SEC sets N50m capital base for collateral management companies

Securities and Exchange Commission (SEC), has set a minimum capital base of N50 million for any company seeking to operate as a collateral management company,
SEC recently listed specific rules and regulations guiding collateral management and warehousing, two important functions in the efficient trading of commodities.
The new policy states thata collateral management firm is expected to provide fidelity bond of up to 20 per cent of its minimum paid up capital of N50 million as well as sworn undertaking to keep proper records and render returns. It added that it must also provide evidence of the minimum paid-up capital of N50 million.
The rules stated that for a collateral management company to be registered by the Commission, it must submit an application to SEC accompanied by the relevant documents.
It is so required to apply for registration of a minimum of two sponsored individuals one of whom shall be the chief executive officer.
Some of the required documents included two sets of completed appropriate SEC Forms to be filed by the sponsored individuals; a copy of the Certificate of Incorporation certified by the Corporate Affairs Commission where a copy not certified is filed, the applicant shall present the original for sighting by an authorised officer of the Commission; a copy of the Memorandum and Articles of Association certified by the Corporate Affairs Commission, which shall among others, include power to act as a collateral manager, a copy of the appropriate CAC Form containing particulars of the directors certified by the Corporate Affairs Commission; as well as a Copy of latest audited accounts or audited statement of affairs for companies in operation for less than one year.
The new rules state that the two principal officers of the collateral management company who shall be registered as sponsored officers must have a minimum of a university degree or its equivalent with not less than 10 years relevant post-qualification experience; a list of key officers and technical experts engaged and details of their qualifications, which should capture evidence of financial, technical capabilities to carry out the functions of a collateral manager, a list of relevant technology systems in place as required by collateral management services; information relating to the relevant commodities management facilities including: assaying facilities, warehousing, aggregation, computerization and telephone systems and a well finalized business plan.
“Two copies of existing or proposed by-laws or rules, Code of Conduct, Warehousing Guidelines etc., instruction and inspection manuals of warehouse activities; detailed information about the promoters and principal officers of the Collateral Management Company; two copies of Warehouse Accreditation requirements of the Collateral Management Company; detailed information about the Technology system to be adopted; and an Undertaking by the CMC to always forward copies of amendments of its Guidelines for approval by the Commission,” the new framework stated.