SEC begins registration of ordinary nominee firms
The Securities and Exchange Commission (SEC) has asked all persons not registered by the commission as custodians, carrying on the business of nominee and holding securities on behalf of actual owners to apply to the commission for registration as nominees.
SEC announced the release of the new rules in a statement on Sunday.
According to the rules, the business of the nominee shall be to take title of property, money or securities in trust for and on behalf of clients as nominee for, or representative of such clients, to hold and deal with such property, money or securities strictly in accordance with any directions given by the respective clients from time to time to the nominee company.
The statement said, “The rule also stipulates that a nominee shall not engage in any business or activity except the business of nominee companies.
“A nominee is a company formed by a bank or other financial institution for the purpose of holding securities and other assets and administering them on behalf of the actual owners under the terms of a custodial or nominee agreement.
“The rule prescribes that a nominee company shall have minimum of three sponsored individuals, one of whom shall be a compliance officer.
“The managing director of the company shall at all times be among the sponsored individuals by complying with the requirements for registration of sponsored individuals.
“A nominee company shall have necessary infrastructure, including vaults for safe custody of title documents, agreements etc. and information technology capability required to effectively discharge its functions.”
SEC said a nominee company should abide by the code of conduct for capital market operators and their employees as set out in the commission’s Rules and Regulations.
It said, “In addition, any person registered by the commission as nominee shall: not carry out any business except the business of nominee prescribed in these rules; not invest in securities; and have a robust risk management procedure and mechanism for compliance with Anti Money Laundering/Combating Financing of Terrorism regulations of its parent company.
“In the case of merger/acquisition, they are required to notify the clients, who shall reserve the right to appoint another nominee company or elect to remain with the new entity.
“Within 24 hours, in the event that its registration is suspended/revoked, notify all its clients including custodians of the suspension/revocation and their obligation to appoint another nominee company within 90 days from the effective date of suspension/revocation.”
It added that where any client failed to appoint another nominee, the commission would appoint another nominee to take over custody of the assets.