In a circular released by Nigeria’s capital market regulator SEC right this moment, funding platforms offering entry to international securities is perhaps treading on harmful grounds.
In keeping with the SEC laws which have simply been dropped at mild, these platforms are buying and selling international securities not registered within the nation and have been warned to cease doing so. Capital market operators in partnership with them have additionally been warned to renege on offering brokerage providers for international securities.
Over the previous three years, Robinhood-esque platforms like Bamboo, Trove, Chaka and Rise have sprung forth within the Nigerian fintech house. They provide Nigerians entry to shares, bonds and different securities in each native and worldwide markets. These platforms have grown in recognition among the many center class and supply a haven to guard earnings from naira devaluations.
That mentioned, there’s an unlimited distinction in how they function when in comparison with Robinhood. Along with being a buying and selling app, Robinhood presents on-line brokerages (introducing and clearing) and likewise zero fee buying and selling. Nigerian funding platforms don’t, and whereas any buying and selling platform can get a brokerage license within the U.S., it may be a Herculean process to acquire one in Nigeria. That is the place capital market operators (native and international brokerage companies on this case) come into play, forming strategic partnerships with these corporations so Nigerians can entry each native and international fractional securities.
After a sequence of regulatory onslaught from completely different authorities our bodies on tech startups final 12 months, the SEC adopted swimsuit in December. It singled out Chaka, one of many platforms and accused it of promoting and promoting shares. The regulator’s definition of the alleged offence was that Chaka “engaged in funding actions, together with offering a platform for buying shares in international corporations equivalent to Google, Amazon, and Alibaba, outdoors the Fee’s regulatory purview and with out requisite registration.”
The corporate’s CEO, Tosin Osibodu, denied any wrongdoing, and for the reason that flip of the 12 months, not a lot has been heard from the SEC and Chaka concerning this matter till the discharge of right this moment’s round. Unsurprisingly, the regulator continued from the place it left off, solely this time, all investment platforms together with brokerage companies — not simply Chaka — are concerned. SEC’s delicate directive is to cease promoting, issuing or providing on the market any international securities not listed on any change registered in Nigeria.
What this inherently means any longer is that funding platforms may have their work lower out and would possibly solely provide people entry to solely native shares and securities. This impacts the enterprise fashions of those startups. And the core worth they supply, which is to assist Nigerians retailer financial worth and hedge towards naira devaluation is at the specter of being worn out.
Right here’s the knowledge launched by the regulator as seen on its website:
The eye of the Securities and Trade Fee (the Fee) has been drawn to the existence of a number of suppliers of on-line funding and buying and selling platforms which purportedly facilitate direct entry of the investing public within the Federal Republic of Nigeria to securities of international corporations listed on Securities Exchanges registered in different jurisdictions. These platforms additionally declare to be working in partnership with Capital Market operators (CMOs) registered with the Fee.
The Fee categorically states that by the provisions of Sections 67-70 of the Investments and Securities Act (ISA), 2007 and Guidelines 414 & 415 of the SEC Guidelines and Laws, solely international securities listed on any Trade registered in Nigeria could also be issued, offered or supplied on the market or subscription to the Nigerian public. Accordingly, CMOs who work in live performance with the referenced on-line platforms are hereby notified of the Fee’s place and suggested to desist henceforth.
The Fee enjoins the investing public to hunt clarification as could also be required through its established channels of communication on funding merchandise marketed via standard or on-line mediums.
It is a creating story. Extra to comply with…