Making sense of Nigeria SEC’s stance on online investment platforms

by | Apr 9, 2021

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Good day,

Múyìwá here.

Nigeria’s Security and Exchanges Commission (SEC) published a memo yesterday, affirming that it is illegal for ‘unregistered’ online investment platforms (OIPs) to sell foreign stock to Nigerians. 

You may recall that late last year, Chaka was singled out and restricted from selling or (debatably) advertising stocks. The motive, according to SEC, was to protect innovators like Chaka from bad actors who could exploit their platform for unscrupulous activities. Now, the regulator is extending the restriction to similar platforms like Trove, Bamboo and Risevest.

What is confusing is that these platforms already operate via partnerships with licensed (local and international) intermediaries. Chaka, for example offers Nigerian stocks via Citi Investment Capital Limited, a SEC-licensed wholesale brokerage firm. For US stocks, while not mentioned on Chaka’s website, a likely partner is popular API-driven brokerage, DriveWealth, which is not under the jurisdiction of Nigeria’s SEC.

However, SEC insists that “only foreign securities listed on any Exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public”. In essence, because they are registered Nigerian companies, and hence fall under SEC’s jurisdiction, local OIPs cannot sell shares from foreign stock exchanges, even if they offer them via US-based brokerage firms. 

It’s all quite confusing but SEC could inadvertently force OIPs to relocate abroad to continue selling foreign stock. 

But maybe don’t panic yet. While SEC’s new memo fails to acknowledge it, the regulator appears to have provided a reasonable middle ground. A recent post, dated March 26, by Chaka CEO, Tosin Osibodu alludes to a newly created SEC license that encourages innovation. 

If Osibodu’s post is anything to go by, Chaka, having had the ironic advantage of being singled out in December, is apparently the only OIP that has obtained the license.

Bamboo CEO, Richmond Bassey, in an assuring email to users yesterday, wrote that the company is “already in discussions with the SEC and our broker partner and are fully committed to working with them to ensure your interests as our users are fully protected. So if you invested via any of these apps, your funds are most likely safe.

Meanwhile, Emmanuel Paul has some interesting alternative insights on the SEC ruling. Read here.

What else is going on?

  • Paymob raises $18.5m in largest Series A for an Egyptian fintech.
  • Why do a bunch of Nigerian Twitter influencers want this alleged money launderer to go free? They’re being paid.
  • Facebook ran ads for a fake ‘Clubhouse for PC’ app planted with malware. Read.
  • Visa appoints Maurice Newa as new country manager for Southern Africa. Read.
  • US-based Muslim advocacy group sues Facebook over claims it removes hate speech. Read.

Have a great weekend!

Múyìwá Mátùlúkò for Techpoint Africa.

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