SEC to amend regulatory requirements of fund managers

Following revocation of licences of some failed investment firms, the Securities and Exchange Commission (SEC) is set to amend its regulatory requirement of fund managers.

Previously, the requirements for application for operating as a fund management firm included a certified true copy of the audited balance sheet and accounts of the applicant for the past three years and auditors statement of affairs if the applicants is yet to commence business, tax clearance certificate with regard to the last period of assessment and a certified copy of the registrar of interests required to be maintained in terms of the provisions of Part V of the Securities and Industries Act.

According to the Director of the SEC, Paul Ababio, there are some regulatory challenges in the current licensing regime that are not up to standard, hence the need for the regulator to amend them to ensure a smooth administration of all fund management funds.

“There will be a few things, one is the qualifications of the people of the key persons involved, one is to also look at a fit and proper criteria to ensure that people have not been accused of embezzlement or have headed failed institutions in which they have been part of the failure. We will also be looking at situation where one they have the right resources in terms of capital, not just paper capital but real capital in the business.

He added that “we will also differentiate the licensing requirements so in the past it was almost like one side fits all, about GHS100,000 was the capital requirement; now we are able to differentiate it, so for fund managers it will be about GHS2 million, for broker dealers we are talking about GHS1 million and so on and so forth, for exchanges and custodians there will be a different level so there will be a differentiated capital requirements for all the operators in the market.

The SEC on November 8, 2019 revoked the licences of 53 Fund Management Companies for failing to meet regulatory requirements, particularly being illiquid. This was pursuant to Section 122 (2) of the Securities Industry Act, 2016 (Act 929).

It said the revocation of the licences of the specified companies has become necessary as they have largely failed to return client funds which remain locked up and in a number of cases, they have even folded up their operations.