Financial technology (fintech) firms in Nigeria's financial services sector are on alert as a result of two recent regulatory actions by the Securities and Exchange Commission (SEC) and BVN's "key custodian."
Only international securities published on a Nigerian exchange can be released, exchanged, or offered for sale or subscription to the Nigerian public, according to the SEC. Additionally, the SEC advises capital market players not to collaborate with unregistered web sites.
Major Updates
- SEC implies that investment platforms that have access to international shares could be putting themselves in risk.
- Platforms similar to Robinhood, such as Bamboo, Trove, Chaka, and Rise, have sprung up in Nigeria's fintech room over the last three years.
Below is the details given by the regulator, as seen on its website
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According to Tosin Osibodu, co-founder and CEO of Chaka Technologies, a fintech firm that recently found itself on the receiving end of the SEC's regulatory stick, registering means coming directly under the SEC's purview, not through a third party. Chaka distributes equity through controlled intermediaries such as Citi Investment Capital Limited (CICL) and others that are licensed by the Nigerian Securities and Exchange Commission and other financial regulators.
Chaka was one of the first companies to answer to consumer requests following the latest SEC regulation.
“We are pleased to notify our stakeholders and the general public that Chaka has taken the requisite steps to register with the Securities and Exchange Commission (SEC) for a newly formed license, in keeping with the SEC's stated intention to foster competition in the market space,” Tosin said.
Chaka is not the only organization that allows investors to trade foreign-listed securities on its website. Trove Finance, Risevest, Standard Chartered Bank, Stanbic IBTC Bank, and Bamboo Invest are only a handful of the others.
Additionally, RIMAN and CIBN assess accredited risk managers' responsibilities for an organization's protection.
Additionally, Risevest posted a note on Thursday night assuring investors that it is fully compliant with all regulatory conditions and does not anticipate receiving a clean bill of health in the execution of the new policy.
“We maintain contact with all key parties to ensure that we remain compliant with applicable regulations. Users should be certain that their investments in Rise are protected and stable, and that the business will remain vigilant about protection, laws, and compliance,” the company said.
Trove Finance stated that it has begun communicating with the SEC following the publication of the memorandum in order to provide more clarification on the circular.
“We are still in contact with senior executives at our nearby affiliate brokerage firms. Additionally, we've enlisted the assistance of legal experts to oversee the continuing mediation," Trove said.
Experts continue to pursue clarity on the SEC's interpretation of "only international securities published on any Nigerian exchange can be released, transferred, or available for sale or subscription to the Nigerian public."
Tosin Osibodu, CEO of Trove Finance, told BusinessDay that more clarification is needed. “For a long time, the large finance houses with foreign reach have been selling this to a small group of clients,” he said.
According to Kalu Aja, a personal finance expert, the clause implies that in order to purchase a stock such as Facebook, it must be licensed and listed in Nigeria.
“I don't believe it would happen,” Aja said.
According to Adedeji Olowe, CEO of Trium Limited, the clause implies that Nigerian brokers may only sell shares published on the Nigerian Stock Exchange directly.
“This would not exclude a Nigerian from investing in the US capital market,” Olowe said. However, this ensures that Nigerian brokers would be unable to sell the impacted international stocks.
However, Yomi Adedeji, co-founder of Softcom, asserts that the company compensates Nigeria and Nigerians for foreign listings on the stock exchange in order to curb capital flight and facilitate naira trade. However, the SEC's inability to draw such listings can not be seen as an act of provocation toward innovators.
“A century brought Nestle, Unilever, and others to the exchange and ensured that all Nigerians had equal access to purchase their stock in Nigeria. If global technology, pharmaceutical, and other firms are not included, the SEC and NSE should conduct a self-inspection. Hammers would not work,” Adedeji said.
