Trust experts, CMOs chart ways to robust trust structure in Nigeria

BY CHARLES ABUEDE & CHISOM NWATU

The Association of Corporate Trustees (ACT) in Nigeria, in an effort to improve the confidence of investors and the sanctity of the capital markets, has called for the adoption of more active role-play and digitalised strategy to grow the industry and enhance confidence.

The association, at the maiden edition of its annual business luncheon held in Lagos on Wednesday with the theme, “An Appraisal of the Nigerian Trust Industry vis-a-vis Global Trends in Trusteeship”, gathered various stakeholders and industry experts to chart a way towards growing the industry, seeking ways to sensitise investors and stakeholders on the effectiveness and benefits of trust structures while encouraging discussions and initiatives that would enhance the robustness of trust structures in Nigeria.

The event, which aligns with the association’s objective of fostering cohesiveness among its members while promoting synergies within the Nigerian capital market community, also featured a panel discussion titled, “Investor Protection: The Indispensable Role of Corporate Trustees,” with hundreds of trust experts, capital market operators and finance professionals in attendance, providing a good platform for the professionals to network and unlock deeper insights and intelligence about the industry.

Lamido Yuguda, director general, Securities and Exchange Commission (SEC), in his presentation called on the trustees and trust companies to be more dedicated and focused on the effective delivery of their services as a way to bolster the confidence and trust of investors in the capital markets.

Also, Olufunke Aiyepola, managing director, UTL Trust Management Services Limited, while speaking on the role of corporate trustees, said it is imperative to have corporate trustees from the restructuring state while carrying out the due diligence on the client.

“You should be sure if the issuer is a sure sovereign or sub-sovereign in the issue. Part of the role of a trustee is to find out the debt-to-income ratio, the strength of repayment, and how the covenants in the issue. Identify the attendant risk on the ability to borrow and pay,” Aiyepola explained.

She added that in mutual fund and collection schemes, the corporate trustee needs to ensure that fund managers are paying dividends as and when due, and ensure the right financial statements are published, adding, “Well, you should know that trustees are risk assessors, guidance and regulatory compliance.”

Bayo Olugbemi, chief executive, First Registrars and Investors Services, said, “the debt market has enjoyed tax exemption as an incentive for 10 years and despite the tax exemption removal policy on the national debt instrument, the pool is not enough because there are unlimited investment opportunities; though, the 2007, 2008, and 2009 financial crises left all stakeholders complicit. For best practice, there should be advocacy for the amendment of the tax law allowing the national and subnational issues or securities to be tax-exempt.”

Leo Okafor, company secretary and general counsel, United Capital Plc, said serving and capturing the younger generation into the market by identifying the need to invest in a trust fund can be done through digitization and rolling out financial products which are tailored to meeting their needs. He said trusteeship deals with investors’ protection and this cuts across every segment of the capital market.

Also, Misan Kofi-Senaya, chief executive officer, DataMax Registrars Limited, spoke about the fees involved and the need for incentives to make the capturing and proper involvement of more domestic, retail players and investors and not only institutions.

Abdulkadir Abbas, director, registration, exchanges, market infrastructure and innovation, SEC, said there is an enormous responsibility and liability on the trustee.

“The major issue is not about the SEC but about the market sanctity and trustees should be allowed to play their roles. Within 10-11 years, there has been no default in the debt market; there are 33 trustees who are active out of the 35 recognised trustees with the SEC and following regulatory guidance.

“Fintech or technological advancements are now at a rapid state and when we talk about issuing bonds through blockchain and trustees, in collaboration with regulators, can come to trend as digitalization will allow for appraisal of fintech ideas and then fix goals to accommodate the ideas. For me, you cannot continue in the traditional way of rendering these services just to accommodate the millennials,” he submitted.

On infractions on investors’ protection funds, Abbas said there have been payouts from the national investor protection fund which is overseen by the SEC to help maintain confidence in the market. “Though, no exact figure on the amount, the enforcement division is responsible for this for your access,” he said.

Earlier in her guest presentation, Bolanle Adekoya, partner at PwC, talked about investor protection in the capital market. “The capital market has been rocked by some scandals from unrecognised businesses and activities of errant market participants which have brought about lack of transparency, absence of third-party custodian and trustees, the importation of independent rating arrangements for dealers.

“Trustees have a fiduciary responsibility and critical role in the representation of assets in a trust. They should be able to manage and administer the trust according to its terms and intents; monitor investment performance; help in the filing of claims and collection of proceeds on life insurance policies among other duties,” she asserted.

According to Adekoya, there is the need to start from the baseline and offer the best services to clients in the business trust as a corporate trustee despite the challenges such as market volatility; cyber security and data protection risks; lack of market deepening; conflicts of interest management; asset utilisation for social impact and the constant market, industry and regulatory developments which are being faced by the corporate trustee.