SEC's Directive to Online Investment and Trading Platforms in Nigeria - The Way Forward

Regulators
1723 VIEWS
Proshare - Facebook Proshare - Twitter Proshare - Linked In Proshare - WhatsApp
Proshare

Tuesday, April 13, 2021 / 01:27 PM / by Detail Commercial Solicitors / Header Image Credit: Q Wealth/Investbamboo/Ecographics


Proshare Nigeria Pvt. Ltd.


Background

On the 8th of April 2021, the Securities and Exchange Commission (the "SEC"), issued a press release addressing the activities of online investment and trading platforms which facilitate direct access of the investing Nigerian public to securities of foreign companies listed on Securities Exchanges registered in other jurisdictions (the "Press Release").

 

In the Press Release, the SEC, in line with its duty to protect the investing public pursuant to Sections 67 – 70 of the Investments and Securities Act 2007 ("ISA") and Rules 414 and 415 of the SEC Rules and Regulations 2013 (as amended), re-iterated that only foreign securities listed on any Exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public. In the same Press Release, the SEC also informed Nigerian Capital Market Operators ("CMOs") that work with these online investment and trading platforms (the "Platforms") to desist from doing so. The SEC also enjoined the Nigerian investing public to seek clarification (via its established channels of communication) on investment products advertised through conventional or online media. Please see the full SEC press release here.

 

This Press Release will affect the ongoing operations of these Platforms which facilitate direct access to securities of foreign companies listed on Securities Exchanges in other jurisdictions.

 

Earlier in December 2020, the SEC published a Memo on the restraint placed on one of such Platforms restricting it from advertising or selling securities on the basis that its activities were being carried out outside the SEC's regulatory purview and without the requisite registration with the SEC. This position was further reinforced in another press release by SEC in February 2021.

 

Implication and Recommendation

The apparent implication of the Press Release is that to the extent that the Platforms facilitate direct access to securities of these foreign companies which are listed on Securities Exchanges in other jurisdictions but not listed on any Exchange registered in Nigeria, such activities by the Platforms are considered by the SEC to be in contravention of the ISA and SEC Rules and are, therefore, illegal.

 

The notice and warning from the SEC to CMOs under the Press Release is expected to result in CMOs putting an immediate halt to the strategic partnerships they have with the Platforms. The likely impact of this is that although the investing Nigerian public may continue to trade on such Platforms, these Platforms will be prevented from lawfully settling the investments via Nigerian brokers, which coincidentally are CMOs registered with the SEC. Reliance will have to be placed on the collaborations with their foreign strategic broker partners. It remains to be seen how this will work in the interim.

 

Upon careful reading of the Press Release, the SEC appears to infer that the activities of these Platforms are being carried out without the requisite registration. Consequently, the entities operating such Platforms are required to be duly registered with the SEC to operate lawfully. This view is buttressed by the fact that one of such Platforms has taken the necessary steps to register with the SEC for a newly created license as stated by its CEO here. Currently, there is no public information on what this license is, the scope of activities that the license permits or the process and requirements for getting this license. However, it is expected that the SEC will follow up the Press Release with Regulations to provide clarity and certainty for the Platforms in this regard, as these Platforms continue to innovate and provide access to investment products which would otherwise have been inaccessible to the Nigerian public.

 

In conclusion and in view of SEC's recent approach as evident in the Press Release, it is advisable that any Platforms, which is yet to do so, should take the initiative and engage the SEC in order to be duly registered with the SEC or take such steps as is necessary to lawfully operate its Platforms as it relates to securities of foreign companies that are registered in securities exchanges in other jurisdictions. 

 

 

About the Author

Detail Commercial Solicitors is distinct as Nigeria's first commercial solicitor firm to specialize exclusively in non-courtroom practice. They can be reached vide info@detailsolicitors.com and/or

+234(0) 12771400-5

 

Credit:

* This regulatory update was first published by Detail Commercial Solicitors on Saturday, April 10, 2021. 


Proshare Nigeria Pvt. Ltd. 


Related News - Online Trading

  1. Simple Steps on How to Approach the Stocks Trading Process
  2. Online Trading Ranking Report 2020: Review of Previous Ranking Reports
  3. Online Trading Ranking Report 2020: The Market - A Hawk's View
  4. Online Trading Ranking Report 2020 - Trading in a Period of a Virus; Building Good Habits
  5. It Is Time for Proshare's 2020 Online Trading Ranking Survey - 6th Edition
  6. 4 Tips to Get Started With Online Trading
  7. Online Trading Ranking Report 2019 - Refining The User Experience; Trends In Digital Trading
  8. Ahead of the 2019 Online Trading Ranking Report - How the Top 3 Rank in Previous Editions
  9. Proshare Set To Release The Nigerian Online Trade Ranking Report 2019
  10. Nigerian Online Trading Portals Ranking Report 2018
  11. It is Time for Proshare's H1 2018 Online Trading Ranking Survey
  12. Nigerian Capital Market and FX Online Trading Portals Ranking Report H2 2017
  13. The Nigerian Capital Market Online Trading Portals Ranking Report
  14. The Nigerian Online Trading Report


Proshare Nigeria Pvt. Ltd.


Related News - Regulators

  1. NIBSSS Issues Approved Standard Operating Guidelines for BVN Matching System
  2. SEC and the Proliferation of Unregistered Investment Platforms
  3. SEC Cautions on the Proliferation of Unregistered Online Trading Platforms Facilitating Trading
  4. SEC Proposes a New Rule, Public Companies to Report Income Earned From Unclaimed Dividends
  5. NSE Receives SEC's Approval on Trading Licence Holders' Rules Amendment, Takes Effect May 3rd
  6. Non-Interest Capital Market, Full of Potentials - DG SEC
  7. Warehousing and Collateral Management: SEC Nigeria Releases Rule
  8. SEC Nigeria Re-introduces Periodic Renewal of Registration by CMOs, Set April 30th Deadline for 2021
  9. IOSCO Statement on Going Concern Assessments and Disclosures During the COVID-19 Pandemic
  10. NSE Notifies of Effective Date of Rules on Net Liquid Capital Requirements, Others
  11. SEC Issues Guidance on the Implementation of Sections 60 - 63 of the ISA 2007
  12. NCM 2020: Regulatory Governance in 2020
  13. NSE Proposes Amendments to Rules Governing Transaction with Related Parties
  14. SEC Releases New Rules and Amendments on Collective Investment Schemes
  15. Sundry Amendment to Valuation Report Rules and Regulations in Nigeria Released by SEC
  16. Sundry Amendment to Amount to be Underwritten Rules and Regulations in Nigeria Released by SEC
  17. Investment by CIS in Unlisted Securities Rules and Regulations in Nigeria Released by SEC
  18. Sundry Amendment to Contents of a Trust Deed Rules and Regulations in Nigeria Released by SEC
  19. Payment of Administrative Charges Rules and Regulations in Nigeria Released by SEC
  20. Annual Supervision Fees for CIS Rules and Regulations in Nigeria Released by SEC
  21. Collective Investment Schemes General Rules and Regulations in Nigeria Released by SEC
  22. Nominee Companies Rules and Regulations in Nigeria Released by SEC
  23. Fund Management Products Rules and Regulations in Nigeria Released by SEC

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

 

 

READ MORE:
Related News
SCROLL TO TOP