Portfolio Management Agreement (Nigeria)

A Portfolio Management Agreement in Nigeria records the obligations the parties accept and the terms governing their arrangement.

Portfolio management in Nigeria is primarily regulated by the Securities and Exchange Commission (SEC) Nigeria under the Investments and Securities Act 2007 (ISA 2007). Section 38 of the ISA 2007 requires any person who carries on the business of portfolio management in Nigeria to be registered with the SEC Nigeria as an investment adviser or fund manager. Unregistered portfolio management activity constitutes a criminal offence under Section 59 of the ISA 2007. The SEC Nigeria Rules and Regulations 2013 (as amended) set out the registration requirements, capital adequacy standards, and conduct of business rules for licensed fund managers.

The investment vehicles available for portfolio management in Nigeria include equities listed on the Nigerian Exchange Group (NGX), Federal Government of Nigeria (FGN) bonds and treasury bills issued through the Debt Management Office (DMO), state government bonds, corporate bonds listed on the FMDQ OTC Securities Exchange, collective investment schemes (unit trusts and mutual funds) registered with the SEC Nigeria under the ISA 2007, and, for eligible counterparty accounts, derivatives and structured products cleared through the FMDQ Exchange.

A Portfolio Management Agreement must be distinguished from a Stockbroking Agreement, by which a client appoints a dealing member of the NGX to execute buy and sell orders on the client's behalf without discretionary management powers. The Portfolio Management Agreement gives the manager discretionary authority to make investment decisions without seeking prior approval for each transaction, whereas under a Stockbroking Agreement, the client directs each transaction. A Portfolio Management Agreement also differs from a Collective Investment Scheme (CIS) prospectus, which governs a pooled investment vehicle open to multiple investors rather than a separately managed individual account.

The CBN Investment Guidelines for banks and the National Insurance Commission (NAICOM) Investment Regulations for insurance companies impose additional restrictions on portfolio composition and asset allocation for regulated entities, and Portfolio Management Agreements for such clients must comply with these sector-specific regulations in addition to the general ISA 2007 framework.

The legal framework governing the Portfolio Management Agreement (Nigeria) in Nigeria draws on several key statutes and regulatory bodies. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Parties executing a Portfolio Management Agreement (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Investments and Securities Act 2007 sets the foundational requirements.

A Portfolio Management Agreement is required in Nigeria whenever an individual or institution wishes to appoint a professional fund manager to manage investment assets on their behalf.

A Portfolio Management Agreement is needed when a high-net-worth individual (HNWI) or family office in Nigeria wishes to appoint an SEC-licensed investment adviser to manage a diversified portfolio of NGX equities, FGN bonds, and money market instruments with a minimum portfolio size that meets the manager's eligibility threshold, typically NGN 50,000,000 or above for separately managed accounts.

A Portfolio Management Agreement is required when a pension fund administrator (PFA) licensed by the National Pension Commission (PenCom) sub-delegates management of a portion of its assets to a specialist fund manager, for example for alternative investments or offshore allocations, within the limits of the PenCom Investment Regulations under the Pension Reform Act 2014.

A Portfolio Management Agreement is needed when a corporate treasury function — a bank, insurance company, or large corporation — appoints an external fund manager to manage surplus cash or investable reserves in compliance with the CBN Investment Guidelines or NAICOM Regulations applicable to the corporate client's sector.

A Portfolio Management Agreement is required when a charitable foundation, endowment fund, or religious organisation operating in Nigeria wishes to professionalise the management of its investment assets and requires a formal mandate document governing the investment strategy, reporting obligations, and fee structure.

A Portfolio Management Agreement is needed when an investor wishes to access Nigerian capital markets through an SEC-registered foreign portfolio investment (FPI) manager under the SEC Nigeria Foreign Portfolio Investment Guidelines, which require a formal investment management mandate as part of the FPI registration process.

Parties in Nigeria should prepare a Portfolio Management Agreement (Nigeria) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A valid Portfolio Management Agreement in Nigeria must contain the following essential elements.

Parties and Regulatory Status: Full legal names and addresses of the client and the portfolio manager, together with the manager's SEC Nigeria registration number and registration category (Investment Adviser — Corporate, Fund Manager, or Dealer). The manager's registration status can be verified on the SEC Nigeria portal at www.sec.gov.ng.

Investment Mandate and Policy Statement: The client's investment objectives (capital preservation, income, growth, or balanced), risk tolerance, investment horizon, and permitted asset classes. The Investment Policy Statement (IPS) defines the strategic asset allocation — for example, maximum 60% equities, minimum 20% fixed income, maximum 10% alternative investments — and sets benchmarks for performance measurement such as the NGX All Share Index or the FMDQ Bond Index.

Discretionary Authority: A clear statement of whether the mandate is discretionary (the manager makes investment decisions independently within the IPS parameters) or non-discretionary (the manager recommends but the client must approve each transaction). SEC Nigeria Rules require the scope of discretionary authority to be documented in writing.

Fees and Charges: The management fee structure — typically expressed as a percentage of assets under management (AUM) per annum, for example 1.0–1.5% p.a. — billed quarterly. Performance fees (carried interest), if applicable, must comply with SEC Nigeria Rules on performance-based compensation and be calculated against a high-water mark or hurdle rate.

Reporting Obligations: The frequency and content of portfolio reports — monthly valuation statements, quarterly performance reports, and an annual audited portfolio report. SEC Nigeria Rules require fund managers to provide clients with periodic statements and to retain records for a minimum of 5 years.

Custody Arrangements: Identification of the custodian bank or securities depository (typically a CBN-licensed custodian or the Central Securities Clearing System (CSCS) for equities) that holds the client's assets separately from the manager's own assets. The manager must not hold client assets in its own name under the SEC Nigeria custody rules.

Termination and Withdrawal: The notice period required to terminate the agreement (typically 30–60 days) and the procedure for transferring assets to the client or a successor manager upon termination.

Conflict of Interest and Fiduciary Duty: The manager's fiduciary obligations to act in the client's best interests, disclose conflicts of interest, and comply with the SEC Nigeria Code of Conduct for Capital Market Operators.

Governing Law and Dispute Resolution: Nigerian law (ISA 2007, SEC Nigeria Rules 2013) with disputes submitted to arbitration under the Arbitration and Mediation Act 2023 or to the Investment and Securities Tribunal (IST) established under Section 274 of the ISA 2007.

Additional compliance elements for a Portfolio Management Agreement (Nigeria) used in Nigeria include: Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Forms-legal.com provides this template as a starting point for Nigeria-compliant documentation.