An investment adviser is a firm or an individual who for compensation, engages in the business of;
1. providing investment advice to others about the value of or investing in securities (i.e stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other investment products)
2. issues report or analysis regarding securities, as a regular business or part of a regular business.
Investment advisers may also provide financial advice with respect to market trends or offer financial planning services.
In this article, we will consider in detail, the legal requirements for operating as an investment adviser in Nigeria. But before we do, it is important to note that the Securities and Exchange Commission (SEC) is the primary agency responsible for regulating investment activities in Nigeria.
WHO QUALIFIES AS AN INVESTMENT ADVISER?
In Nigeria, an individual or corporate organization may qualify as an investment adviser so long as they are registered or licensed by the Securities and Exchange Commission (SEC).
MUST AN INDIVIDUAL INVESTMENT ADVISER BE REGISTERED WITH THE SEC IN NIGERIA?
Yes. As deduced from the SEC Rules, an individual investment adviser must obtain the required license to be able to provide financial advice to others or carry out other functions as permitted by the rules.
WHAT IS THE ROLE OF AN INVESTMENT ADVISER?
According to Rule 97 of the SEC Rules, Investment advisers (both individual and corporate) are permitted to do the following;
1. Provide investment advisory services
2. Make recommendations as to types of securities to buy or sell
3. Publish financial market periodicals
4. Keep proper records and file annual reports with the Commission
An investment adviser is not permitted to do the following;
a. Engage in the maintenance and management of investor funds
b. Make claims and advertisement that is misleading or false in content and contrary to the SEC rules and regulations.
LEGAL REQUIREMENTS FOR REGISTERING AS AN INVESTMENT ADVISER IN NIGERIA
As stated earlier, individuals and corporate organizations can register with the SEC as investment advisers. That being established, we will consider the legal requirements for registering with the SEC as an individual investment adviser and a corporate investment adviser respectively.
LEGAL REQUIREMENTS FOR REGISTERING AS AN INDIVIDUAL INVESTMENT ADVISER IN NIGERIA
Under Rule 96 (2) of the SEC Rules, an individual applying to register with the SEC as an investment adviser is required to do the following;
1. Submit an application in the format prescribed by the rules
2. Attach to the application in (1) above, the following documents;
3. Certified copy of the certificate of registration of the business name (where applicable)
4. A sworn undertaking to comply with the provisions of the Acts and the regulations as may be prescribed from time to time by the SEC
5. Evidence of minimum net worth of N500,000 (five hundred thousand naira)
LEGAL REQUIREMENTS FOR REGISTRATION AS A CORPORATE INVESTMENT ADVISER IN NIGERIA
Where a company wishes to register with the SEC as a corporate investment adviser, such a company must satisfy the following requirements;
1. Submit an application in the format prescribed by the rules
2. Attach the application in (1) above, with the following documents;
3. Two (2) sets of SEC Forms to be filed by sponsored individuals (NB; Sponsored individuals are officers of the company applying for registration with the SEC. They are also responsible for ensuring that the company they represent acts in accordance with the SEC guidelines.
4. A copy of the certificate of incorporation of the company
5. The Memorandum and Articles of Association (MEMART) of the company
6. A copy of CAC Form containing details of the directors of the company as approved by the Corporate Affairs Commission. (NB; This document is currently known as “Status Report”)
7. Copy of the latest audited account (for companies in operation for more than a year) or audited Statement of Affairs for companies in operation for less than one (1) year.
8. Fidelity bond representing 20% of paid-up capital
9. A sworn undertaking to keep proper records and render returns
10. Evidence of minimum paid-up capital of N5,000,000 (five million naira)
The minimum share capital requirement for registering a company as an investment adviser with the Corporate Affairs Commission is 5,000,000 (five million) naira.
CONCLUSION
Approval for an application for registration as an investment adviser is not automatically guaranteed as the SEC has the power to grant or deny registration to an applicant. In the event the SEC denies an application, it must do so in compliance with the procedure for granting a denial as provided by the rules.
When it comes to the area of offering financial advice with respect to securities such as bonds, stocks, Exchange Traded Funds (ETFs), and other financial assets covered within the scope of the SEC, such investment experts must as a matter of law, be registered with the SEC. Failure to do so attracts penalties on the defaulter in accordance with the prescribed rules.
Are you in the business of providing investment advice in Nigeria? Now you know the requirements. If you’ll like to secure your registration with the SEC, you may reach out to us to help you get sorted. Do you want to know more about the requirements for registering as an investment adviser? Click the Whatsapp icon and the lower right part of this page or HERE to schedule an appointment. We look forward to hearing from you.
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