Imminent Changes to Nigeria’s Investments and Securities Law

The ISB is intended to modernise the country’s capital market regulatory framework by repealing the current Investments and Securities Act 2007 and paving the way for a more robust regulatory system that aligns with present-day realities. The bill contains several provisions designed to strengthen the regulatory environment and promote a transparent capital market. A highlight of some of these provisions is outlined below.

Key Provisions

1. Merger Control for Public Companies
   The ISB provides that no public company shall undertake a scheme, transaction, arrangement, or issue securities in relation to corporate actions and restructurings without the prior approval of the Securities and Exchange Commission (the “SEC”).This provision adds statutory backing to underpin the SEC’s merger control prerogative over public companies in Nigeria, supplementing the provisions of the Federal Competition and Consumer Protection Act 2018.
2. Investor Protection and Fraud Prevention
   The ISB expressly empowers the SEC with the ability to impose strict penalties on Ponzi scheme operators and other prohibited schemes, with fines starting at NGN 5 million and prison terms of up to 10 years, or both.[1]The proposed law also expands the scope of the Investor Protection Fund (IPF) to cover losses that arise from the revocation or cancellation of a brokerage firm’s license.[2]
3. Enhancement of Regulatory Framework for Financial Market Infrastructures
   The ISB reorders and reorganises the regulatory framework pertaining to financial market infrastructures and sets out elaborate provisions relating to the resolution of these entities in the event of insolvency. It also sets out provisions designed to mitigate financial market risks.[3]The proposed law also strengthens the commodities ecosystem by providing a system that allows trading warehouse receipts and commodities contracts.
4. Recognition of Virtual Assets as Securities
   The definition of securities under the ISB now includes virtual assets. Similarly, virtual assets are recognised as assets that can be traded on a securities exchange.This amendment aligns with the government’s resolve to implement regulatory controls over virtual assets rather than the previous prohibitive stance that was in place.
5. Systemic Risk Management
   The ISB includes provisions that enhance SEC’s ability to take measures to monitor and mitigate systemic risk in the capital markets. These powers include the suspension of trading on all or specific assets on a securities exchange.

Conclusion
The ISB marks a transformative milestone for Nigeria’s capital markets. By addressing systemic risks, embracing technological innovation, and enhancing investor protection, the bill is set to enhance Nigeria’s capital market framework.

The ISB is expected to become law in 2025.

[1] Sections 146 (2) and 195 (3) of the ISB.

[2] Section 197 of the ISB.

[3] Section 41 of the ISB.

Should you have any questions about this article do not hesitate to contact Ajibola Asolo or Bukola Akinsulere.

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Contributors
Chidozie Chikwe – Associate