CODE OF CONDUCT FOR ASSET MANAGERS

The Securities and Exchange Commission of Nigeria (SEC Nigeria) has come up with draft new code of conduct for professional asset managers in Nigeria.

The code covers basic musts for asset managers; obligations towards clients; code of conduct guiding investment process and actions; while trading; while managing risks; performance valuation and disclosures.

For example, the code expects asset managers to act in professional and ethical manner at all times; act for the benefit of clients; act with independence and objectivity; act with skill, competence and diligence; communicate effectively with clients and uphold all laws, rules and regulations governing capital markets in Nigeria.

While taking investment actions on behalf of clients, the asset manager  has to use reasonable care and prudence; avoid practices that distort prices or artificially inflate trading volume; and must deal fairly and objectively.

As a professional, he must also have reasonable and adequate basis for investment decisions; if managing portfolios, decisions and actions must be consistent with portfolio objectives and constraints; and he must arm investors with adequate information to decide on changes in style or strategy.

The new rules and code also cover conduct while trading on behalf of clients including trading in unlisted securities and risk management.

On disclosures to clients, this is expected to be timely; ongoing; truthful, accurate; complete and presented in format the client can easily grasp.

It also prescribes sanctions for breach of the code to wit: N100,000 at first instance and maximum of N5000 daily as long as the default continues.

Under the new rules, minimum paid up capital of corporate sub brokers to be increased from N1m to N10m while the minimum networth of the individual sub broker now stands at N1m as against N500,000 previously.

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