Last week, on the 8th of April, Nigeria’s Securities and Exchange Commission (SEC) released a directive instructing online investment platforms to quit trading foreign securities not registered in the country, while being themselves unregistered. Capital market operators who collaborate with these platforms have also been told to put an end to such partnerships.
What are these platforms about?
Online investment and trading platforms like Bamboo, Chaka and Trove, offer Nigerians access to foreign securities, particularly in the USA. These platforms enable anyone to purchase stocks and bonds at affordable rates. They have become quite popular as a secondary means of income at a time when the Naira is constantly plummetting in value.
What are the implications of this directive?
From the SEC’s statement, it appears that the dealings of online investment platforms like Bamboo, Chaka and so on, are not recognized by Nigerian law. As of now there are no regulations specifically guiding the activities of these platforms. Before the directive, most of them partnered up with capital market operators who are fully in compliance with all SEC regulations. However, in light of these recent developments, these online investment platforms will have to get their own license from the SEC before they can operate in the country.
Platforms like Bamboo have been in operation for a few years now and in all this time, the commission has only once drafted regulations for them, which never saw completion. With this new directive, these investment platforms will either have to sell only local stocks or pursue a means of being ratified by the commission. The former option will mean deviating from their intended business goals and the reason for their popularity. Therefore, the latter option is more appealing, if they are to keep their business model up.
Is there a solution to this?
Earlier this year, the SEC singled out Chaka for selling and advertising securities outside its authority. After this dilemma, Chaka announced last month that steps had been taken to procure a license. Also, Risevest, another online investment platform, came out to say that they’re already compliant with the SEC’s regulations. However, none of these platforms divulged how they were going about this.
Furthermore, the SEC hasn’t publicly announced requirements or how these platforms can operate legally. We would like to believe that this would be remedied very soon. The SEC should work with these startups to create regulations that work for both parties, and which would be beneficial to Nigerians. Regardless, all online investment platforms will have to follow in the footsteps of Chaka and Risevest by complying with the new regulations.
What can we expect afterwards?
Most likely, other trading platforms will be able to get a license and the SEC would make official regulations. However, it’s what follows that one can’t be sure of. Once these platforms are registered under the SEC, they are compelled to follow its regulations, whatever it may be. Hopefully, this is not the beginning of a plan to disable Nigerians access to foreign stocks, just like the Crypto currency ban.