By Aduragbemi Omiyale
The Securities and Exchange Commission (SEC) has explained that its decision to bar licenced capital market operators (CMOs) from offering support to online investment platforms trading foreign stocks in Nigeria was mainly to prevent exploitation.
An executive commissioner for operations of the SEC, Mr Dayo Obisan, made this clarification to Bloomberg in an interview.
Last month, the agency said it was aware of “the existence of several providers of online investment and trading platforms which purportedly facilitate direct access of the investing public in the Federal Republic of Nigeria to securities of foreign companies listed on Securities Exchanges registered in other jurisdictions.
“These platforms also claim to be operating in partnership with Capital Market operators (CMOs) registered with the commission.
“The commission categorically states that by the provisions of Sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations, only foreign securities listed on any Exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public.
“Accordingly, CMOs who work in concert with the referenced online platforms are hereby notified of the commission’s position and advised to desist henceforth.
“The commission enjoins the investing public to seek clarification as may be required via its established channels of communication on investment products advertised through conventional or online mediums.”
In the interview with Bloomberg, Mr Obisan said the agency became worried about “an increasing interest among the younger population” in foreign stocks trading, which can create “an avenue for exploitation.”
According to him, at least 400,000 Nigerians poured funds into foreign stocks through online brokers in the past 18 months and trading or holding foreign equities now exceeds those investing in local collective investment schemes or mutual funds.
However, he disclosed that SEC is planning to “actively monitor the local market in foreign stocks in furtherance of our mandate of ensuring investor protection and market transparency.”
Online investment and trading platforms like Bamboo, Chaka, Trove, amongst others would be licensed to trade foreign stocks in Nigeria under the “digital sub-broker” regulations, which would provide a form of legitimacy for their activities.
The requirement will ensure “that regulatory responsibilities in on-boarding clients, custody of assets, and compliance with reporting requirements are met,” according to Mr Obisan.
