART 5 - REQUIREMENTS WITH RESPECT TO TRANSACTIONS 24. Receipt of an application by the Crowdfunding Intermediary [Mandates providing information to Commission.] 25. Procedure by the Commission Upon Receiving an application [2 working days for response.] 26. The Offering [Specifies time limits and funding conditions.] 27. Lock-in period [One-year transfer restriction.] 28. Tag-along Rights [Requires inclusion in articles of association for equity offers.]

PART 6 – OBLIGATIONS OF THE FUNDRAISER 29. Fundraiser submission requirements. 30. Issuance of offering document. 31. Offering document format. 32. General Disclosure Requirements. 33. Risk Disclosure [Must state all risks without mitigants.] 34. Ongoing disclosure requirements. 35. Access to offering and ongoing disclosure documents. 36. Marketing and Communication.

PART 7 – RESTRICTIONS 37. Prohibited Activities [Prohibits financial assistance or secondary trading facilitation.] 38. Fundraisers Prohibitions/Restrictions. 39. Non-permitted Fundraisers [Excludes complex structures, blind pools, etc.]

PART 8 – ADDITIONAL REQUIREMENTS FOR COMMODITIES INVESTMENT PLATFORMS 40. Additional requirements for operating a commodities platform.

PART 9 - MISCELLANEOUS 41. Industry Association formation.

PART 10- PENALTY 42. Penalty of N100,000 fine and N5,000 per day for non-compliance.

PART 11- TRANSITIONAL PROVISION 43. Existing entities have 90 days to comply and apply for registration.

B. SUNDRY AMENDMENTS

1. Contents of a Trust Deed/ 465(d)&(e) [Adds target asset allocation and cash limit constraints.]
2. Investment by Collective Investment Schemes in Unlisted Securities / Additional Disclosure /497 [Adds requirements for disclosure in prospectus and website.]
3. Amount to be Underwritten/Rule 517 [Merges Rule 519 into 517.]
4. Valuation Report / Rule 522 [Adds rating report requirement every two years.]