- Investors Threaten Legal Action Over SEC Levy Deductions
Some Ghanaian investors have threatened legal action against their fund manager if money is deducted from their investment portfolios to meet new Securities and Exchange Commission levies, exposing a potentially deeper problem of consent, liquidity and investor confidence surrounding the regulator’s revised fee regime.
The dispute suggests that implementation of the levy may prove as consequential as its headline cost, particularly where investment managers are required to remove money from client portfolios for a regulatory obligation that some clients say they never expressly authorised.
William Mensah, Executive Director of Bora Capital Advisors, said his firm encountered resistance after informing clients that funds would have to be deducted from their investment accounts and remitted to the SEC.
Speaking during a special edition of the NorvanReports Economic Governance Platform on X Spaces under the theme “Regulating or Overcharging? Examining SEC’s New Levies and the Future of Ghana’s Capital Market,” he said some clients explicitly warned the company not to touch their money.
“We wrote to our clients, and then we started getting all sorts of calls, some threatening to sue us, and some saying we don’t know and we touched any money,” Mr Mensah said. According to him, the objections went beyond dissatisfaction with investment returns and extended to whether the documentation governing the fund manager’s relationship with clients permitted deductions from their portfolios for payments to the regulator.
“Some said we should show them where on the KYC forms they filled we said that we were going to take money and give to the regulator,” he said.
The response illustrates the increasingly complicated position in which fund managers could find themselves as the SEC begins collecting levies linked to assets under management, because regulatory compliance obligations imposed on the institution can collide with contractual duties owed directly to clients.
Unlike annual licence charges imposed on investment firms as part of the cost of operating in the regulated market, an AUM-based levy reaches portfolios containing assets beneficially owned by investors.
That distinction is economically significant because the fund manager may be responsible for calculating and remitting the charge, but the immediate reduction in portfolio value is borne by the client whose investment is being debited.
Mr Mensah said Bora Capital divided affected clients into different categories as it sought to manage the implementation challenge. “Those who had told us that if we pay money for, we are going to sue you, etc., etc., we put them in one category. The other category are those who don’t have the cash to pay, we did another category. And then the third category are those who have the cash to pay and have not threatened to, etc., etc. So those were the ones that we paid,” he said.
Bora Capital subsequently made its first payment at the end of July, according to Mr Mensah, but his explanation underlined the central ownership issue confronting investment managers. “First of all, it’s not our money, right? It’s the client’s money,” he said, adding that clients with sufficient cash who had not objected represented roughly a quarter of the firm’s client base.
The experience also exposes a liquidity problem that could become particularly significant for portfolios invested predominantly in securities rather than cash. Assets under management are not equivalent to readily available cash, meaning a client can hold a substantial portfolio of equities, government securities or corporate debt while having insufficient liquidity available when a regulatory levy becomes payable.
Where cash is inadequate, a fund manager may have to determine whether securities must be sold solely to generate money for the regulatory payment. Such a transaction could create additional dealing costs, alter the portfolio’s investment strategy and potentially force the sale of an asset at an unfavourable point in the market cycle, thereby converting a regulatory charge into a wider portfolio-management problem.
The legal threat also raises questions about how existing investment agreements accommodate statutory or regulatory charges introduced after a client relationship has begun. The central issue is not necessarily whether the SEC possesses the legal authority to impose a levy, but how fund managers implement deductions where clients believe their original mandate did not give an intermediary permission to remove funds from an account for that particular purpose.
That makes communication critical, because fund managers risk becoming the immediate target of investor dissatisfaction even though they did not design the levy. Mr Mensah said Bora Capital therefore urged the regulator to consider pausing implementation while undertaking broader public education to explain the rationale, calculation and operational mechanics of the new charges.
“One of the things we said in the letter to the regulator is that it would be good if we pause this thing, and then the regulator does a little more public education, because we have to go out there and charge the fees,” he said. His argument points to a wider weakness that can emerge when financial regulation is implemented primarily through intermediaries, because legal authority does not automatically produce public understanding or acceptance.
Investors need to know precisely whether the levy is deducted directly from their portfolios, how frequently it is calculated, which assets form the assessment base and what happens when sufficient cash is unavailable.
They also need to distinguish clearly between management fees retained by a fund manager, transaction charges generated through investment activity and regulatory levies collected for the SEC, because any ambiguity risks turning dissatisfaction with public regulation into distrust of the wider investment-management industry.
That risk is especially important for Ghana, where deeper participation in professionally managed investment products is central to mobilising domestic savings and expanding long-term capital formation. Collective investment schemes and managed portfolios can aggregate household savings and channel them into equities, government securities and corporate financing, but investors may reconsider those products if regulatory deductions become difficult to understand or appear to occur without their explicit consent.
The SEC has a legitimate need for sustainable financing to supervise market operators, strengthen enforcement and protect investors, but those objectives ultimately depend on confidence in the regulated financial system.
If implementation of a levy produces disputes between clients and intermediaries, regulators must consider not only the revenue being collected but the behavioural consequences for investors deciding whether to remain within formal capital-market products.
The Bora Capital experience therefore shifts the controversy beyond a technical disagreement about regulatory financing. When investors begin threatening litigation simply to prevent deductions from their portfolios, the policy question becomes whether stronger regulation can be financed in a way that is legally clear, operationally workable and sufficiently transparent to preserve the trust of the very investors the SEC is mandated to protect.
