The Securities and Exchange Commission (SEC) has directed all capital market operators to ensure they submit their updated fidelity bond on or before January 31.
A fidelity bond is essentially a form of insurance against internal fraud, malpractices and willful professional negligence. It provides cushion for various losses that might arise from employee’s dishonesty.
In a circular to all capital market operators, SEC noted that by virtue of Rule 27 (1) of SEC Rules and Regulations, which was made pursuant to the Investments and Securities Act, 2007, every registered capital market operator is required to provide and maintain a bond or professional indemnity insurance policy.
“In view of the foregoing, all registered capital market operators who have not updated their fidelity bond for the year 2019 are required to do so on or before January 31, 2019. All fidelity bonds submitted to the commission shall cover the period between January 1, 2019 and December 31, 2019,” SEC stated.
The commission warned that failure to comply with the deadline would attract penalty as stipulated in extant rules and regulations. Operators with deficient fidelity bond might not be allowed by SEC to handle transactions.
SEC had in 2013 adopted the annual Gregorian calendar as duration for each fidelity bond. The change came on the heels of an exclusive report by The Nation that some 213 capital market operators including several high-brow law firms, reporting accountants, banks, investment management firms and advisory firms were operating with expired fidelity bond.
The expiration of fidelity bonds makes the functional registration of the companies and individuals as capital market operators incomplete.
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