SEC and the Proliferation of Unregistered Investment Platforms

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Friday, April 09, 2021 / 02:18 PM / by CSL Research / Header Image Credit: Money Control

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According to a circular issued by the Securities and Exchange Commission (SEC), it affirmed its knowledge of the existence of trading platforms that allow investors access to securities listed in other jurisdictions. The capital market regulator further reiterated that inline with the provisions of sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations state that only foreign securities listed on any exchange registered in Nigeria maybe issued, sold or offered for sale or subscription through approved channels to the Nigerian public.


The announcement furthers SEC's quest to strengthen investor protection, promote transparency in the operations of the Nigerian capital market and ensure all investment transactions are within the regulatory purview of the commission. Recently, the capital market regulator introduced a new requirement for the inclusion of the commission's contact details in all prospectuses or offer documents issued to the general public in a bid to ascertain the genuinity of such securities. Besides, it is often found that the activities of illegal fund managers become prevalent during a financial or economic downturn, hence making the public susceptible to the juicy yet unsustainable returns as promised by these managers.


The recent move has generated diverse views from stakeholders with some critics classifying this action as irrational. They cited the impact of investing in foreign stocks on portfolio diversification and the role of Fintechs in driving financial inclusion among others. On the other hand, supporters of this action argued for the need to reduce the pressure on external reserves especially at a time when the green-back is needed to stimulate economic recovery. Also, that it helps to safeguard the country's investing community. We recall that the recent policy by the CBN to close all accounts by Deposit Money Banks (DMBs) and Other Financial Institutions (OFIs) involved in dealing with cryptocurrencies received a lot of backlash from the public.


On this move, however, we opine that it is still within the legal purview of the SEC to discourage investments in foreign listed securities. Nonetheless, we are aware of the concept of globalization in commerce and thus, there might be a need for a rejig of the Investment and Securities Act 2007, and other related acts to capture current trends and developments in the investment globe. To avoid backlash going forward, we suggest more public education for clarity with regards to future policy decisions.


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