SEC orders market operators to maintain January to December fidelity bonds

The Securities & Exchange Commission (SEC), on Wednesday directed all operators in the capital market to henceforth maintain a fidelity bond with a January to December validity every year.

According to Wikipedia, “a fidelity bond is a form of insurance protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.

“While called bonds, these obligations to protect an employer from employee-dishonesty losses are really insurance policies. These insurance policies protect from losses of company monies, securities, and other property from employees who have a manifest intent to cause the company loss.

A statement on the website of the commission warned that “any fidelity bond which does not conform to this standard will henceforth not be accepted.”

The commission also directed “operators that have already submitted bonds that will expire before December 2013 should extend their policy to expire in December 2013 before its expiry date. This will enable them have a new policy in January 2014 which will extend to December 2014.”

Operators in the Nigerian capital market without a valid fidelity bond, the SEC further warned, contravene the enabling “Investments and Securities Act (ISA) No. 29, 2007 and SEC Rules & Regulations Pursuant to the Act.”

Presently, besideds having a minimum paid up capital of N2 billion and maintaining sufficient liquid assets to cover its current indebtedness, market makers, are among others, required to maintain a Fidelity Bond in line with provisions of Rule 45, among others.