© Lolade Ososami1 AN OVERVIEW OF COLLECTIVE INVESTMENT VEHICLES UNDER THE NIGERIAN INVESTMENT LAWS Lolade Ososami Abraham & Co.

© ‘Lolade Ososami 1

AN OVERVIEW OF COLLECTIVE INVESTMENT VEHICLES UNDER THE NIGERIAN INVESTMENT LAWS

‘Lolade Ososami

Abraham & Co.

'LOLADE OSOSAMI ALL RIGHTS RESERVED (C) 2003

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Governing Laws & Regulation The Investments and Securities Act, 1999

Establishes the Securities and Exchange Commission (SEC), which is the regulatory authority in charge of portfolio investment in Nigeria.

SEC Rules Nigerian Stock Exchange Rules &

Regulations Companies and Allied Matters Act, 1990


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COLLECTIVE INVESTMENT

An arrangement under which participants pool their contributions for the purpose of sharing the profits or income arising from the management of their money or property solely from the efforts of a third party. (S. 123(2) ISA)


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Collective Investment Vehicles Recognized Under the ISA

Investment Company Unit Trust Investment Trust Venture Capital Company Real Estate Investment Coy. Trust for Sale Pension Fund Provident Fund


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Investment Company

Must be registered under the CAMA as a private Nigerian company.

Membership must not exceed 50 SEC registration is not required. Shares held by members represent a

proportionate interest in the IC’s portfolio of securities


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…investment company

Securities purchased are determined by the IC’s investment objective.

Investors can participate in the income and assets of the IC at winding up.

Fund Manager employed or engaged by the Company must be registered with SEC.


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Unit Trust

Must be registered under CAMA Owns and manages a diversified

portfolio and issues units linked to the value of the portfolio.

Its units are redeemable at net-asset value

Its units must be listed on the Stock Exchange


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…unit trust

Can only invest in securities prescribed by the Trustees Investment Act or approved by SEC

Assets are vested in the Trustees Its prospectus must be in the format

prescribed by SEC Rules and Schedule 3 of the ISA.


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Investment Trust

Must be registered under CAMA as a PLC.

Its shares must be listed on the Stock Exchange.

Its prospectus must be in the prescribed format.

It sells its shares like any public company.


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…investment trust

Its shares are irredeemable Investors can only sell their shares in

the stock market at a price determined by demand and supply

Investors must pay a brokerage commission at the time of sale and purchase


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Venture Capital Fund/Coy.

Company must be certified by the FIRS as a VCC

Investment must be in a certified Venture Project

The project must fulfill the objectives set out in Decree 89 of 1993


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…venture capital company Provisions of the Trustees Investment

Act will apply

Company must register with SEC

Trustees of other investment schemes can invest in the Company and their investment will be deemed as security


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Real Estate Investment Coy. Usually takes the form of a registered

company set up solely to acquire intermediate or long-term interests in real estate or property development.

Investors must be shareholders in the company so that they can exercise voting rights in the management of the company.


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…real estate investment coy The company can raise funds from the

Capital Market through the issuance of securities which must be in form of “income certificates” that give investors the right to a share of the income from any property acquired by the company or property development project undertaken by the company.


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Real Estate Trust (also known as “Trust for Sale”) A Trust constituted for the sole purpose

of acquiring a property on a “Trust for Sale” for investors.

Investor shall be entitled to retain control over their instruments by investing directly in a particular property rather than in a portfolio of investments.


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…trust for sale Investors shall acquire units in the

Trust through which they shall be entitled to receive periodic distribution of income and participate in any capital appreciation of the property concerned.


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Pension Funds

Any society, fund or scheme, the assets of which are held under irrevocable trusts and the main objects of which are the provision of non-assignable and non-commutable retirement pensions or annuities for an individual or his dependants after his death.


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Pension Funds contd.

Its main purpose shall be the provision of pensions for employees on retiring at a specified age; or the accumulation of sums payable to an employee on leaving the service of an employer.

The Fund must be constituted under an independent and irrevocable trust.


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…pension fund

Membership must be open to all employees

At least 50% of funds must be invested in Securities issued by or under the authority of any government in Nigeria and other Capital Market Instruments.


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Provident Fund

Any society, fund or scheme, not being a pension fund, established under irrevocable trusts or a law in Nigeria or elsewhere the objects of which are the provision of commutable retirement benefits for an individual or his dependants after his death or a group of individuals and their dependants.


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Provident funds contd.

The retirement benefits are commutable (i.e they can be altered)

The total contribution made by the employer is limited to 25% of the employee’s annual salary.

© Lolade Ososami1 AN OVERVIEW OF COLLECTIVE INVESTMENT VEHICLES UNDER THE NIGERIAN INVESTMENT LAWS Lolade Ososami Abraham & Co.

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