SEC Corrects AUM Capital Rule to 0.1% After Industry Pushback

The Securities and Exchange Commission (SEC) has issued a crucial clarification on its revised minimum capital framework. It confirms that fund and portfolio managers must hold 0.1% of Assets Under Management (AUM) as regulatory capital, not 10%, as widely interpreted from its January 16, 2026 circular.

The clarification follows intense feedback from capital market operators, who warned that the original interpretation would impose an unsustainable burden on the asset management industry. Multiple SEC sources confirmed the correction to Nairametrics, with Director-General Dr. Emomotimi Agama expected to formally announce it during a stakeholder briefing this week.

The adjustment significantly lowers capital pressure on large asset managers and averts what many industry leaders feared could destabilize Nigeria’s investment management ecosystem.

What the numbers really say

This clarification comes amid sweeping reforms in the SEC’s Revised Minimum Capital (MC) framework, which raised thresholds across nearly all capital market categories.

Under the updated framework:

• Tier 1 fund and portfolio managers must hold a base capital of ₦5 billion.

• Firms managing above ₦100 billion in AUM (Assets Under Management) must hold an additional 0.1% of AUM, not 10%.

The difference is substantial. A firm like Stanbic IBTC Asset Management, with over ₦11 trillion in AUM, would have needed ₦1.1 trillion under the earlier interpretation, an amount exceeding the capital base of several Nigerian banks with far higher risk-weighted assets. With the 0.1% correction, the requirement drops to a realistic ₦11 billion.

The broader capital hikes (still in force)

While the AUM clarification brings relief, other revised capital requirements remain unchanged:

- Brokers: ₦600 million

- Dealers: ₦1 billion

- Broker-dealers: ₦2 billion

- Issuing houses: ₦2–7 billion (depending on scope)

- Digital asset platforms: ₦2 billion

All regulated entities must comply by June 30, 2027.

Why operators pushed back hard

Market operators quickly challenged the original interpretation, especially for fund managers. A policy memo titled “Review of Tier 1 Fund and Portfolio Management Capital Requirements”, circulated by the Fund Managers Association of Nigeria (FMAN), argued that bank-style capital rules ignore asset management realities. 

The memo distinguished fund managers as fiduciary agents, not principal risk-takers: they manage client assets but do not own them, unlike banks that deploy deposits at risk.

Using financial modeling, it highlighted the mismatch:

• A Tier 1 manager with ₦50 billion AUM, charging a 1.5% fee, generates ₦750 million in annual revenue.

After costs, profits might hit ₦350 million.

This yields a 7% return on a ₦5 billion capital, which is below Nigeria’s risk-free rate.

Higher requirements could thus deter scaling and erode competitiveness.

Why the correction matters

The SEC’s shift from 10% to 0.1% on AUM is a critical course correction. Without it, firms might have:

1. Artificially capped AUM growth.

2. Restructured or downsized

3. Fragmented portfolios to dodge thresholds.

The revised rule upholds SEC goals for stability and investor protection without gutting asset management economics. It also aligns Nigeria with global norms. In the UK, US, EU, and Australia, fund manager capital is tied to operational risk, fixed overheads, and business complexity, not full client assets.

Concerns that haven’t gone away

Relief aside, the ₦5 billion flat floor for Tier 1 managers still draws fire:

• It favors bank-affiliated managers.

• It raises barriers for independents.

• It curbs market diversity and competition.

Custodians, trustees, registrars, and rating agencies seek more on compliance, enforcement, and transitions. The SEC retains flexibility, extensions possible, but operators assume June 30, 2027 compliance is firm.

What to watch next

Expect public confirmation at this week’s stakeholder engagement, after industry consultations. The framework integrates fintechs, digital assets, and new infrastructure into Nigeria’s capital markets.

As the 2027 deadline nears, watch firm adaptations and potential tweaks. The correction calmed markets, but it spotlights the need for precise, consultative reforms that move trillions. Regulation shapes markets, but a misplaced decimal can shake them.