SEC directive puts fintech firms on edge

Companies in the financial technology (fintech) segment of Nigeria’s financial services industry are on edge over two new regulatory moves by the Securities and Exchange Commission (SEC) and “primary custodian” of BVN.

According to the SEC, only foreign securities listed on any exchange registered in Nigeria may be issued, sold, or offered for sale or subscription to the Nigerian public. Also, capital market operators who work in concert with unregistered online platforms are advised by the SEC to desist.

The Circular from the Securities and Exchange Commission

Registering means being directly under SEC’s purview not just via another party, according to Tosin Osibodu, co-founder and CEO, Chaka Technologies, a fintech company that recently found itself on the short end of SEC’s regulatory stick. Chaka offers equities through regulated parties like Citi Investment Capital Limited (CICL) and others who are licenced by the Nigerian SEC and other financial regulators.

Chaka was among the first to respond to inquiries by its customers in the wake of the new SEC policy.

“We are pleased to inform our stakeholders and the general public that Chaka has taken the necessary steps to register with the Securities and Exchange Commission (SEC) for a newly created licence, as SEC continues to maintain its avowed intention to encourage innovation within the market space,” Tosin said.

Chaka is not the only company that offers investors on its platform foreign-listed stocks. The others are Trove Finance, Risevest, Standard Chartered Bank, Stanbic IBTC Bank, Bamboo Invest to mention a few.

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Risevest also posted a message on Thursday night assuring investors that it is in full compliance with all regulatory requirements, and is not expecting to be among those given a clean bill of health in the implementation of the latest policy.

“We are in touch with all the relevant stakeholders to ensure that we continue to stay on the right side of regulations. Users should rest assured that their investments in Rise are secure, safe and that we will continue to be proactive about safety, regulations, and compliance,” the company said.

Trove Finance said it has started engaging with SEC since the memorandum was released to get more clarity on the circular.

“We are also engaging with top-level executives at our local partner brokers. Additionally, we have involved legal professionals to manage the ongoing mediation,” Trove said.

Experts are still seeking clarification of what the SEC meant by “only foreign securities listed on any exchange registered in Nigeria may be issued, sold or offered for sale or subscription to the Nigerian public.”

Like Trove Finance, Tosin Osibodu told BusinessDay more clarity is needed.

“The big finance houses with international presence have been offering this for a while just to select clients,” he said.

Kalu Aja a personal finance specialist said the SEC is implying by the provision that to buy a stock like Facebook, it has to be registered and listed in Nigeria.

“I don’t see that happening,” Aja said.

Adedeji Olowe, CEO of Trium Limited said the provision means that only securities listed on the Nigerian Stock Exchange can be sold directly by Nigerian brokers.

“It doesn’t mean that a Nigerian can’t buy stock in the US market,” Olowe said. However, it also means Nigerian brokers cannot sell the affected foreign stocks.

But Yomi Adedeji, co-founder of Softcom says it pays Nigeria and Nigerians to have global listings on its stock exchange to reduce capital flight and enable more naira trading. However, SEC’s failure to attract such listings should not become transferred aggression to innovators.

“A generation attracted Nestle, Unilever, and others to the exchange and provided equitable access for all Nigerians to buy their stock in Nigeria. If global tech, pharma, and other companies are not listing, then SEC and NSE should check themselves. Hammers won’t make it work,” Adedeji said.

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