The Nigerian capital market is overseen by the Securities and Exchange Commission (SEC), and it plays a vital role in the nation’s financial ecosystem. Capital Market Operators (CMOs), comprising diverse actors like brokers, dealers, registrars, and investment advisors, serve as the backbone of this market. To ensure transparency, accountability, and market stability, the SEC mandates CMOs to file various returns periodically.
This article delves into the specifics of these requirements, shedding light on the types of returns, filing deadlines, penalties for non-compliance, and helpful resources.
Understanding the Regulatory Landscape
The SEC establishes and enforces regulations governing the Nigerian capital market through the Investments and Securities Act (ISA) 2007 and its subsidiary rules and regulations. These regulations, including Rule 905 on Filing of Returns by Capital Market Operators, serve as the legal framework for CMOs’ return filing obligations.
Types of Returns and Filing Deadlines
CMOs are required to file various returns with the SEC, each serving a specific purpose and adhering to distinct deadlines:
1. Quarterly Returns
- Financial Returns: Unaudited financial statements and non-financial reports must be submitted within 30 days after the end of each quarter. These are used by the SEC to monitor the financial health and performance of CMOs.
- Utilization of Issue Proceeds Returns: Quarterly reports detailing the utilization of funds raised through public offerings are due within 30 days after the end of each quarter. This ensures transparency and compliance with relevant offering documents.
- Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) Returns: Quarterly reports on AML/CFT activities are due within 30 days after the end of each quarter. These support national efforts to combat financial crime.
2. Annual Returns
- Audited Financial Statements: Audited financial statements for the full financial year must be submitted within 3 months after the end of the accounting year. These provide a comprehensive picture of the CMO’s financial position and performance.
- Annual AML/CFT Returns: Annual reports on AML/CFT activities are due by December 31st of each year. These contribute to a broader, annual assessment of AML/CFT compliance.
3. Other Returns
Depending on the specific type of CMO and its activities, additional returns may be required. These might include reports on specific transactions, complaints received, and disciplinary actions taken.
Consequences of Non-Compliance:
CMOs face significant penalties for non-compliance with return filing requirements. These include:
Financial Penalties
Penalties range from ₦5,000 per day for late filing of quarterly returns to a minimum of ₦100,000 for non-filing of annual returns, in addition to daily penalties.
Regulatory Sanctions
The SEC may issue warnings, reprimands, suspension of operations, or even revocation of licenses for repeated non-compliance.
Reputational Damage
Delayed or inaccurate reporting can erode investor confidence and damage the CMO’s reputation.
How to Ensure Timely and Accurate Reporting
Given the significance of these requirements, CMOs should prioritize timely and accurate filing of returns. Here are some steps:
Maintain Accurate Records: Implement robust record-keeping systems to ensure comprehensive and readily available data for return preparation.
Familiarize Yourself with Regulations: Thoroughly understand the specific requirements applicable to your CMO type and activities.
Seek Professional Assistance: Consider engaging qualified accountants and compliance professionals to ensure accurate and timely reporting.
Utilize the SEC E-Portal: Leverage the SEC’s online platform for convenient and secure electronic filing of returns.
Use AutoComply
AutoComply is a SaaS tool designed to empower compliance teams in companies by facilitating the discovery, management, and automation of repetitive processes related to tax, corporate governance, global, and industry-specific compliance obligations. Additionally, AutoComply provides real-time insights into compliance health for Founders, COOs, and Investors with access to the companies.
With an array of solutions custom built for compliance teams with numerous obligations and multiple entities, AutoComply is everything you need to comply with industry regulations.
1. Discovery Dashboard: The initial step in grasping compliance involves identifying the specific requirements for your company. Vault’s discovery dashboard accomplishes this by displaying obligations relevant to your company based on its country of incorporation, company type, and industry. It also supports multiple company discovery, allowing users to switch between companies or view all obligations at once through the obligation planner view.
2. Automated Task and Sub-task Tool: Government-imposed obligations typically require the submission of forms or documents. Assigning a single team member to collect and maintain the specifics for each obligation can lead to human errors and missed deadlines over time. AutoComply addresses this issue by enabling collaborative document completion. Admins can assign specific tasks for obligations to team members, and Vault automatically generates the necessary documents for submission to regulatory authorities or government agencies.
3. Alerts via Email, Slack, and Teams: Timely compliance is essential, and AutoComply helps teams stay informed about upcoming obligations with real-time alerts delivered via email, Slack, and Microsoft Teams. Users also receive email summaries of all pending obligations.
4. Document Management System: As demonstrated by the features mentioned earlier, compliance obligations generate various documents. AutoComply assists teams in managing these documents by automatically archiving them in smart folders matching the obligation, reference, and month of generation. Users can also create their own folders and upload external documents.
5. Ancillary Features like PEP and Sanction Screening: In addition to standard compliance obligations, some companies may need to handle specific tasks such as Politically Exposed Persons (PEP) screening or monitoring sanction watch lists for their customers. AutoComply performs these functions through a third-party integration with a global KYC provider as part of its comprehensive suite of services.
SEC REQUIREMENTS FOR FILING OF RETURNS BY CAPITAL MARKET OPERATORS (CMOs)
| S/N | SERVICES | Penalty for non-compliance | TIMELINES | REQUIREMENTS | OTHER INFORMATION |
| 1. | Filing of Quarterly Returns by CMOs | Minimum of N100,000 plus N5,000 per day of default. | Within 30 days after the end of each quarter. | Unaudited financial and nonfinancial reports using the harmonized reporting templates by all CMOs. However, there are separate template for Registrars and Custodians. | Dedicated emails according to registered function: brokers@sec.gov.ng portfoliomanager@sec.gov.ng investmentadvisers@sec.gov.ng trustees@sec.gov.ng ratingagency@sec.gov.ng registrars@sec.gov.ng issuinghouse@sec.gov.ng custodians@sec.gov.ng |
| 2. | Filing of Annual Returns by CMOs | Minimum of N100,000 plus N5,000 per day of default. | Within three (3) months after the end of the accounting year. | Audited Financial Statements | Dedicated email: afs@sec.gov.ng |
| 3. | Quarterly Returns on utilization of Issues proceeds | Minimum of N100,000 plus N5,000 per day of default. | Within three (3) months after the clearance of allotment. | Utilization of issue proceed report using templates given by the Commission | Dedicated email: utilization@sec.gov.ng |
| S/N | SERVICES | Penalty for non-compliance | TIMELINES | REQUIREMENTS | OTHER INFORMATION |
| 4. | Weekly Foreign Exchange Transactions Reports (FTRs) on AML/CFT | N500 per day of default for late rendition | Within 2 days after the week (i.e. not later than Tuesday of every week). | Foreign Transaction reports using templates given by the Commission | Dedicated email: amlcftreturns@sec.gov.ng |
| 5. | Quarterly AML/CFT returns | Minimum of N100,000 plus N5,000 per day of default. | Within 30 days after the end of each quarter. | Report on Internal Policies, procedures & controls, Monitoring of internet based businesses & clients, Financial Exclusion and Monitoring of Employees Account using templates given by the Commission. | Dedicated email: amlcftreturns@sec.gov.ng |
| 6. | Annual AML/CFT returns | Minimum of N100,000 plus N5,000 per day of default. | Not later than December 31st of each year | Reports on Employee training programme, Mitigants/ contingency plans and compliance programme using templates given by the Commission. | Dedicated email: amlcftreturns@sec.gov.ng |
Note
There is no provision for granting of waivers in SEC Rules and Regulations.
