No Due Diligence On Over 4m Capital Market Investors
Nigerian capital market is running the risk of being the haven of proceeds of crime following incomplete due diligence on 4,012,311 investors which may affect their registration in the ongoing renewal which closes 30th April 2021.
This huge number of accounts with incomplete Know Your Customers(KYC) information as of 8th April came to light during the reintroduction of the periodic renewal of registration by the regulator, the Securities and Exchange Commission (SEC), an exercise that closes month-end.
KYC is a standard due diligence process used by investment firms including wealth management, broker-dealers, private lenders, commercial real estate investment, among others to assess investors they are conducting business with.
This was one of the highlights of the maiden edition of the capital Market Committee meeting for 2021 during which the capital market operators were reminded of the directives of the SEC on the update of investors’ KYC information which is still in effect.
“We have noted that the level of compliance has been low. Despite several engagements, we realised that as of April 8, 2021, there were still 4,012,311 accounts with incomplete KYC information. This exercise is critical to deepening the participation of retail investors and we direct all CMOs to accord it the highest level of priority”, the Director-General of the SEC, Lamido Yuguda stated.
Yuguda disclosed that a major highlight of the year 2021 is the reintroduction of periodic renewal of registration by Capital Market Operators and the rationale for this is to ensure that operators in the market are fit and proper at all times while it also strengthens the supervision and monitoring activities of the Commission.
The renewal process is electronic and the deadline for 2021 renewal is 30th April, 2021.
KYC is necessary for a view of the various Anti-Money Laundering (AML) policy and it also being employed now by companies in the efforts to ensure that their proposed customers, agents, consultants, or distributors are anti-bribery compliant and are actually who they claim to be.
Banks, insurers, export creditors and other financial institutions are increasingly demanding that customers provide detailed due diligence information. Initially, these regulations were imposed only on the financial institutions but now the non-financial industry, fintech, virtual assets dealers, and even non-profit organizations are liable to oblige.
The SEC Boss also commended the resilience of the capital market despite the turbulence experienced with the outbreak of the pandemic, adding that the capital market community contributed its quota to the fight against COVID-19.
The lockdown occasioned by the pandemic that ravaged the world left the Nigerian economy in a precarious state and pushing it into recession.
“I am delighted at the efforts that we made and pledge that we shall not relent in our efforts. To this end, our next phase of the support in the fight against COVID-19 will be the establishment of the Strategic Health Impact Fund for Transformation (SHIFT). This is planned to be a N100 billion fund for investment in healthcare assets in Nigeria”.
Yuguda also stated that the Commission is at the mid-point of implementing its Capital Market Master Plan (CMMP) and has commenced a review to update the assumptions, and align the plan with current realities.
Similarly, he said the Commission has released new rules on warehousing, collateral management, crowdfunding, fund management products and nominee companies to ensure proper regulation and development of our market.
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