The fiduciary role of a trustee has its origin from the English Common Law and the principles of Equity. This concept has authorized the trustee to be an independent third party saddled with the responsibility of protecting conflicting interests between the issuer and investor in the financial market. A trustee is usually hired by an issuer to oversee the implementation of a bond between the bond issuer and a bondholder.
The functions of trustees shall be as follows:-
In respect of collective investment scheme:
- Monitoring of the activities of the fund manager and custodian on behalf of and in the interest of unit holders or fund contributors;
- Ensuring that the custodian takes into custody all of the schemes assets and holds it in trust for the beneficiaries in accordance with the trust deed and custodial agreement;
- Monitoring of the register of unit holders or contributors;
- Ascertaining compliance with the provisions of the Trustee Investments Act, the Investments and Securities Act and the trust deed by the fund manager;
- Ascertaining that monthly and other periodic returns/reports relating to the scheme or fund are sent by the fund manager to the Commission;
- Taking all steps and executing all documents which are necessary to secure acquisitions or disposals properly made by the fund manager in accordance with the trust deed and custodial agreement;
- Exercising any right of voting conferred on it as the registered holder of any investment and/or forward to the fund manager within a reasonable time all notices of meetings, reports, circulars, proxy solicitations and any other document of a like nature for necessary action;
- Ensuring that a scheme is managed by the fund manager in accordance with the Act, these rules and regulations, the schemes’ trust deed and custodial agreement;
- Ensuring that the fees and expenses of a scheme are within the prescribed limits;
- Acting at all times in the interest of and for the benefit of unit holders of the scheme.
In respect of debt instruments
- Protect the interest of lenders and investors in such instruments.
- Hold and enforce (where necessary) such securities on behalf of investors or lenders.
- Hold and administer sinking funds where applicable.
- Monitor the register of bonds/unit holders.
- Perform all other functions stipulated in the requisite trust deed, ISA, CAMA,TIA and other legislations.
Below are the registration requirements of a Trustee as stipulated by Rule 109 of SEC, 2013;
(1) An application for registration as trustee shall be filed on Form S.E.C. 4A and shall be accompanied by-;
(a) a minimum of two (2) sets of completed Form S.E.C. 2 to be filed by the sponsored individuals;
(b) copy of Memorandum and Articles of Association of the company certified by the Corporate Affairs Commission, which shall among others include the power to act as trustees;
(c) copy of 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;
(d) a copy of CAC Form containing particulars of the directors certified by the Corporate Affairs Commission.;
(e) latest copy of audited accounts or statement of affairs for companies in operation for less than one year;
(f) fidelity bond representing 10% of the paid-up capital;
(g) sworn undertaking to keep proper records and render returns;
(h) evidence of minimum paid–up capital of N40 million or any other sum as prescribed by the Commission from time to time;
(i) any other document or information required by the Commission from time to time.
(2) One of the sponsored individuals shall be a lawyer experienced in trusteeship function.
(3) Rule 83 (3) and (4) shall, with all necessary modifications, apply in case of denial or suspension of registration of a trustee.
The involvement of the trustee in the capital market fosters a contractual relationship between the Issuer, Trustee and Investor. It is therefore expedient that a trustee ensures that the SEC approval is duly obtained and diligent care is taken as the capital market can be full of risks.