As part of requirements for eligibility to solicit investments, foreign CISs that have no intention of listing on the Nigerian exchanges are required to invest no less than 20% of the fund's total assets in Nigeria (Rule 2g). Obviously, the key consideration is the retention of a minimum level of investment within the Nigerian market, and by extension the reduction of capital flight. Equally, the foreign operator is required to appoint a representative in Nigeria for the life of the fund approved in Nigeria. This appointed representative can either be a duly registered fund manager with whom the foreign operator may enter into a representative agreement, or a freshly incorporated representative entity registered with SEC (Rule 3b). Solicitation of investments in the fund is then carried on through the representative (Rule 4). Where the foreign operator elects to incorporate a vehicle for the purposes of registration with the SEC, such local incorporation throws up a host of regulatory compliance requirements, including licensing with the Nigerian Investment Promotion Council and compliance with the various applicable tax regimes.
The Rules, however, impose no onerous reporting requirements, as all that is required is the formality of filing the same returns and reports as those filed with the home regulator of the operator of the foreign CIS (Rule 8). This is commendable in light of the multiple jurisdictions in which a foreign CIS may be undertaking solicitations. Minimum disclosure requirements are also set out (Rule 6), including details on taxation of income accruing to an investor (both in the home country of the fund and Nigeria), investor protection mechanisms, protection of assets, and disclosure of differences in regulatory requirements applicable to the fund in the home country and Nigeria.
These Rules indicate a progressive shift in attention toward the regulation of foreign CISs. They also give an indication of the SEC's continued focus on investor protection by proscribing non-disclosure of material information and the distribution of materially misleading information.