Nigeria's SEC Moves Against Investment Platforms Trading Foreign Securities

The regulator warns operators to stop trading "unregistered" securities that are based in other countries.

Nigeria's Securities and Exchange Commission (SEC) has warned capital market operators to stop giving support to online investment trading platforms providing access to foreign securities in Nigeria.

In a statement Thursday, the regulator said those securities were not registered in Nigeria, and platforms providing access to them were acting against the law. It warned capital market operators in partnership with the platforms to desist from providing brokerage services for foreign securities.

The apparent move by the SEC to bar fintechs from selling, issuing or offering for sale foreign securities not listed on any exchange registered in Nigeria, if seen through, will negatively impact thousands of Nigerians who have lately been drawn by technology to investing in foreign securities.

Platforms like Bamboo, Trove, and Risevest that offer Nigerians access to stocks, bonds and other securities in both local and international markets, have in recent years grown in popularity in the Nigerian fintech space, especially amongst young people.

The investment platforms have worked with local and foreign brokerage firms to provide the services, in a way sidestepping the difficult task of obtaining SEC approval.

In December 2020, the SEC tackled Chaka, another investment platform it accused of engaging in investment activities, including providing a platform for purchasing shares in foreign companies such as Google, Amazon, and Alibaba, outside the Commission's regulatory purview and without requisite registration.

In its statement Thursday, SEC said, "The attention of the Securities and Exchange Commission (the Commission) has been drawn to the existence of several providers of online investment and trading platforms which purportedly facilitate direct access of the investing public in the Federal Republic of Nigeria to securities of foreign Companies listed on Securities Exchanges registered in other jurisdictions. These platforms also claim to be operating in partnership with Capital Market operators (CMOs) registered with the Commission.

"The Commission categorically states that by the provisions of Sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations, only foreign securities listed on any Exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public. Accordingly, CMOs who work in concert with the referenced online platforms are hereby notified of the Commission's position and advised to desist henceforth.

"The Commission enjoins the investing public to seek clarification as may be required via its established channels of communication on investment products advertised through conventional or online mediums."

The move is coming months after the Central Bank of Nigeria barred banks from allowing cryptocurrency-related transactions in the country.

Nigerians have reacted to the new directive.

"I don't understand this SEC memo. Were any capital market operators working with the platforms or are the platforms themselves capital market operators?" asked Osaretin Asemota, a Twitter user who describes himself as a "retired investor". "I don't know why we like making things hard for no reason. Money is going to move elsewhere as they will only go global."

Another user, Prince Humphrey, wrote, "I think these folks are genuinely afraid of losing their historical economic power. Young people are just finding ways to break free and they will find a way - I now see the power of crypto enabled global investment opportunities."

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