In a circular issued by the Nigerian capital markets regulator, the SEC, investment platforms providing access to foreign securities could operate on dangerous grounds. According to the new SEC regulations, these platforms trade in foreign securities not registered in the country and have been warned not to do so anymore. Capital market operators, in partnership with them, have also been warned to stop providing such services.
Over the past three years, Robinhood-like platforms like Bamboo, Trove, Chaka and Rise have sprung up in the Nigerian fintech space. They offer Nigerians access to stocks, bonds and other securities in local and international markets. These platforms have developed among the middle class and have grown in popularity, providing a safe haven to protect profits from naira devaluations.
That said, there is a big difference in how they operate compared to Robinhood. In addition to being a trading app, Robinhood offers online brokers (introduction and clearing) as well as commission-free transactions. Nigerian investment platforms don’t, and it can be a Herculean task to get a brokerage license from the SEC. This is where capital market operators (local and foreign brokerage firms in this case) come in, forming strategic partnerships with these firms so that Nigerians can access fractions of both local and foreign securities. .
Last year, the SEC singled out Chaka, one of the platforms accused of selling and advertising shares. The definition of the alleged infringement by the regulator was that Chaka “engaged in investment activities, including providing a platform for the purchase of shares in foreign companies such as Google, Amazon and Alibaba,” outside the regulatory competence of the Commission and without registration required. “
Company CEO Tosin Osibodu has denied any wrongdoing. And since the start of the year, the SEC and Chaka haven’t heard much about this issue until today’s circular was released. Unsurprisingly, the regulator continued where it left off, but this time around all investment platforms, including brokerage firms – not just Chaka – are involved. The SEC’s subtle directive is to stop selling, issuing or offering for sale foreign securities not listed on a stock exchange registered in Nigeria.
Here is the information published by the regulator as seen on its website:
The attention of the Securities and Exchange Commission (the Commission) has been drawn to the existence of several providers of online investment and trading platforms which purport to facilitate direct access of the investing public in the Federal Republic of Nigeria to the securities. foreign companies listed in securities. Scholarships registered in other jurisdictions. These platforms also claim to work in partnership with capital market operators (CMOs) registered with the Commission.
The Commission categorically states that, in accordance with the provisions of Articles 67-70 of the Investment and Securities Act (ISA), 2007 and Rules 414 and 415 of the SEC Rules and Regulations, only foreign securities listed on a Stock exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public. As a result, CMOs who work together with the referenced online platforms are informed of the Commission’s position and are invited to abstain from now on.
The Commission urges the investing public to seek clarification, where appropriate, through its established communication channels on investment products advertised on conventional media or online.
This is a developing story. More soon…