The Securities and Exchange Commission (SEC) recently issued a statement concerning several providers of online investment and trading platforms that purportedly facilitate the direct access of the investing public in the federal republic of Nigeria to securities of foreign companies listed on Securities Exchanges registered in other jurisdictions. It was also stated that these companies often claim to work with duly registered Capital Market Operators (CMOs). 

The SEC directive stems from its role as a regulator in a bid to protect the Nigerian investing public. Most potential investors currently seek out these investments as alternative stores of value and their perceived ability to hedge against inflation. The SEC has a very clear position concerning the sale of foreign equities in Nigeria- “only foreign securities listed on any exchange registered in Nigeria may be issued, sold or offered for sale and subscription to the Nigerian public”. This is summed up by provisions 67-70 of the Investment act 2007 and rules 414 &415 of the SEC Rules and Regulations.

By extension, this notice also warns CMOs to desist from working with companies that contravene this core tenet of the SEC. 

Implications for fintechs and end-users

As much as the directives may hinder certain advancements within the sector, the companies involved can make use of this time to seek the relevant approvals and pursue proper registration with the SEC. The position of the SEC is to regulate the operation of capital market organizations, and as such exercise the right to enforcement of its policies. However, innovation does not have to suffer on the altar of regulation and that is where the role of compliance and stakeholder alliances comes into play. 

The SEC needs to develop a framework that guides the activities of fintech companies currently in contravention of these laws, with a view to removing grey and blurry areas of regulations which will allow for the introduction of fresh players in the sector. 

While end-users and fintech companies have been advised to seek clarification from the SEC via its official channels, the companies affected have also begun to seek the required approvals and clarification surrounding their operations. 

Regulation and its impact on the sector

The SEC is doing what it believes to be the best way of protecting the Nigerian population from bad actors in the capital market space. In fact, the SEC’s current position could be amended to allow Nigerians take advantage of the changing global financial Landscape. As much as the agency seeks to safeguard Nigerians, it is important for there to be a viable framework guiding the operations of fintech companies. 

Also, the Central Bank of Nigeria (CBN) established a regulatory sandbox providing developers with access to tools. The SEC can consider adopting one for capital market operations. 

As much as the SEC aims to protect the Nigerian investing public, it is also vital that it is able to adapt to changes brought about by advances in technology while ensuring that Nigerians remain ahead of the curve. At the end of the day, fintech companies are positioned to solve hard problems using technology that can greatly improve customers’ access to essential services.

By Ogodilieze Osaji-Ugo