SEC drafts new guidelines to check misappropriation of investments

The Securities and Exchange Commission (SEC), has begun drafting a new guideline on third party and related transactions that will prevent misapplication and misappropriation of investment funds by fund management firms.

The collapse of some management firms was attributed to a third party and related transactions.

The deputy director of the Securities and Exchange Commission Paul Ababio made this know at the Tesah Capital webinar on the topic “investing after the financial sector clean up”.

“We gave a directive for fund managers to halt the guarantying of returns, this was because it gives the impression that the fund manager has a balance sheet to support the risk that they take so irrespective of what happens at the line portfolio the fund manager will make you whole, that was the first initiative that we took. And then we also started investigations into troubled fund management companies, we called hearings, we engaged the consultants to look at their books and take a deep dive,” he said.

He further explained that “we also worked on reviewing and enhancing licensing requirements so that has also been issued in the last quarter of last year and that has new capital requirement. We also did an amendment to the LI 1728 and these provisions were replaced by the licensing and conduct of business guideline. And then we also did some amendments to suit act 129 namely section 35, 37 and 209 of the act 929 and these allowed us to become a signatory to the International Organization for Securities Commission, which is a global body that we are part of as well.”

He further added that the commission is preparing a review of act 929 following lessons learnt from the financial cleanup exercise.

“We are also preparing a review of act 929 drawing on the lessons learnt from the clean-up exercise to clarify some of the powers of the commission following a revocation action,” he noted.