The Securities and Exchange Commission (SEC) will in the coming months announce a schedule for the payment of claims to investors of the 53 Fund Management Companies (“FMCs”), whose licenses were revoked.
This was contained in a notice issued by the Regulator on Tuesday, following the successful completion of the submission of claims which commenced on 18th November 2019 and ended on 15th January 2020.
According to the notice, the payment of claims will be in two phases, whereby, in the first phase, the amount promised and allocated by Government would be paid to investors after the validation of claims submitted.
The second phase, is expected to take place after a Court-appointed Official Liquidator realizes net proceeds upon successful winding- up proceedings in Court in relation to the affected Fund Managers’ assets.
This process excludes investors of collective investment schemes, since such schemes are expectedly still solvent – being separate companies from their operators – although new fund managers will have to be appointed to replace any erstwhile fund managers whose licenses were revoked by SEC last year.
SEC notes that investors who are yet to receive acknowledgment of claims from it should note that acknowledgments are ongoing.
Background
Pursuant to Section 122 (2) (b) of the Securities Industry Act, 2016 (Act 929 or “the Act”), the Securities and Exchange Commission (SEC) on Friday, November 8, 2019, revoked the licenses of 53 Fund Management Companies.
The revocation of the licenses of these companies became necessary as they had among other things, largely failed to return client funds, which remain locked up. Some fund managers were also found guilty of other major regulatory infractions, such as investing in unapproved securities, over-concentration of investment portfolios , and offering customers guaranteed returns which is not only illegal but impracticable.
In view of this, the Boards of Directors (for the Mutual Funds) and Trustees (for Unit Trusts) of 18 Collective Investment Schemes (CIS) whose Fund Managers had their licenses revoked, were directed by the SEC on November 15, 2019 to appoint new fund managers for the management of the various affected CIS by January 10, 2020, which itself was an extended deadline.
In the past weeks, the Regulator has engaged the respective trustees and directors, in the interest of investors in order to determine other possible courses of action for unitholders/shareholders of the unit trusts/mutual funds that were unable to meet the requirements of the previous directive.
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