Investment App Chaka Becomes First To Receive SEC's Digital Stock Trading License

Chaka technologies limited has become the first fintech to receive Nigeria’s Securities and Exchange Commission (SEC) license for digital stock trading.

The SEC's Sub-Broker Serving Multiple Brokers Through a Digital Platform License will enable Chaka to offer stocks directly to Nigerian investors. The license also lets the company work with multiple stockbrokers and help digitize their services.

Earlier this year, the Securities and Exchange Commission of Nigeria issued a circular directing Investment Technology platforms such as Chaka to cease offering foreign stocks to Nigerians.

An excerpt from the circular stated that “… only foreign securities listed on any Exchange registered in Nigeria have the permission to engage in any form of transaction with the Nigerian public.”

This development had led Chaka to take steps in registering for the “newly created license” with the Securities Exchange Commission of Nigeria (SEC).

Tosin Osibodu, the startup’s CEO, said on Wednesday that the acquisition took “a tremendous amount of effort” and is the fruit of frequent engagement with the capital markets regulator.

On the 19th of December 2020, the SEC published a statement that effectively barred Chaka from offering its services in Nigeria. SEC’s complaint was that Chaka operated “outside the regulatory purview of the Commission and without requisite registration, as stipulated by the Investment and Securities Act 2007.”

SEC ordered Chaka to stop advertising to users, justifying it as a need to prevent “unscrupulous actors” from harming the investing public. Though the order was particular to Chaka, it was the first major signal that regulation was coming to the investment-tech sector.

Tosin Osibodu, CEO of Chaka, reveals that the company has been actively engaging the SEC since the circular was first released in December 2020. 

Osibodu reveals that the new digital sub-broker license would change its investment operations structure as it would no longer need to operate through a broker. 

“We now have direct oversight from the SEC. So the customer is aware that all the funds and his entire account are supervised directly by the SEC,” he reveals. 

Though the SEC has not published a specific regulatory framework for the Digital Sub-broker license, an April 2021 amendment to the SEC rule indicates that the regulator now fully recognizes the presence of investment-tech platforms. 

According to the SEC, the ‘’Sub-broker Serving Multiple Brokers Through a Digital Platform’’ uses a digital platform to serve clients and interact with the sponsoring broker or brokers.

Until now, Chaka’s operations were based on a partnership with Citi Investment Capital Ltd, a Lagos-based broker licensed by the SEC. An official license now places the startup directly under SEC’s supervision.