- Some big-name investment technology platforms that allow Nigerians to invest and trade in stocks listed on the Nigerian and foreign stock exchanges have been declared illegal by the Federal Government.
- A circular issued on April 8 2021, by the Nigerian Securities and Exchange Commission warned unregistered investment tech platforms against providing foreign securities.
- Chaka, Trove, Bamboo, and Risevest are among the investment tech platforms required to secure a license before continuing operations.
What’s the issue?
The Securities and Exchange Commission (SEC) on Thursday issued a directive on the “proliferation of unregistered online investment and trading platforms” in the country, declaring that only foreign securities listed on any Exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public.
In other words, foreign stocks such as Microsoft, Tesla, Amazon, Netflix, which are currently not listed within Nigerian jurisdiction, should not be offered to Nigeria-based residents and businesses.
Why did SEC ban investment technology platforms from offering foreign stocks to Nigerians?
The SEC is using its jurisdiction to remind participants and investors that only approved securities can be sold to the Nigerian public.
Sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations, states that only foreign securities listed on any Exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public.
In the circular issued, the SEC added that “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.”
According to Techcabal, the SEC’s action is within its powers, and in fact, these rules show that the investment-tech model of offering foreign stock to Nigerians is illegal. But this is hardly an indictment of these startups; it’s instead a reflection of how fast innovation moves.
Critics also say that the new directive by the SEC is because of the surging shares of big tech companies such as Amazon, Microsoft, Apple, Netflix and Google-parent Alphabet that have all led the market higher in recent weeks. Young Nigerians have been leveraging these new investment tech service providers to help diversify their portfolios, and with as little as $5, anyone can get in on the action happening outside the Nigerian Stock Exchange.
Who would be affected?
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