Nigeria’s SEC warns on the proliferation of unregistered online financial platforms

The Nigerian Securities and Exchange Commission SEC has warned of the proliferation of unregistered online investment and trading platforms that facilitate access to securities trading listed in foreign markets, as stated in a circular to Capital Market Operators by the management of the Commission on Thursday.

“The attention of the SEC has been drawn to 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,” the circular read. “The platforms also claim to be operating in partnership with capital market operators (CMOs) registered with the Commission.”

The SEC said that according to Sections 67-70 of the Investments and Securities Act (ISA) 2007 and Rules 414 & 415 of the SEC Rules and Regulations, only registered foreign securities listed on any exchange in Nigeria may be issued, sold, or offered for sale or subscription to the investing public in Nigeria.

All CMOs that work in collaboration with referenced online platforms as listed by the Commission have been notified to cut off from them. The SEC urged the investing public to make further inquiries via its official channels of communication either online or conventional mediums, for clarification.

“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,” the circular added.

The evolution of the financial markets in Nigeria has seen an upsurge since the coronavirus pandemic. As more businesses go digital, online services and businesses have been in high demand. For many Nigerians, this means accepting or processing payments online – this is expanded be beyond doing jobs online to earn money to trading securities online.

A 2020 Proshareng.com report revealed that the outbreak of Covid-19 caused a high demand in remote businesses. They also stated that “the fixed income securities market is the largest and possibly the most attractive segment of financial trades.”

With more support and investment from foreign funding companies targeted in the fintech sector, more Nigerian startups have emerged in the past few months. The fintech industry, alongside many online stockbroking companies, has noted that this digital evolution has made service delivery less stressful, creating a more market-friendly environment for them. While this is exciting, these platforms must have a risk-protection strategy or technique to ensure that amateur investors can purchase financial assets with a proper understanding of the risks involved.

Financial markets can be profitable as well as brutal at the same time, as such, CMOs are now using artificial intelligence (AI) to profile investors to provide investment advice to them.

Online financial and trading platforms are beginning to put brick-and-mortar financial institutions under pressure as more Nigerians opt for these online platforms, escaping the government strictness associated with conventional financial institutions.