May 24, 2021
OVERVIEW OF THE SEC REGULATIONS ON MICRO-INVESTMENT TECH AND DIGITAL SUB-BROKER PLATFORMS
By Akorede Folarin (Associate)
INTRODUCTION
The increasing popularity and adoption of digital micro-investment Fintech platforms like Chaka, Bamboo, Trove, etc. had been under threat of being proscribed but the recent regulatory amendments by the Securities and Exchange Commission (SEC) has given them a new lease of life.
On April 8 2021, the Securities and Exchange Commission (SEC) issued a statement titled: “Proliferation of Unregistered Online Investment and Trading Platforms Facilitating Access to Trading in Securities Listed in Foreign Markets” by which it effectively proscribed the activities of micro-investment fintech companies like Risevest, Bamboo, Trove, etc. which facilitate access to trading in foreign securities to Nigerian investors for being outside of its regulatory purview and in violation of the applicable laws and regulations in Nigeria.
In the same statement, the SEC warned the investing public to be wary of the proliferation of these platforms and enjoined the capital market operators (CMOs) purportedly operating in partnership with these platforms to desist henceforth. This came on the heels of the Commission earlier obtaining from the Investment and Securities Tribunal (IST) interim orders suspending Chaka from carrying out investment activities outside the regulatory purview of the Commission and without requisite registration.
However, on 22 April 2021, the SEC, in a commendable turn of events, amended its Consolidated Rules and Regulation (“the Amendments”) to make provisions for the incorporation of the activities of these digital micro-investment tech platforms, especially with regards to the definition of sub-broker, the keeping of the records of transactions with clients, and the introduction of a risk management regime for these platforms.
