SEC releases rules on warehousing, collateral mgt
By Kayode Tokede
In a bid to ensure the nation has a vibrant commodities trading ecosystem which would in turn translate into foreign exchange earnings for the country, the Securities and Exchange Commission (SEC) has released new rules covering warehousing and collateral management among others.
According to the rule, every warehouse that stores commodities to be traded on a registered Exchange shall apply to be registered by the Commission, while the Commission shall maintain a Register of all registered warehouses which shall be published on its website.
A warehouse applying for registration going by the rule, shall submit proof of ownership or registered-lease deed or rent agreement, along with disclaimer from the owner of the Warehouse/property providing waiver of ownership regarding Commodities stored in such Warehouse, in case of leased or rented Warehouse; present evidence of construction in compliance with the National Building Code, Present evidence of compliance with relevant Federal and State regulation relating to the operation of warehouses, and have facility(ies) appropriate for storage of commodities.
Other requirements are that the warehouse should have appropriate security arrangements in place, have adequate trained staff with expertise and knowledge of scientific storage of commodities, have requisite equipment for weighing and quality measures of commodities, as well as have comprehensive insurance cover for the building, equipment, stock and other items as may be necessary.
The Rule also states that “The warehouse should be located in a place with access to infrastructure to support its operations and have sufficient space for parking and movement of large vehicles, have an efficient system for loading/unloading of Commodity including proper mechanism for segregation of different kinds/quality of Commodity.
“They are to submit a Standard Operating Procedure (SOP) which shall cover the following among others: Procedures for acceptance of commodities to be deposited and delivery of commodities; procedures for weighing, sampling of goods to be deposited in compliance with industry standards, procedure for verification of commodities and communication to depositors, and procedure for maintaining the quality of the goods stored in line with relevant specifications.
“Others are procedure for Know your depositor, security policy for ensuring the safety of the goods, procedure for the use of modern techniques for storage of goods, procedure for determining and addressing losses due to theft, fire, burglary, fraud, negligence and force majeure events, procedure for internal verification of stock, procedure for maintenance of warehouse and preservations of Stock, Organizational structure and Job description for every staff.”
The rules states that for a Collateral Management Company to be registered by the Commission, an application shall be filed to the SEC accompanied by the relevant documents.
Some of the documents are two sets of completed appropriate S.E.C Forms to be filed by the sponsored individuals; a copy of the Certificate of Incorporation certified by the Corporate Affairs Commission where a copy not certified is filed, the applicant shall present the original for sighting by an authorized officer of the Commission; a copy of the Memorandum and Articles of Association certified by the Corporate Affairs Commission, which shall among others, include power to act as a Collateral Manager, a copy of the appropriate CAC Form containing particulars of the directors certified by the Corporate Affairs Commission; as well as a Copy of latest audited accounts or audited statement of affairs for companies in operation for less than one (1) year.
The rule further requires Fidelity Bond representing 20% of paid-up capital; sworn undertaking to keep proper records and render returns; evidence of minimum paid-up capital of N50 million. As well as application for registration of a minimum of two sponsored individuals one of whom shall be the chief executive officer.
“The two principal officers of the Collateral Management Company who shall be registered as sponsored officers must have a minimum of a university degree or its equivalent with not less than ten (10) years relevant post-qualification experience; a list of key officers and technical experts engaged and details of their qualifications, which should capture evidence of financial, technical capabilities to carry out the functions of a Collateral Manager, a list of relevant technology systems in place as required by collateral management services; information relating to the relevant Commodities Management Facilities including: Assaying facilities, Warehousing, Aggregation, Computerization and Telephone systems and a well finalized Business Plan.
“Two copies of existing or proposed by-laws or rules, Code of Conduct, Warehousing Guidelines etc., instruction and inspection manuals of warehouse activities; detailed information about the promoters and principal officers of the Collateral Management Company; two copies of Warehouse Accreditation requirements of the Collateral Management Company; detailed information about the Technology system to be adopted; and an Undertaking by the CMC to always forward copies of amendments of its Guidelines for approval by the Commission.”
On Management of the CMC, The SEC rule stipulates that Board of directors and the chief executive should be appointed with prior approval of the Commission; key officers are to fulfil the fit and proper criteria as provided in these regulations; the CMC is expected to maintain the eligibility criteria provided by the Commission and notify the Commission immediately if it ceases to fulfil any of the conditions provided in these rules; maintain high standard of integrity and fairness in discharging its functions and its dealing with other persons with whom it has agreed in writing to render services as CMC; fulfil its obligations in a fair, efficient, transparent and ethical manner; and act with due skill, care and diligence in performing all its functions and discharging all its obligations and responsibilities;
Upon Registration, the CMC is expected to display such license, in a conspicuous place, in the principal place of its business; establish the procedure for pledging, in favor of a financial institution, the Depositor’s commodities held with the Warehouse against which Electronic Warehouse Receipt has been issued; and certify a Warehouse.
