The Security and Exchange Commission (SEC) has published guidelines for its Regulatory Incubation (RI) program for fintechs looking to operate in the Nigerian capital market.
According to a statement released by the commission, the RI program will be launched in the third quarter of 2021 and will operate by admitting identified fintech business models and processes in cohorts for a one-year period.
Fintech startups applying to the RI program are expected to complete an Initial Assessment Phase where the regulator determines whether the proposed innovation is eligible for further consideration.
Eligibility criteria for fintechs
Startups seeking to undertake the RI program should be businesses leveraging innovative technology to offer a new type of product or service, or applying innovative fintech to an existing product or service.
It is necessary to state that the startup’s operations must lie within the scope of the activities that the SEC regulates.
Section38 (1) of the Investment and Securities Act (ISA) prohibits any expert or professional from carrying out any activity in the Capital Market except it is registered by SEC.
Participating startups also cannot conduct any other investment business except that which is presented to the commission. Applicants are required to complete the RI fintech initial assessment form.
Among other criteria, mandatory processing fee for applications is N200,000.
Enabling or stifling innovation?
Unsurprisingly, the SEC says that its RI program supports the evolution of effective regulation that accommodates innovation by fintechs without compromising market integrity.
But is that really the case?
The N200,000 processing fee requirement for the RI program alone might actually deter investment tech startups from applying to participate. The fee is one-fifth of N1 million, yet there is no certainty that these startups will even be selected into the program in the end.
Also factor in the precedent set by the SEC in recent times. Without prior warning, the commission recently issued a directive ordering investment fintechs to register by June 30 or cease operations.
In an earlier move, the regulator had also clamped down on fintech startup Chaka, then later relayed a warning to other investment tech companies offering foreign stocks.
Nigeria’s financial regulatory space is one many fintech startups are rather wary of than confident about. Taking all this into account, the RI program may be more about monitoring innovation than enabling it.
However, it remains to be seen how this plays out going forward.
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