SEC NIGERIA

SECURITIES AND EXCHANGE COMMISSION, NIGERIA

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 to the effect that:

a. Where there occurs an error in valuation of the Fund/Scheme's asset resulting in a mispricing of the Fund's/Scheme's unit price, the Fund Manager will take immediate action to remedy the error; or where the Custodian observes such error in valuation and pricing of the Fund/Scheme's unit price, it shall immediately bring this to the attention of the Fund Manager who shall immediately rectify same;

b. Where a mispricing of units of the Fund/Scheme occurs, in the case of an over- valuation, the Fund Manager shall restitute out of the Fund/Scheme assets existing investors and former investors whose holdings were part of the Fund/Scheme at the time the mispricing occurred by the margin of the difference arising from the mispricing including any accrued interests computed at the weighted average policy rate of the jurisdiction where the assets are invested;

iii. Other Disclosure Requirements

a. Names, profile and experience of the fund manager's principal officers and management team;

b. tax implications;

c. Material risks of investing in the Fund;

d. Arrangements for the safe custody of assets;

e. Statement of minimum investment required of an investor;

f. policy on distribution of income and or reinvestment;

g. relevant fees and charges connected with investment in the Fund;

h. prohibition from investing in the fund manager's, its affiliates' and the fund sponsor's instruments;

i. relevant investment restrictions (if any)

j. provision for admission of new and withdrawal of existing investors;

k. management participation in the Fund;

I. the Fund's policy with respect to mispricing;

m. Duration of the Fund;

n. Risk Management and controls;

o. Duties, responsibilities and liabilities of Trustee (if constituted as Trust);

p. Duties, responsibilities and liabilities of Fund Manager/Management or Governing Board (if constituted as Investment Trust Company

q. Duties, responsibilities and liabilities of Other Parties to the Scheme/Fund;

r. Provision for meetings and voting quorum;

s. Provision for termination or winding up of Scheme;

t. Dispute resolution mechanism;

u. A Foreign Market Due Diligence Review Report (where applicable)

v. Provision for Anti-Money Laundering and Combating Financing of Terrorism
(AML/CFT) controls;

w. Any other material information as may be required by the Commission from time to time

9. Applicable fees

i.
Application fee

• N50,000

ii.
Filing fee

• N20,000

iii.
Authorization fee

• 0.075% of the Fund size for Fund up to N10
  billion.

• 0.050% of the Fund size for Fund over N10
  billion

b. APPLICATION FORM FOR REGISTRATION OF EXCHANGE TRADED FUNDS (ETF)

FORM SEC 6A6

(To be completed in duplicate)

SECURITIES AND EXCHANGE COMMISSION (SEC) NIGERIA

SEC
SECURITIES & EXCHANGE COMMISSION

APPLICATION FORM FOR REGISTRATION OF EXCHANGE TRADED FUNDS (ETF) IN ACCORDANCE WITH THE PROVISIONS OF THE INVESTMENTS AND SECURITIES ACT, NO 29, OF 2007 AND THE SEC RULES AND REGULATIONS

Instructions for Completion

i.
All questions must be answered in the spaces provided. No space should be blank. Where a question is not applicable please indicate N/A in the space provided.

ii.
Information supplied/entered in the application form must be valid and correct as at a date not earlier than 30 days preceding the date of this application.

iii.
In the event of any material change to the information provided in this application prior to the authorization of the Offer/Scheme, the applicant shall notify the Commission of such changes immediately.

iv.
Any false/misleading information found to have been supplied herein shall attract appropriate sanction/penalty in line with the requirement of the SEC Rules and Regulations.

1.

Date of submission of application

Reference/Processing Application
No

Cheque No.

APPLICANT/SPONSOR

i) Name:.

a. (Exact name as in certificate of incorporation)

ii) Address:.

(Principal Office Address)

iii) Telephone Number:.
Fax:.................E-mail:.

iv) Investment Objective:.

2.
THE SCHEME/FUND

a) i)
Name of proposed Fund:.

ii) Proposed Date of Commencement:.

iii) Benchmark Index/Underlying Asset...

iv)
Market sector of Index.

b)
Investment Strategy of the Fund (if tracking an index include method of tracking i.e. full replication or sampling):.

c) i)
Proposed size/value (Aggregate Number of Units being offered):.

ii)
Initial Issue/offer price per unit.

iii)
Basis for determination of the issue/offer price:

iv)
Basis for determination of the IOPV:

d)
Creation and redemption of units

i)
Method of subscription (i.e. cash or in specie or both):.

ii)
Units required for delivery of one (1) Basket weighting:.

iii)
Baskets required for delivery of one (1) Block:.

iv)
Details of redemption provisions:

e) i)
State voting rights of unit holders (if any):

ii)
Disclose any special rights under the proposed scheme:.

f) i)
Frequency of Income Distribution:.

ii)
State provision for closure of register of unitholders

(iv)
Briefly explain proposals for periodically accounting to unitholders

g)
(i)
Composition of the Index/Underlying Asset

S/N Index constituents/Underlying Asset Description Weighting

1.

2.

3.

4.

5.

6.

(ii)
Date of composition...

(iii) Frequency of re-balancing index (where applicable).

2)(1) FOREIGN ETFs

i)
Name of Exchange of primary listing

ii)
Is the primary Exchange a member of the World Federation of Exchanges?.........

iii)
Country of primary registration or approval

iv)
Nature of periodic filings made to Home Regulator/Primary Exchange:.

3.
THE FUND MANAGER

a)
(i)
Name & Address

(ii)
Date & Place of Incorporation

(iii)
Date of commencement of business...

iv) Telephone Number:..
Fax:.
.........E-mail:.

(v)
Authorized Capital:

(vi) Issued and Paid up Capital:

(vii) Disclose relevant expertise on ETF or access to such expertise to issue
ETF's.......

b)
Shareholding of Fund Manager:

i)
Name(s) of Substantial Shareholders (5% & above):

Name of Company

No. of shares

Amount

%

NIGERIAN

FOREIGN

ii)
Give the names of beneficial owners of nominee shareholding of at least 5% of the ordinary share capital apart from pension funds. (State the percentage in each case)

c) Details of funds and portfolio being managed:

Name of
Fund

Year

Privately managed

Institutional

Commenced

funds/Aggregate Value

Investors/Aggregate

Value

Quoted Money Others

Quoted Money Others

Equities Markets

Equities Markets

(Attach schedule to accommodate additional clients if need be)

d) State specific lines of business (where appropriate) and percentage contribution to turnover from each line

No.
Description

e)
Furnish details of affiliates as follows:

Name of Affiliate/Address/Nature of Affiliation

f) Management and Principal Officers

% contribution to

Turnover

Net Profit

Name

Educational

Positio

Address

Share

%

No. of

Rema

Qualificatio n Held

Qualificati

Shareholdi Units

rks

on ng in

of

relation to

Schem

total share

e held

capital

g)
Management Fees to be charged on the Fund and basis

h)
Provide evidence of membership of a Fund Managers' Association...

i)
Have you ever been found guilty of any misdemeanor or breach of the rules of any such association?

j)
Give full details of contingent liabilities (if any):

k)
(i) Is any Investment advisory contract subsisting between your company and any other: YES/NO

(ii) If yes, give details about such Investment Advisers as below:

Name & Address

Pertinent Fund

Basis of Remuneration

l)
Summary of Five Year audited financial account (including management account where the latest is more than 9 months)

4.
TRUSTEE

a)
(i) Name and Address of Trustee:

(ii)
Date & Place of Incorporation

(iii) Telephone Number:.

(iv) Authorized Capital:.

(v)
Issued and Paid up Capital:

Fax:.

E-mail:.

b)
Disclose any special relationship with Fund Manager

c) Management of Trustee Company:

Nam Educationa Positio Addres Share
%
No. of
Remar e
I n Held S
Qualificati
Qualificati
Shareholdi Units ks on ng in

of

on relation to

Schem

total share

e held

capital

d) years:

Particulars of Trusteeship of other Collective Investment Schemes within the last five (5)

Title of Scheme

Year

Current

Reason(s) for Cessation

Commenced

(Yes/No)

e)
Have you ever been sued for or found guilty of breach of Trust under the laws of Nigeria or any other relevant jurisdiction?

Yes

No

If yes, please give details:

f) Remunerations/Charges of Trustee and basis:

g)
Five Year financial Summary of Trustee (including management account as at immediate quarter preceding submission of application)

5. AUTHORIZED DEALER (Attach appendix if more than one)

a) i.
Name of proposed Authorized Dealer:

b) ii.
Date and Place of Incorporation:.

iii. Address:

iv. Telephone Number:.

v. Relationship with fund manager:

Fax:.

E-mail:.

vi. Relationship with Trustee:

Remuneration/charge of Authorized Dealer and basis..

SIGNATURES AND CERTIFICATION

Pursuant to the requirements of the Investments and Securities Act, No 29, 2007 and the Rules and Regulations made thereunder, the Applicant/Sponsor has duly caused this application form to be signed on its behalf by its duly authorised signatory.

Applicant/Sponsor

Date
.Signature:.

(Full Name and Title)

I certify that to the best of my knowledge and belief the information set forth in this application form is true, complete and correct.

Date

Signature

(Full Name and Title)

SWORN to at the

Court Registry this

day of

BEFORE ME

COMMISSIONER FOR OATHS

OR

NOTARY PUBLIC

c. APPLICATION
FORM
FOR
REGISTRATION OF
ADDITIONAL
UNITS/SECURITIES OF COLLECTIVE INVESTMENT SCHEMES

FORM SEC 6A7

(To be completed in duplicate)

SECURITIES AND EXCHANGE COMMISSION (SEC) NIGERIA

SEC
SECURITIES & EXCHANGE COMMISSION

APPLICATION FORM FOR REGISTRATION OF ADDITIONAL UNITS/SECURITIES OF COLLECTIVE INVESTMENT SCHEMES IN ACCORDANCE WITH THE PROVISIONS OF THE INVESTMENTS AND SECURITIES ACT, NO 29, OF 2007 AND THE SEC RULES AND REGULATIONS

Instructions for Completion

i.
All questions must be answered in the spaces provided. No space should be left blank. Where a question is not applicable please indicate N/A in the space provided.

ii.
Information supplied/entered in the application form must be valid and correct as at a date not earlier than 30 days preceding the date of this application.

iii.
In the event of any material change to the information provided in this Form prior to the registration the Units/Securities, the applicant shall notify the Commission of such changes immediately.

iv.
Any false/misleading information found to have been supplied herein shall attract appropriate sanction/penalty in line with the SEC Rules and Regulations.

Date of submission of application

Reference/Processing Application No

Cheque No.

1.
APPLICANT

i)
Name:.

(Exact name as in certificate of incorporation)

ii)
Address:.

(Principal Office Address)

iii) Telephone Number:.
.Fax:.
.E-mail:.

2.
THE SCHEME/FUND

a) i)
Name of Fund:.

ii)
Date of registration/authorization by the Commission:

iii)
Date of Commencement:.

b) i)
Total Number of Units registered at inception :

ii)
Total Number of existing registered Units:.

iii)
Number of Additional Units to be registered:.

iv)
Price per Unit:.

v)
Basis of determination of the price:.

vi)
Total number of existing Unit holders:.

3. a)
THE FUND MANAGER

Name & Address of fund manager:.

b)
Disclose any change in the management of the Fund since the last registration of Units:

4. a)
TRUSTEE

Name & Address of Trustee:.

b)
Disclose any change of Trustee since the last registration of Units:

5.
REGISTRATION FEE

a)
Total registration fee payable:

SIGNATURES AND CERTIFICATION

Pursuant to the requirements of the Investments and Securities Act, NO 29, 2007 and the Rules and Regulations made thereunder, the Applicant/Fund manager has duly caused this application form to be signed on its behalf by the duly authorised signatory.

Date:.
Applicant

Signature:

(Full Name and Title)

I certify that to the best of my knowledge and belief the information set forth in this application form is true, complete and correct.

Date

Signature

(Full Name and Title)

SWORN to at the

Court Registry this ............. day of

BEFORE ΜΕ

COMMISSIONER FOR OATHS

OR

NOTARY PUBLIC

d. REGISTRATION REQUIREMENTS FOR COMMODITY BROKERS

1. DEFINITION OF TERMS

Commodity Brokers These are entities registered by the Commission to trade commodities on spot commodities exchange market on behalf of clients only.

Commodity Dealers These are entities registered by the Commission to trade commodities on spot commodities exchange market for proprietary accounts only.

Commodity Broker Dealers - These are entities registered by the Commission to trade commodities on spot commodities exchange market for proprietary accounts and on behalf of clients.

2. PAYMENTS/FEES

(1) Evidence of Payment of Filing/Application Fee- N10,000 (Ten Thousand Naira) (2) Evidence of Payment of Processing/Registration Fee- N25,000 (Twenty-Five Thousand Naira) (3) Evidence of Payment of Sponsored Individual Fee- N10,000 (Ten Thousand Naira) (4) Duly Executed Form SEC 3- For the Company

3. FORMS

(1) Form SEC 2 and 2D Sponsored Individual and Compliance Officer (To be completed in duplicates); (Note that every applicant is to have at least one sponsored individual who shall be the Compliance Officer and 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)

4. MINIMUM PAID-UP CAPITAL AND FIDELITY INSURANCE BOND

(1) Evidence of required minimum paid up capital - Commodity Broker -N3,000,000 (Three Million Naira); Commodity Dealer N3,000,000 (Three Million Naira); Commodity Broker/Dealer – N10,000,000 (Ten Million Naira)

(2) Current Fidelity Insurance Bond covering at least 20% of the minimum paid-up capital as stipulated by the Commission's Rules and Regulations.

5. SPONSORED INDIVIDUALS AND DIRECTORS

(1) Minimum of two Sponsored Individuals, one of who shall be the Compliance Officer (2) Where the_Managing Director of the Company is not a Sponsored Individual, he shall complete SEC form 2D as required by the Commission's Rules and Regulations.

(3) Full postal addresses of immediate previous employers, bankers (with current account number) and nominated referees of sponsored individuals

(4) Detailed curriculum vitae of Sponsored Individuals and Directors (all gap in employment and educational history should be explained)

(5) Copies of credentials of sponsored individuals, originals will be required for sighting by the SEC

(5) Police clearance report for each sponsored individual. Each sponsored individual is to report at the SEC office in Abuja or the Lagos Zonal office with two recent passport photographs to commence the process

(6) Copy of means of identification of the directors and the Sponsored Individuals of the company (International passport, tax or utility payment documents)

6. APPLICANT COMPANY

(1) A copy of license from an Exchange
(2) Profile of the company, where applicable, shall include among others brief history of the company, organizational and shareholding structure, principal officers as well as details of past and current activities (3) The name(s) and address(es) of the company's subsidiaries/associated companies, type of business and percentage holding, if any (4) Evidence of payment of shares allotted to the shareholders, where applicable (5) Commodities owned by such broker or dealer or in which the broker or dealer has an interest shall be listed in a separate schedule and valued at the current market price (6) Operational manual or organizational chart of the company, if any (7) Business plan; (7) Bank statement of accounts

e. RULES ON CAPITAL MARKET HOLDING COMPANIES (CMHC)

1. DEFINITION OF TERMS

Capital Market Group means a corporate structure where a parent-subsidiary relationship exists with the parent and subsidiaries carrying out capital market operations strictly.

A Capital Market Holding Company (CMHC)

A Capital Market Holding Company is a company whose principal object is for the purpose of making and managing (for its own account) equity investment in two or more companies, being its subsidiaries, one or more of which must perform registered capital market functions, and others performing other financial services as may be approved by the Commission from time to time.

The Commission or SEC “means the Securities and Exchange Commission, Nigeria”.

Control in respect of an entity means

(1) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

(a) cast or control the casting of more than 50% of the maximum number of votes that might be cast at a general meeting of such entity;

(b) appoint or remove all, or the majority of the directors or other equivalent officers of such entity; or

(c) give directions with respect to the operating and financial policies of such entity with which the directors or other equivalent officers of such entity are obliged to comply; or

(2) the holding beneficially of more than 50% of the issued share capital of such entity (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital);

(3) The holding of more than 50 per cent of the voting shares of the subsidiary or in instances where the holding is less than 50 percent, an entity has control of an investee when it has;

(a) power over the investee, i.e. the investor has existing rights that give it the ability to direct the relevant activities (the activities that significantly affect the investee's returns);

(b) exposure, or rights, to variable returns from its involvement with the investee; and (c) the ability to use its power over the investee to affect the amount of the investor's returns.

Holding Company (HoldCo) means a company whose principal object is making and managing (for its own account) equity investment in two or more companies, being its subsidiaries.

Mono-line Capital Market Operator means an entity that performs only one registered capital market function.

Permissible Financial Institutions are institutions carrying out banking, insurance, pension, mortgage and any other financial services as may be approved by the Commission from time to time.

Related Party: a party is related to an entity if the party:

(1) Directly, or indirectly through one or more intermediaries,

(a) controls, is controlled by, or is under common control with such entity which may include its holding company, its subsidiaries and the subsidiaries of its Holding company

(b) Has an interest in the entity that gives it significant influence over the entity; or

(c) Has joint control over the entity.

(2) Is an associate of the entity. An associate is an unconsolidated party in which an entity has a significant influence or which has significant influence over that entity.

Significant influence over a party is the power to participate in the financial and operating policy decisions of the party but is less than control over those policies.

(3) And the entity are members of the same joint venture; (4) Is a member of the key management personnel of the entity or its Holding Company;

(5) Is a close member of the family of any individual referred to in (a) or (d); (6) Is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e) or

(7) Is a post-employment benefit plan for the benefit of employees of the entity, or any entity that is a related party of the entity.

Related Party Transaction is a transfer of resources, service or obligations between related parties, regardless of whether a price is charged.

2.
PRE-REGISTRATION CONDITIONS

A proposed CMHC shall prior to incorporation submit the following information to the Commission:

(1) The names, number and profiles of proposed directors/promoters of the companies within the group;

(2) Proposed group structure with detailed explanatory notes; (3) Proposed Memorandum and Articles of Association of the CMHC; (4) Capital Structure of each company within the group and; (5) Any other document/information that the SEC may require.

Upon clearance, the Commission shall grant a No Objection to the incorporation of the proposed CMHC.

3. REGISTRATION REQUIREMENTS

Upon incorporation, a CMHC shall file an application for registration on relevant SEC forms as contained in the Rules and Regulations and shall be accompanied by:

(1) a minimum of two sets of completed Form S.E.C. 2 to be filed by the sponsored individuals;

(2) a copy of Certificate of Incorporation certified by the Corporate Affairs Commission (C.A.C.); where a copy not certified is filed, the applicant shall present the original copy for sighting by an authorized officer of the Commission;

(3) a copy of Memorandum and Articles of Association certified by the Corporate Affairs Commission;

(4) a copy of CAC Form containing particulars of directors certified by the Corporate Affairs Commission;

(5) copy of latest audited accounts or audited statement of affairs for companies in operation for less than one (1) year;

(6) profile of the company covering among others, a brief history of the company organizational structure, shareholding structure, principal officers, etc. (see Form S.E.C. 3 for details);

(7) evidence that the CMHC holds an aggregate of more than 50% of the voting shares of each company within the group or otherwise controls each company within the group.

(8) sworn undertaking to keep proper records and render returns; (9) evidence that the primary focus of the entire group is on Capital Market activities.

(10) evidence of at least two subsidiaries.
(11) evidence of meeting the prescribed minimum capital requirement (12) a written and duly executed undertaking by the CMHC that the group will comply with the minimum capital requirements for the volume and nature of its business at all times.

(13) copy of corporate governance charter for the CMHC.
(14) In the event the proposed CMHC is a foreign entity, a “no objection" letter from the relevant regulatory body in the entity's home country should be filed in addition to the requirements under this section.

(15) Any other document/information that the SEC may require.

4.
STRUCTURE OF THE CMHC

(1) A CMHC shall be a non-operating company that controls subsidiaries that primarily operate in the Capital Market and other subsidiaries operating in the financial system

(2) Where a CMHC acquires a 100 percent interest in another company, that company shall be referred to as a wholly owned subsidiary of the CHMC.

(3) A CMHC may elect to acquire less than 100 percent ownership, but own at least 51% and also have control over the other entity

(4) A CMHC may acquire any permissible financial institution, subject to the prior approval of the SEC.

(5) Where the target company is outside the supervisory purview of the SEC, the prior No Objection of the relevant regulator is required.

(6) A CMHC that elects to change to mono-line capital market operator shall seek the prior approval of the SEC. Such CMHC shall submit along with its request for approval the following:

(a) Annual audited financial statements for the immediate past three years under the arrangement/structure it seeks to discontinue;

(b) Divestment plan from subsidiaries; and

(c) Any other requirements as may be determined by the SEC from time to time.

(7) A CMHC shall operate under the approved structure for a minimum of 3 years in order to ensure stability before it can be permitted to apply to the Commission for a change in structure.

Provided that the Commission may consider and approve a change in structure before the expiration of the 3-year time limit, where the Commission is satisfied with the reasons for the change.

(8) The SEC may direct a CMHC to divest from a financial market subsidiary where in the opinion of the SEC, the subsidiary is being run in a manner detrimental to the interest of investors and/or other stakeholders.

(9) A CMHC shall