SEC Foreign Securities Trading Circular in Nigeria By Ibrahim Moshood
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.
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.
Ibrahim Moshood is an Associate, Centurion Law Group