Key Highlights
- The bill is expected to protect investors, adequately regulate the market to reduce systemic risks as well as provide for more stringent punishment for operators of Ponzi schemes.
- The ISB 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.
- It ensures the inclusion of the National Pension Commission (PenCom) on the SEC board for increased collaboration between the two agencies, particularly to encourage greater investment of pension funds.
The Senate of the Federal Republic of Nigeria has passed into law, the Investments and Securities Bill (ISB) 2023.
The bill was passed during the plenary of the Senate Wednesday according to a statement obtained from the Securities and Exchange Commission.
Investors’ protection
Senate President Ahmad Lawan while announcing the passage of the Bill, stated that it is expected to protect investors, adequately regulate the market to reduce systemic risks as well as provide for more stringent punishment for operators of Ponzi schemes. He said:
- “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 the 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”.
Market transformation
Chairman of the House Committee on Capital Markets and Institutions, Hon. Babangida Ibrahim recently stated that the ISB is capable of transforming the capital market, encouraging the influx of foreign investors as well as boosting investors’ confidence, among others.
- Ibrahim said: “the Bill seeks to repeal the existing Investments and Securities Act 2007 and to establish a new market infrastructure and wide-ranging system of regulation of investments and securities businesses in Nigeria, especially in the areas of derivatives, systematic risk management, financial market infrastructure and Ponzi scheme and platforms.
- “Other areas the bill addresses are alternative trading systems, the inclusion of the National Pensions Commission as part of the board of the Securities and Exchange Commission, deletion of the provisions on merger control in the current Act and amendment of the criteria of borrowing by sub nationals and strengthening and enforcement powers of the Securities and Exchange Commission in line with the requirement of the International Organisation of Securities Commissions (IOSCO).”
- According to him, “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.”
Bill expands the categories of issuers
Speaking on some highlights of the major innovations and changes in the Bill, Mr Yuguda Lamido, DG SEC disclosed that it 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.
- “The Bill expands the definition of a Collective Investment Scheme to include schemes offered privately to qualified investors. Minor reviews on various Sections of the extant law have been carried out to provide greater clarity.
- “Importantly, the Bill introduces an express prohibition of Ponzi/Pyramid Schemes and other illegal investment schemes. The bill also prescribes a jail term of not less than 10 years for promoters of such schemes.
- “This bill contains an entirely new part which regulates Commodity Exchanges and Warehouse Receipts. These provisions are essential for developing the entire gamut of the Commodities ecosystem,” he stated.
Inclusion of PenCon on the SEC board
The DG also said that a recommendation is made in the bill for the inclusion of the National Pension Commission (PenCom) on the SEC board for increased collaboration between the two agencies, particularly to encourage greater investment of pension funds and capital market products/instruments.
Also, according to him, a new part on the management of systemic risk has been introduced, covering the following themes: 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/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, Trade Depositories etc,” he added.
What you should know
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.
The Bill seeks to repeal the ISA and introduced new provisions that empower the SEC to collaborate with other regulatory bodies in the financial sector to manage and mitigate systemic risks as it confers new investigative and enforcement powers on the apex regulator, SEC, to effectively regulate the Nigerian capital market.
It introduces the framework for the regulation of new products including financial and commodities derivatives and financial market infrastructures, which are expected to lead to increased activities, and thus, deepen the Nigerian capital market.
