Connect with us
SSN
Advertisement
IZIKJON
Advertisement
forex
Advertisement
Stanbic IBTC
Advertisement
Binance
Advertisement
Esetech
Advertisement
Patricia
Advertisement
Fidelity ads
Advertisement
app

Funds Management

SEC publishes new Crowd Funding Regulations limiting investment to 10% of income

SEC Nigeria recently published new rules intended to regulate crowdfunding.

Published

on

How to build a profitable Mutual Fund Portfolio

The Securities and Exchange Commission, SEC, has issued updated guidelines and rules governing the operation of Crowd Funding activities in Nigeria.

This follows an exposure draft issued in May 2020 as reported by Nairametrics.

Key Highlights of the new SEC regulations

  • SEC introduced Crowd Funding Intermediaries who will facilitate crowdfunding transactions such as offer for sale of securities or instruments through its portal.
  • This means anyone seeking to raise money through a crowdfunding service will have to go through a Crowd Funding Intermediary (CFI).
  • Thus, a fundraiser (the initiator of the fund) will need to go through a CFI web portal to raise capital
  • The new rules also limit the amount retail investors can invest in a crowdfunding transaction to just 10% of their net annual income in a year.
  • This means individuals cannot invest more than 10% of their net salaries in crowdfunding activities. But this excludes High Networth Individuals who do not have limits.

READ: SEC declares the activities of Famzhi Interbiz illegal

Information contained in the regulation highlights 

In summary, this is SEC Nigeria’s attempt to provide a framework around who can participate in crowdfunding issuances, drive increased transparency around Crowdfunding issues AND create more accountability to investors.

Specifically, the new rules specify the following four (4) participants in a crowdfunding issuance.

  • Fundraiser, Crowd-Funding Intermediary, Investors, and Custodians.
  • There is also a provision for applications for a self-regulatory trade association to facilitate Crowdfunding supervision.

READ: Anti-virus creator, John David McAfee charged for U.S tax evasion

Definitions of the participants per the new rule

  • Fundraiser: refers to the originator, maker, or obligor of the investment instrument to be issued pursuant to these Rules.
  • Crowdfunding Intermediary (CFI): An entity organized and registered as a corporation to facilitate transactions involving the offer or sale of securities or investment instruments through a Crowdfunding Portal (CFP);
  • Investors: As defined by the act; relates to end takers of the instruments and products from the crowdfunding issue. The SEC attempts to differentiate between High-net-worth individuals, Retail Investors, and Qualified Institutional Investors.
  • Custodians are the banks who will hold the funds contributed on behalf of the parties.

READ: SEC to strictly regulate crowdfunding, issues new rules

Requirements

The four categories of participants specified in the rule are required to register with the SEC for purposes of taking part in Crowd Funding activities. Whereby the SEC will approve or reject registration requests depending on the eligibility criteria as outlined in the new rules on Crowdfunding.

The eligibility criteria vary by participant type. As an example,

  • Fundraisers must be entities incorporated in Nigeria and have been in operation for at least two years. Or have technical partners who meet the 2-year operating track record requirement.
  • Crowdfunding Intermediaries have a lot more onerous set of requirements for registration. This is because these intermediaries are the core participants saddled with creating and operating crowdfunding portals (i.e., Platforms/marketplace for the crowdfunding issue).
  • Notably, both the Crowdfunding intermediaries and the actual Crowdfunding platforms need to be registered.
  • Custodians: As the name implies will facilitate the aggregation of funds deposited and only release to the Fundraiser subject to the criteria of each issuance being met.

READ: SEC restrains fintech company, Chaka from advertising or offering for sale shares

Workflow highlights for each Crowd Funding issuance

  • The workflow highlights for each crowdfunding issue include
  • Fundraisers need to engage a Crowdfunding Intermediary (CFIs) to facilitate the pooling of funds from investors via the approved Crowdfunding Portals (CFPs).
  • These CFIs will ensure that there are sufficient disclosures by Fundraisers to Investors about the purpose and use of funds.

Notably the new rules prohibit misleading information to investors.

Binance
  • The amounts being raised will be safe kept at a Custodian for the duration of the fund-raising window and released to the Fundraiser subject to meeting criteria.
  • Crowdfunding Intermediaries and the Portals are required to provide a plethora of information to both SEC and Investors. The portals also help ensure compliance with approved guidelines (e.g. not exceeding target amounts approved for each issuance)

READ: 94% of Bitcoin investors are making money

In conclusion,

  • The new rule on Crowdfunding is a welcome development. Specifically, the introduction of technology portals to enhance disclosures about funds should bring more transparency into the sector and facilitate investor due diligence.
  • Furthermore, the introduction of eligibility criteria for the various participants should serve to increase accountability whereby Fundraisers will need to provide increased levels of assurance with regards to the use of funds whilst Crowdfunding intermediaries will be keen to facilitate investor due diligence as they seek to protect their reputation and prevent censure from the SEC.
  • One observation however is that the new SEC rule is not explicit about the issue of recovering investor funds in the event of registered entities failing. This may explain why the SEC is keen to differentiate between classes of investors (i.e. High-net-worth, Institutional investor, and Retail investor) and then further require that retail investors, who are arguably the most vulnerable to financial shocks, do not invest more than 10% of their annual income in these schemes.

Download New SEC Nigeria Guidelines for Crowdfunding

Jaiz bank ads

Nairametrics is Nigeria's top business news and financial analysis website. We focus on providing resources that help small businesses and retail investors make better investing decisions. Nairametrics is updated daily by a team of professionals. Post updated as "Nairametrics" are published by our Editorial Board.

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Funds Management

Nigeria’s pension asset under management hits N12.3trillion in December 2020

Nigeria’s pension asset under management hits N12.3trillion in December 2020.

Published

on

PenCom, unremitted pensions, Lagos State Pension Commission, LASPEC, Pension Fund Assets, PFAs make N1.69 trillion ROI  

Nigeria’s pension asset under management, as of December 2020, stands at N12.3trillion which represents a modest growth of 20% year-on-year and 0.003% month-on-month (no significant change), according to the monthly report by National Pension Commission (Pencom).

According to the report, total RSA funds increased by 20% year-on-year while the funds under both existing schemes and Closed Pension Fund Administrator (CPFA) as well, grew by 21% year-on-year.

Other Key highlights

  • As of December 2019, investments in FGN Securities accounted for 72% of the total pensions assets fund, out of which 73% was invested in Bonds and 26% in Treasury Bills.
  • As of December 2020, investments in FGN Securities accounted for 66% of the total pensions assets fund, out of which 84% was invested in Bonds and a paltry 8% in Treasury Bills, which is not unrelated to the subsisting very low yield of TB in the money market.
  • The investments in FG Bonds represent 56% of the total pension assets fund under management. The renewed and increased investments in FG Bonds can be attributed to the attractiveness of the yields of FG bonds over the Treasury Bills.
  • RSA Fund II and III accounted for 89% of the total RSA funds and 69% of the total pension assets under management as of December 2020, while others – Funds I, IV and V accounted for 31%
  • All the RSA funds, including existing scheme and CPFA recorded year-on-year growth as follows: Existing scheme (13%), CPFA(28%), Fund I (49%), Fund II(19%), Fund III(21%), Fund IV(18%).
  • As of December 2020, only N80.54million was invested under the newest RSA fund (Fund V) – specifically created for micro pensions.

What you should know

There are 4 pension fund types, with the newest recently introduced for the micro pension scheme.

The Multi-Fund structure is a framework that aims to align the age and risk profile of RSA holders, as follows:

  • Fund I – This is an optional fund. Contributors must write formally to opt for this Fund.
  • Fund II – This is the default fund for contributors aged 49 and below.
  • Fund III – This is the default fund for contributors aged 50 and above.
  • Fund IV – This is the Retiree Fund.

Continue Reading

Exclusives

Best performing Mutual Funds in January 2021

According to data from the SEC, 49.2% of the 118 registered funds recorded positive growth in January 2021

Published

on

Best Mutual Funds in Nigeria

Mutual funds are one of the fastest-growing asset classes in Nigeria, as data from the Security and Exchange Commission (SEC), shows that 49.2% of the 118 registered funds recorded positive growth in January 2021.

A mutual fund is a type of financial vehicle made up of a pool of money collected from various investors, with the aim of investing them in securities like stocks, bonds, money market instruments, and other assets.

According to SEC, a total of 118 mutual funds were registered as of January 29, 2021, with a net asset value of N1.57 trillion across several fund types.

Nairametrics tracked the performance of these mutual funds by comparing the fund prices as of 31st December, 2020 with the fund prices as of the last trading day of January 2021.

Below were the top-performing mutual funds in the month of January 2021. We also highlighted their performance in terms of changes in net asset value and included profiles of the funds as described on their websites.

READ: Investors pump N7 billions into New Gold ETF


Lotus Capital Halal ETF – Lotus Capital Limited (Exchange Traded Fund)

The Lotus Halal Equity Exchange Traded Fund “LHE ETF” is an open-ended fund that tracks the performance of the NSE-Lotus Islamic Index (NSELII). It is designed to enable investors obtain market exposure to the securities of the constituent companies of the NSE-Lotus Islamic Index and to replicate the price and yield performance of the index.

December 31st, 2020

Fund Price – N12.73

January 29th, 2021

Fund Price – N13.66

Return – 7.31%

Ranking – Fifth

Binance

Commentary: This is an Exchange Traded Fund by Lotus Capital Limited, which grew by 7.31% in the month of January. The fund also grew significantly by 51.7% in the year 2020, indicating that the fund is a delight to its investors. Also, the net asset value stood at N655.04 million as of 29th January, 2021, indicating 6.76% growth compared to N613.59 million recorded as of 31st December, 2020.

READ: Understanding how Mutual Funds and ETFs work in Nigeria

Jaiz bank ads

Stanbic IBTC Aggressive Fund – Stanbic IBTC Asset Mgt. Limited (Equity Based Funds)

The Stanbic IBTC Aggressive Fund (SIAF), which was launched in June 2012, is an open-ended fund that invests a minimum of 60% of its portfolio in equities of companies listed on the Nigerian Stock Exchange (NSE) and a maximum of 40% in fixed income securities. Notably, the expense ratio for the fund is 1.5%.

December 31st, 2020

Fund Price – N2,525.55

Coronation ads

January 29th, 2021

Fund Price – N2,713.93

Return – 7.46%

Ranking – Fourth

app

Commentary: Stanbic IBTC Aggressive Fund is the second-best performing Equity-Based fund in the month of January, growing by 7.46% to stand at N2,713.93 as of 29th of January, 2021. The net asset value also grew by 7.43% to close at N340.8 million.

READ: DV Balanced Fund to become a Money Market Fund


FSDH Dollar Fund – FSDH Asset Management Ltd. (Fixed Income Funds)

This is an open-ended mutual fund that invests in US Dollar denominated Fixed Income Securities issued by Nigerian Sovereign and Corporate Entities. The objective of the fund is to provide customers with the opportunity to invest in dollar-denominated instruments. Meanwhile, the minimum amount required to invest in the fund is $1,000.

December 31st, 2020

Fund Price – N415.1

January 29th, 2021

Fund Price – N447.7

Return – 7.85%

Ranking – Third

Commentary: The fixed income fund managed by FSDH Asset Management, recorded growth of 7.85% in January from N415.1 recorded as of the end of 2020 to stand at N447.7 at the end of January. The net asset value grew by 18.41% to close at N1.002 billion.


Paramount Equity Fund – Chapel Hill Denham Mgt. Limited (Equity-based Fund)

Paramount Equity Fund is Nigeria’s oldest mutual fund, which invests in a broad range of high-quality equities and fixed income securities. The fund aims to provide an investment vehicle that will enable unit holders to achieve consistent capital appreciation over a medium-to-long term.

December 31st, 2020

Fund Price – N16.27

January 29th, 2021

Fund Price – N17.56

Return – 7.93%

Ranking – Second

Commentary: This is an Equity Based Fund managed by Chapel Hill Denham Management, which grew by 7.93% in the month of January 2021 to stand at N17.56 as of 29th of January 2021, while the net asset value grew by 8.22% to stand at N598.19 million.


Vantage Dollar Fund – Investment One Funds Management (Fixed Income Fund)

Vantage Dollar Fund is an open-ended Unit Trust Scheme by Investment One Funds. The Fund seeks to provide investors with a bias for Dollar denominated securities an access to such securities, which ordinarily would be inaccessible to them by virtue of the minimum amount typically required to make such investments.

December 31st, 2020

Fund Price – N559.87

January 29th, 2021

Fund Price – N502.9

Return – 11.33%

Ranking – First

Commentary: This is the best performing mutual fund in the month of January 2021 and the only fund with a double-figure yield in the month under review. Vantage Dollar Fund grew by 11.33% to stand at N502.9 as of 29th of January 2021 while the net asset value also grew by 10.93%. This is quite an impressive performance as the fund primarily invests in Corporate and Sovereign Eurobonds.


 

Bubbling under……

The following funds make up the rest of the top 10 our list in ascending order:

AXA Mansard Equity Income Fund – AXA Mansard Investments Limited (Equity Based Fund)

Return – 6.69%

VETBANK ETF – Vetiva Fund Managers Limited (Exchange Traded Fund)

Return – 6.82%

PACAM Equity Fund – PAC Asset Management Limited (Equity Based Fund)

Return – 6.86%

Legacy Equity Fund – First City Asset Management (Equity Based Fund)

Return – 7.14%

VCG ETF – Vetiva Fund Managers Limited (Exchange Traded Fund)

Return – 7.16%

Continue Reading



Advertisement





Nairametrics | Company Earnings

Access our Live Feed portal for the latest company earnings as they drop.