The Securities and Exchange Commission has issued a new directive which is intended to apply to all Capital Market Operators required to open, maintain and operate Trust Accounts for and on behalf of its clients.
“This Directive is issued by the Securities and Exchange Commission (hereinafter referred to as “the SEC”) pursuant to sections 3, 140, 159, 160 and 209 of the Securities Industry Act, 2016 (Act 929) with respect to opening, maintenance and operation of Trust Accounts held by Capital Market Operators (hereinafter referred to as “Licensees firms”.
The Securities and Exchange Commission in furtherance of this statement, gave a litany of guidelines on the designation and operation of these Trust Accounts.
According to the regulatory body, based on the requirement from these capital operators,
“All monies received from clients or on behalf of clients by Capital Market Operators shall be deposited for the purposes of investment”.
Also, a Trust Account shall not contain any other money except those deposited by clients or on behalf of clients of Capital Market Operators for investment purposes.
Accounts shall be immune to bankruptcy and liquidation proceedings or processes of Court, thus, where a licensee becomes bankrupt or falls into liquidation or incurs a debt, a Trust Account operated by the Capital Market operator shall not be subject to bankruptcy or liquidation proceedings or be used as a payment for the debt.
SEC further stated that monies held in a Trust Account are not available for payment of the debts of Capital Market Operator or liable to be paid or taken in execution under an order or process of a court.
In this regard, a Trust Account shall be separated from other Accounts maintained by the Capital Market Operator for operational or proprietary purposes.
As a measure adopted by the regulator to ensure absolute compliance to the directive by Capital Market Operators, it advised Custodians to ensure payments bear the details of the beneficiaries such that a statement containing all debits and credits on the Account can be attributed to individual beneficiaries.
“All Custodians and Trustees with which Trust Accounts are opened, maintained and operated by a Capital Market Operator shall ensure that receipts, payments and disbursements into and from a Trust Account are only in respect of clients investments and the beneficiary on behalf of whom the receipt, payment and disbursement is made is clearly identified by name and Identity card”.
The Commission further stated that where it appears to a Custodian or Trustee that a Trust Account is not being used for the purposes above, the Custodian or Trustee shall notify the Regulator immediately before the transaction in question passes or is effected by the Custodian or Trustee.
Violators of the directive are liable to punitive measures meted out by the Commission which includes possible revocation. It also maintained its position to “revise, amend, vary or revoke this directive”.
“Where there is a breach of any provision stipulated in these guidelines the SEC may take any action(s) specified under section 209, 159(7),(8), 160(1)(d), 160(2), 160(7)(8), and/or any other relevant provision applicable under the Securities Industry Act 2016 (Act 929)”.
