Reactions as Nigeria’s SEC Announces Regulation Preventing Fintech Companies from Selling Foreign Stocks

Nigeria’s Securities and Exchange Commission (SEC) has issued a statement warning unregistered investment tech platforms against providing foreign securities.

According to the SEC, “only foreign securities listed on any exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public.”

This announcement comes at a time when many Nigerians are investing in US dollar stocks to avoid the pitfalls of the Naira’s weakening exchange rate. Dollar-denominated assets are more appealing to investors as a better alternative for storing wealth.

SEC statement
SEC statement

In the wake of SEC’s warning, prominent US dollar stock trading platforms such as Risevest, Bamboo and Trove have reassured users that their investments are secure.

Similarly, Bamboo sent an email to users stating, “We are aware of the recently released SEC circular about trading in foreign markets. First off, we want to assure you that your assets on Bamboo remain safe and easily accessible to you.

We are already in discussions with the SEC and our broker partner and are fully committed to working with them to ensure your interests as our users are fully protected.”

SEC Regulations on the Way

The SEC’s recent dispute with Chaka had perhaps hinted at plans to introduce robust regulations for investment tech platforms offering foreign stocks. The capital markets regulator clamped down on Chaka’s operations, subsequently forcing the startup to register with the commission for a newly created license.

HOW TO BUY STOCKS - Ghana Talks Business
Foreign stock trading is gaining traction in Nigeria

Going forward, the SEC could make it mandatory for other investment tech platforms to secure this licence before they can continue operations.

For Nigerian investments, these stock trading platforms work with registered Capital Market Operators (CMOs) such as Lambeth Capital and Sigma Securities Limited. However, the SEC’s stance effectively invalidates these partnerships.

While the likes of Risevest and Bamboo are duly registered with the Corporate Affairs Commission, there are no records to show that they are directly registered with the SEC.

Risevest offers foreign securities to Nigerians

Rule 415 of the SEC Rules and Regulations, 2013 states: “Every foreign issuer of securities is required to file an application for registration of its securities with the Commission, accompanied by a draft prospectus and under such conditions as prescribed by the Commission.”

But 416 grants exemption from compliance with the registration requirements under certain conditions including if the issuer’s country is a member of the International Organization of Securities Commissions (IOSCO).

The United States is a member of IOSCO and this might explain why startups like Risevest offering US dollar stocks remain unregistered with the SEC.

That said, it remains to be seen how this plays out in the coming weeks.

Featured Image Credit: Decentralize Africa


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