In a circular issued today by the Nigerian capital markets regulator SEC, investment platforms providing access to foreign securities could prove dangerous.
According to the SEC regulations that have just been updated, 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 brokerage services for foreign securities.
Over the past three years, Robinhood-like platforms like Bamboo, Trove, Chaka and Rise have sprung up in the Nigerian fintech space. They provide Nigerians with access to stocks, bonds and other securities in local and international markets. These platforms have gained popularity among the middle class and provide 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 do not, and while any trading platform can get a brokerage license in the United States, it can be a Herculean task to get one in Nigeria. 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. .
After a series of regulatory attacks by various government agencies against tech startups last year, the SEC followed suit in December. He singled out Chaka, one of the platforms, and accused him of selling and advertising stocks. The definition of the alleged infringement by the regulator was that Chaka “was engaged in investment activities, including providing a platform to buy shares in foreign companies such as Google, Amazon and Alibaba, outside of 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 the matter until the release of today’s circular. hui. 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.
What this inherently means from here on out is that investment platforms will have their work cut out for them and may only offer individuals access to local stocks and securities. This affects the business models of these startups. And the core value they provide, which is to help Nigerians store their monetary value and guard against the devaluation of the naira, is in danger of being wiped out.
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 allegedly facilitate direct access by the investing public in the Federal Republic of Nigeria to 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…