The Securities and Exchange Commission has proposed amendments that would address the complaints of players in the Collective Investment Scheme segment of the capital market.
There have been complaints about the lack of standardised information from the administrators of Collective Investment Schemes which are popularly called mutual funds.
As of the end of October, the value of Collective Investment Scheme funds held in custody had hit N2.1tn from N1.1tn at the beginning of 2020.
In a notice on its website, the Commission revealed the new amendments to its regulations titled, ‘Exposure Of New And Sundry Amendments To The Rules And Regulations Of The Commission.’
Relating to Collective Investment Schemes, the commission has proposed amendments to Rule 450 – New Sub-Rule (9) General Rules for CIS, some of the proposed amendments include, “The fund manager of a scheme shall provide every unitholder with an electronic investment statement within two weeks after the end of each month. a. The investment statement shall be an unaudited financial summary of the scheme’s operations comprising an abridged and concise statement of comprehensive income, a statement of financial position, a cash flow statement and a statement of changes in equity of the scheme.
“b.The investment statement shall disclose i. the scheme’s yield for the period and a month-on-month comparison. ii. the number of units held by the unitholder and the unit price as of the date of the statement. iii. a breakdown of inflows and outflows from the unitholder’s account including any accrued or deducted expenses, capital appreciation or depreciation and any income accruing to the account of the unitholder.”
The proposed rules will also demand that the fund manager disclose on its website; the daily bid and offer prices of each scheme under its management, details of the schemes under its management including the parties, risk profile and taxconsiderations of each scheme, annual total expense ratio of each scheme for the last five years, year-on-year comparison of each scheme’s yield for the last five years including comparison with the scheme’s stated benchmark.
In addition, the fund manager of the scheme will be expected to disclose the trust deed including supplementals of each scheme, rights of the unitholders of each scheme, distribution frequency of each scheme and the audited financial accounts of each scheme for the last five years.
Justifying the proposed amendments, the Commission said they are “To enhance the quality of disclosures and information to investors to improve investment decisions in accordance with Principles 16 and 26 of the IOSCO Objectives and Principles of Securities Regulation.
“Complaints from unitholders over the past years have shown that most unitholders do not have access to information about the schemes they invest in, even after they have requested this information from the scheme’s fund manager. Some unitholders are also not aware of the trustees to their schemes and the role of such trustees in representing their interests.
“While we note that some fund managers provide investors with online access to their accounts, this is insufficient in terms of the content of the account info.’’
This is also a passive approach to providing info. Similar to bank and RSA statements, fund managers should actively provide investors with investment statements.
“Additionally, we observed that some fund managers provide investors with factsheets that are not standardized. However, this is not bespoke and some investors may struggle to understand how the information directly relates to their investment. It is expected that the above disclosures will provide unitholders with sufficient information to assess the value-added by a fund manager which will improve trust and influence increased investments in mutual funds.”
Collective Investment Schemes is one of the ways that the Commission encourages investors, especially those on the retail end, to approach the capital market as it offers an opportunity to have their investments managed by knowledgeable investment professionals.
