SEC stops guaranteed returns in capital market

Business News of Monday, 29 October 2018

Source: citinewsroom.com

2018-10-29

Daniel Ogbarmey Tetteh, Director General of Securities and Exchange Commission (SEC)

The Securities and Exchange Commission (SEC) has asked all Fund Managers to stop offering guaranteed returns on investment to their clients.

The directive which has been in effect since July, is among the numerous interventions to sanitise the industry and protect the integrity of the capital market.

The Director General of the SEC, Daniel Ogbarmey Tetteh explained that his outfit will enforce the policy to the latter.

Citi Business News understands that though the regulator’s directive has been for about four years now, the industry has practically refused to comply.

As a result, the latest directive from the SEC is to enforce the action especially in the wake of recent rounds of panic in the banking sector.

Mr. Ogbarmey Tettey in a Citi Business News interview further explained the rationale for the move.

“If you look at the nature of products we offer in the securities industry, the idea is to offer the product based on the risk return profile and let the client make a decision on the kind of risk they are ready to take because there is a tradeoff between how much risk you are ready to take and the kind of return you will earn.”

He added, “If you should buy shares, there is no way any operator should give you a guaranteed return because we do know that the factors or the forces that influence the price movements are not in the hands of one market operator.”

Already, industry operators have begun announcing to clients the decision to stop the offering.

Groupe Ndoum for instance has announced that all such accounts have been replaced with a Collective Investment scheme of which payments will be effected over a three year period.

Citi Business News also understands that other operators are contemplating means to dissolve the said fund and return investors’ money.

The CEO of Databank Group, Kojo Addae-Mensah describes the intervention as commendable: “The directive is just to protect us and I think my colleagues should for their own good work on adhering to the directives and for Ghanaians to understand the difference between walking into a commercial bank to buy a fixed deposit and walking into an investment company for an investment package,” he remarked.

Responding to what will be the next line of action after the December 2018 timeline, Daniel Ogbarmey Tetteh further said they will collaborate with Fund Managers to manage the disbursement of all matured investments.

“From the data they submit to us, we will make a determination once we get a sense of the the maturity periods. We accept the fact that there could be some of those instruments they’ve issued which may go beyond December. We are not interested in disrupting or causing a shock in the system so we will work with the fund managers to manage the process,” he observed.

Meanwhile Mr. Addae-Mensah believes all stakeholders will have to blame for the apparent delay in implementing the policy.

“The regulator has been a bit too understanding and should have cracked the whip many months or years ago. Again, we the market players because we are all eager to get funds from the clients and that is what the client supposedly understands…The customer for not investigating and try to understand what he or she is getting into.”

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