Chaka Technologies, a financial technology platform that enables investors in Nigeria to invest in foreign assets, received an unwanted surprise on Saturday, 19 December 2020 when it saw a message from the Securities and Exchange Commission (SEC) on Twitter that it has been restrained from advertising or offering for sale shares, stock, and other securities.
Tosin Osibodu, founder and CEO of Chaka who spoke to BusinessDay on Sunday, 20 December, said it was the first time it was aware that the SEC was investigating its activities. The commission had kept quiet about the matter until it issued a statement on that Saturday.
“Interestingly, I was just thinking about how we were going to approach the SEC on Friday for another compliance related-issue, only to see the statement on Saturday,” Osibodu said.
The SEC in its statement said the temporary restraining order was granted by the Investments and Securities Tribunal (IST) pursuant to an application by the Securities and Exchange Commission. The application brought by the commission’s solicitor, Chuka Agbu, alleged that Chaka and its partners were engaged in investment activities, including providing a platform for the purchase of shares in foreign companies such as Google, Amazon, and Alibaba. These activities, according to the commission, were being carried out outside the regulatory purview of the commission and without the requisite registration, as stipulated by the Investment and Securities Act 2007.
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“The proceedings came on the heels of the commission’s avowed intention to encourage innovation within the market space, whilst also ensuring that all market activities are brought within the regulatory purview and conducted within the ambit of the law and extant regulations. The commission is concerned that without proper regulation, the genuine aspirations of market innovators and investors could be subverted through the activities of unscrupulous actors who would try to exploit the growing popularity of fintech investment options, to the detriment of the investing public,” the SEC said in its statement.
In many matured markets, statements like this from the SEC would easily frighten investors. Chaka was not exempted as investors took to the company’s Twitter timeline to ask whether their investments were safe.
“Regulation is one of the biggest challenges for the tech sector,” Odun Eweniyi, co-founder of a fintech company, PiggyVest said at a conference in 2019. “With a new fintech opening in Nigeria every month, the need for lawyers to help navigate the risks for tech clients has never been greater.”
In a statement it released to address the SEC’s position, Chaka assured investors of the safety of their investments as they are facilitated through Citi Investment Capital who is SEC-compliant.
Moreover, Osibodu said Chaka is only a technology company providing a platform for registered brokers in the US and in Nigeria, specifically Citi Investment Capital.
“Our position is well stated on the platform,” Osibodu.
It noted that since it began operations in 2019, it has displayed transparency about its regulatory status, leveraging strategic partnerships with registered brokers in the US and in Nigeria, specifically Citi Investment Capital.
“Since we began our journey in 2019, we have been transparent about our regulatory status, leveraging strategic partnerships with registered brokers in the U.S and in Nigeria, specifically Citi Investment Capital Ltd, which is regulated by the SEC. Our commitment to investor education, trust, and transparency remain a top priority,” Osibodu said in the statement.
The SEC has in recent times moved to regulate players in the fintech space. Aside from fintech firms like Chaka, the commission has also released regulatory documents on Crowdfunding platforms and cryptocurrency exchanges operating in Nigeria.
This, it says, is part of measures to encourage innovation within the market space, whilst also ensuring that all market activities are brought within the regulatory purview and conducted within the ambit of the law and extant regulations.
