SEC Tags Investment Platforms Illegal, Cautions CMOs To Withdraw Support

Nigeria’s Securities and Exchange Commission (SEC) has issued a statement warning capital market operators against supporting "unregistered" investment tech platforms providing foreign securities.

The SEC in a circular released late Thursday declared 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.”

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The regulatory body also went ahead to warn the public on the proliferation of unregistered online investment and trading platforms facilitating access to trading in securities listed in foreign markets. It advised the investing public to seek clarification as may be required via its established channels of communication on investment products.

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Over the past three years, Robinhood-like platforms like Bamboo, Trove, Chaka, and Risevest have sprung forth in the Nigerian fintech space. They offer Nigerians access to stocks, bonds, and other securities in both local and international markets. These platforms have grown in popularity among the middle class and provide a haven to protect earnings from naira devaluations. The investment platforms have worked with local and foreign brokerage firms to provide the services, in a way sidestepping the difficult task of obtaining SEC approval.

However, in December last year, the SEC published a surprising memo that stated that Chaka would be restricted from offering stocks to the public.

What this inherently means from now on is that investment platforms will have their work cut out and might only offer individuals access to only local stocks and securities. This affects the business models of these startups. And the core value they provide, which is to help Nigerians store monetary value and hedge against naira devaluation, is at the threat of being wiped out.