From Cryptos to Ponzi Schemes: What to Know About Nigeria’s New Capital Market Law
The Nigerian capital market has a new law following President Bola Tinubu’s assent to the Investments and Securities Act (ISA) 2024, which repeals the
The Nigerian capital market has a new law following President Bola Tinubu’s assent to the Investments and Securities Act (ISA) 2024, which repeals the Investments and Securities Act No. 29 of 2007.
Key highlights of the ISA 2024:
The Act enhances the regulatory powers of the SEC in a manner comparable with benchmark global securities regulators. These enhanced powers and functions ensure full conformity with the requirements of IOSCO’s Enhanced Multilateral Memorandum of Understanding (EMMoU), enabling the SEC retain its “Signatory A” status and enhancing the overall attractiveness of the Nigerian capital market.
Other notable provisions of the ISA 2024 include:
- Classification of Exchanges and inclusion of provisions on Financial Market Infrastructures- The Act classifies Securities Exchanges into Composite and Non-composite Exchanges. A Composite Exchange is one in which all categories of securities and products can be listed and traded, while a Non-composite Exchange focuses on a singular type of security or product. There are also new provisions on Financial Market Infrastructures such as Central Counter Parties, Clearing Houses and Trade Depositories.
- Expansion of the definition and Understanding of Securities – The Act explicitly recognises virtual/digital assets and investment contracts as securities and brings Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs) and Digital Asset Exchanges under the SEC’s regulatory purview.
- Comprehensive Insolvency Provisions for Financial Market Infrastructures – The Act introduces provisions that exempt transactions facilitated through or otherwise involving Financial Market Infrastructures from the application of general insolvency laws.
- Management of Systemic Risk – The Act introduces provisions for the monitoring, management and mitigation of systemic risk in the Nigerian capital market.
- Expansion of the Category of Issuers to the Public– The Act expands the categories of issuers, as a key step towards the introduction of a wide range of innovative products and offerings as well as the facilitation of “commercial and investment business activities”, subject to the approval of the Commission and other controls stipulated in the Act.
- Legal Framework for Commodities Exchanges – The Act contains a new Part which provides for the regulation of Commodities Exchanges and Warehouse Receipts. These provisions are essential to allow for the development of the entire gamut of the Commodities ecosystem.
- Issuance of Securities by Sub-Nationals and their Agencies- Salient provisions of the Act address existing restrictions in respect of raising of funds from the capital market by Sub-Nationals to allow for greater flexibility in this regard.
- Transparency in Securities Transactions – The Act introduces the mandatory use of Legal Entity Identifiers (LEIs) by participants in capital market transactions. This stipulation is designed to improve transparency in the conduct of securities transactions.
- Enforcement Against Illegal Investment Schemes – The Act expressly prohibits Ponzi Schemes and other unlawful investment schemes, while prescribing stringent jail terms and other sanctions for the promoters of such schemes.
- Strengthening the Investments and Securities Tribunal- The Act amends some key provisions in the repealed ISA 2007 pertaining to the Composition of the Tribunal, constitution of the Tribunal, qualification and appointment of the Chief Registrar as well as the jurisdiction of the Tribunal to enhance the ability of the Tribunal to optimally discharge its mandate.
