The Securities and Exchange Commission (SEC) has announced that fintech companies in Nigeria with crowdfunding platforms have to register and comply with its terms before June 30 or stop operating if they are unable to meet the requirements.
This also applies to those with digital commodities investment platforms like Piggyvest, Trove, Chaka and other entities rendering similar services. According to the SEC, the regulations came into effect on the 21st of January and were supposed to be complied with within 90 days. All of the fintechs are also expected to apply for registration within the specified time period.
For crowdfunding companies, part of the SEC regulations says that only an MSME incorporated in Nigeria with a minimum operating track record of two years can raise funds through a crowdfunding portal operated by a registered crowdfunding intermediary.
This means that startups like Thrive Agric must have a microfinance license in order to carry on with crowdfunding projects. In Piggyvest’s case, it already has a microfinance license, hence, its ‘Investify’ crowdfunding platform already complies with this part of the regulation.
When crowdfunding fintechs meet this rule, they have to consider the fundraising limit next. Medium enterprises are not allowed to raise more than ₦100 million on each platform, while the limit for small enterprises is set at ₦70 million. Micro-enterprises can only raise a maximum of ₦50 million.
There is a subset of companies known as commodities investment platforms (CIPs). These ones connect investors to specific agricultural or commodities projects so that they can sponsor such projects in exchange for a return. CIPs include Thrive Agric, Eat Rich Farms and others.
The CIPs do not have a limit on what can be raised, however, they all have to be registered with the SEC and provide quarterly returns report in order to protect the investor’s interest.
A minimum paid-up capital of N100 million is also required for companies to operate in any of these two areas. As such, there may be mergers between two or more of the companies if each one can not singly provide the minimum capital base. The merger will allow parties to pool the required amount together in order to continue operating as one.
Companies that fail to fully comply before June 30 will be deemed illegal in the country. A copy of the rules can be found here. The regulatory body said, “such platforms would be categorized as illegal and attract regulatory sanctions as stipulated in the Rules.”
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