LAGOS, Nigeria, April 13, 2021/ -- By Ibrahim Moshood, Associate, Centurion Law Group (https://CenturionLG.com)
The
apex regulator of securities in Nigeria, the Securities and Exchange
Commission (“SEC”) has issued a circular, with respect to technology
investment platforms providing the Nigerian public with access to
foreign securities. The circular dated 8 April 2021, issues a strong
warning to these investment platforms and Capital Market Operators
(“CMOs”) in partnership with them to provide brokerage services. Both
categories of players in the financial space were warned to desist from
providing the Nigerian public, with access to foreign securities. This
is pivoted on the grounds that these securities are neither registered
with the SEC nor listed on the Nigerian Stock Exchange (“NSE”).
From
2018, technology start-ups have pioneered major disruptions of the
financial space in Nigeria. These disruptions have been lauded by
Nigerians, particularly at a time when there has been a persistent
devaluation of the Naira. Savvy and upwardly mobile Nigerians have then
opted to use these technology platforms, to save in foreign currencies
and also purchase foreign stocks that are being offered. Some of these
technology investment platforms include Trove, RiseVest, Chaka and
Bamboo etc. They typically partner with CMOs in Nigeria for their
expertise and already-procured brokerage licence.
As a
background, recall that in December 2019, the SEC had published a
statement to notify the Nigerian public of its interim orders to
restrain an investment platform called Chaka Technologies Limited
(“Chaka”). This order came about as a result of the advertisement and
sale of foreign securities of companies such as Google, Alibaba,
Facebook, Tesla etc. in Nigeria by Chaka. The SEC had informed the
Investment Securities Tribunal (“IST”) that Chaka had offered securities
for sale “outside the regulatory purview of the Commission and
without requisite registration as stipulated by the Investment and
Securities Act (“ISA”).
Chaka responded to the allegations
above by releasing a press statement, denying the wrongdoing entirely.
However, in March, Chaka announced that it had obtained a newly created
licence from the SEC which allows it to offer the services above i.e.
advertising and sale of foreign securities to the Nigerian public.
Notwithstanding
the development above, the SEC had kept quiet for months on this issue
until this recent circular, which Nigerians have reacted to as a
deliberate attempt to stifle innovation by the regulators, create a
multiple licensing regime, an inordinate drive for revenue and a shoddy
attempt at stabilizing exchange rate of the Naira.
Currently, two major questions should be addressed by the SEC.
- Is the sale of foreign securities by these platforms prohibited in Nigeria?
- Is
there a licence issued by the SEC or some other regulatory agency that
would allow these investment platforms carry on the business of selling
foreign securities in Nigeria?
Hopefully,
the SEC will release a more informative circular or press statement
clarifying what investment firms should do to continue offering these
foreign securities. In the meantime, investors and investment firms
alike are enjoined to consult professionals for more clarity.
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