•Boost for commodities trading, crowdfunding, others
The Investment and Securities Bill (ISB), which was passed by the Senate last week, stipulates a minimum jail sentence of 10 years for operators of Ponzi schemes and other illegal, unapproved investment schemes.
The Bill contains a categorical prohibition of Ponzi schemes, illegal investment schemes and other bogus offerings aimed at luring people into unapproved fund or investment management.
The prohibition clause and the stipulation of specific punishment, which are newly included in the body of capital market law, provide the proposed law with a stronger enforcement basis to tackle Ponzi schemes and other bogus offerings.
The ISB, upon harmonisation and assent by President Muhammadu Buhari, is s expected to replace the Investment and Securities Act (ISA) and become the main body of law for the capital market. It will be the operative legal framework for the Securities and Exchange Commission (SEC), the apex capital market regulator.
The draft law passed by the Senate also contains new sections on regulation of commodities exchanges, warehouse receipts and other important processes necessary to the development of Nigeria’s nascent commodities trading ecosystem.
Besides, there are several provisions on innovative finances including crowdfunding, private investments and derivatives among others, which are expected to widen the scope and depth of the capital market and bring it at par with global trends in capital formation and distribution.
The proposed law also strengthen the enforcement powers of SEC in line with the requirement of the International Organisation of Securities Commissions (IOSCO)”
The Bill, which is expected to aid the functioning of the capital market and facilitate the ongoing economic diversification in the country among others, had been passed by the House of Representatives last December.
Senate President, Ahmad Lawan, said the proposed law would further protect investors while adequately regulating the market to reduce systemic risks.
“The Bill for an Act to repeal the Investments and Securitas Act 2007 Act No. 29 2007 and enact the Investments and Securities Bill 2023 to service the SEC as the apex regulatory authority for the Nigerian capital market as well as regulation of market to ensure capital formation, to protect investors, maintain fair, efficient and transparent market and reduction of systemic risk and for related matters is hereby passed,” Lawan had said.
Chairman, House of representatives’ Committee on Capital Markets and Institutions, Hon. Babangida Ibrahim had earlier noted that the ISB was capable of transforming the capital market, encourage the influx of foreign investors as well as boost investors’ confidence, among others.
He outlined that the Bill addressed new areas like alternative trading systems, inclusion of National Pensions Commission (Pencom) as part of the board of the SEC, deletion of the provisions on merger control in the current Act and amendment of the criteria of borrowing by sub-nationals.
“We owe a duty to Nigerians and Nigeria to make sure that things work well. In the financial market we have the money market and the capital market. With the challenges facing the money market, the only option left is the capital market. What we tried to do is to build investors’ confidence and ensure that investors are comfortable,” Ibrahim said.
Director-General, SEC, Mr. Lamido Yuguda, who provided additional insights into the Bill, said the proposed law also expands the categories of issuers as a key step towards the introduction of innovations and offerings such as crowd-funding as well as the facilitation of “commercial and investment business activities”, subject to the approval of the Commission and other controls stipulated in the bill.
According to him, the bill expands the definition of a collective investment scheme to include schemes offered privately to qualified investors while minor reviews on various Sections of the law were done to provide greater clarity.
He pointed out that the inclusion of the PenCom on the board of SEC would foster increased collaboration between the two agencies, with a view to encouraging greater investment of pension funds in capital market products and instruments.
He outlined that a new part on the management of systemic risk has been introduced, covering themes such as monitoring, management and mitigation of systemic risk in the Nigerian capital market; arrangements with other regulators relating to information required from entities that are regulated by other regulators; sharing of information between financial sector regulatory authorities or government agencies; and use of a legal entity identifier to provide for proper monitoring of systemic risks.
“Securities Exchanges are now classified into composite exchanges and non-composite exchanges. A composite exchange is one in which all categories of securities and products can be listed and traded. In contrast, a non-composite exchange focuses on a singular type of security or product.
“Furthermore, the duties and responsibilities of Exchanges have been expanded, and the conditions for revocation of registration clearly stated. There are also new provisions on financial market infrastructures such as central counter parties, clearing houses and trade depositories among others,” Yuguda said.
Meanwhile, SEC is prosecuting a firm and its promoters for alleged N2 billion Ponzi scheme.
Justice Inyang Ekpo of the Federal High Court, Court 7, Abuja has set May 4, this year for the commencement of trial of Ovaioza Farm Produce Storage Business Limited along with ImuYunusa and Goodness Omeiza on allegations of operating as fund managers without registration by the SEC.
The SEC had in March, last year sealed up the 27, Abeokuta Street, Garki, Abuja office of the company on suspicions of illegally collecting from the public N2 billion while not registered with the Commission.
In the five-count charge brought against the company and its promoters by the Federal Government, they were alleged to have between 2020 and last year within the jurisdiction of the court committed a felony to wit: with the intent conspired among themselves with their staff to do an illegal act – to lure and offer for subscription an unregistered investment scheme valued at over N2 billion to the unsuspecting public.