Why Nigeria’s SEC Issued a strong Warning to Fintech Startups Bamboo, Trove, Rise and Chaka

Nigeria’s Securities and Exchange Commission (SEC) has issued a strongly-worded circular to “unregistered” fintech and investment platforms that specialise in offering Nigerians the opportunity to trade in foreign securities.

The circular, which was obtained by Business Elites Africa, explained that Nigeria’s Investment and Securities Act prohibits the trading of foreign securities to Nigerians, except such securities are listed on a securities exchange that is duly registered in Nigeria.

To this end, the Securities and Exchange Commission warned all Nigerian fintech startups that are currently facilitating the sale of foreign securities to Nigerians to immediately desist from such. In the same vein, capital market operators that facilitate such “illegal” transactions were also warned to stop.

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The implication of this, therefore, is that the Nigerian fintech startups that currently help Nigerians to buy foreign stocks are either not registered at all or do not qualify to be regarded as a registered “Securities Exchange”. Note that an Exchange “is a marketplace where securities, commodities, derivatives and other financial instruments are traded,” according to Investopedia.

“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 purportedly facilitate 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. These platforms also claim to be operating in partnership with Capital Market operators (CMOs) registered with the Commission.

“The Commission categorically states that by the provisions of Sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations, only foreign securities listed on any Exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public. Accordingly, CMOs who work in concert with the referenced online platforms are hereby notified of the Commission’s position and advised to desist henceforth,” the circular said in part.

Note that even though the Securities and Exchange Commission did not mention the companies by name, a growing number of fintech startups in the country are currently rendering this service. Good examples include the likes of Bamboo, Trove, Rise and Chaka. Some of these companies have reassured investors of the safety of their assets.

We are in touch with all the relevant stakeholders to ensure that we continue to stay on the right side of regulations. Users should rest assured that their investments in Rise are secure, safe and that we will continue to be proactive about safety, regulations and compliance.

— Rise 🚀 (@Risevest) April 8, 2021

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