The Securities and Exchange Commission recently released a statement on the proliferation of “unregistered” online investment and trading platforms involved in facilitating purported direct access to trading in securities of foreign markets.
According to the statement, these unauthorized platform claims to have partnered with Capital Market operators (CMOs) registered with the Commission.
However, according to the Commission, it has authoritatively stated that through 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 have the permission to engage in any of form of transaction with the Nigerian public.
The Commission in the statement urged Nigerians to seek clarification through its channel before making such an investment.
This development means that all Fintech startups in Nigeria, currently executing transactions on foreign securities to the Nigerian public should with immediate effect detest from such activities.
By implication, Nigerian fintech startups presently involved in purchasing foreign stocks for the Nigerian public are now illegal as they are now considered unregistered by the Commission or not qualified to be registered as a “Securities Exchange” platform.
This also means that these platforms might only provide access to stocks and securities within Nigeria. This will however disrupt the model of their business.
What platforms are now regarded as “Exchange?”, the updated definition according to Investopedia defines an exchange as “a marketplace where securities, commodities, derivatives and other financial instruments are traded.
The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments, and other groups a platform from which to sell securities to the investing public.”
In the statement issued by the Commission dated Thursday, April 9, 2021, no specific names of unregistered companies were mentioned.
However, there a significant number of fintech startups in Nigeria that are running the services stated by the Commission.
Popular mentions include Rise, Bamboo, Chaka and Trove.
Rise in response to this directive had tweeted that:
“Hello all, we wanted to send a message out to our users in light of recent news from our regulators! Rise has always made sure that we are in full compliance with all regulatory requirements, and the recent announcement from the Commission is no exception.
We are in touch with all the relevant stakeholders to ensure that we continue to stay on the right side of regulations. Users should rest assured that their investments in Rise are secure, safe and that we will continue to be proactive about safety, regulations and compliance.”
In a blog post, Trove said, “Since the memorandum, we have been liaising with the Commission to get more clarity on the circular.
We are also engaging with top level executives at our local partner brokers. Additionally, we have involved legal professionals to manage the on-going mediation.
From all indications, we anticipate everything would be resolved.”
Following these steps, we await to see the outcome of who comes on top.
Recall that the Commission in February 2021 had stated that it would execute regulations on online investment platforms providing securities to the Nigerian public.
In another similar development, the Central Bank of Nigeria bans Paystack and others in the same space from providing BVN validation services for customers.
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