Why Nigerian fintech industry is strictly regulated – SEC
In the past few months, the Nigerian financial technology (FinTech) industry was constantly in the news, not just for the huge investments it attracted from foreign investors but for the several circulars, guidelines, regulation announcements that were thrown at it by regulators.
While in the process of digesting one regulation, the industry players said another policy was thrown at them and was closely followed by another, a development that made many perceive the regulators as stifling Fintech innovations.
However, the Securities and Exchange Commission (SEC), one of the major regulators of the technology-driven industry, says the quest to create a balance between protecting investors and developing the market is the sole reason it has been coming up with the many regulations.
“It is naturally a critical space that we find ourselves in trying to create a balance between innovations and protecting the interest of investors,” Emomotimi Agama, deputy director and head of registration, exchanges, market infrastructure & innovation department, SEC, said.
Speaking on whether the regulator stifles Fintech innovation in the process of carrying out its responsibility as a regulator, the director said “we can beat our chest as a regulator and say we are about the most innovative in the space of regulating the Fintech industry.”
“The point about the restriction of innovation is a misstatement from the uninformed because a number of persons that have really been burnt by the actions of “innovators” is so huge that you would rather do what you need to do to ensure that such doesn’t repeat itself. This, you do, by introducing regulation even though it is construed the other way,” Agama said during a panel discussion with the regulators at the 12th annual pan-Africa investor conference by Renaissance Capital on Thursday.
According to him, the most significant role of the SEC in the Fintech industry is that of investor protection.
“So, all we do at SEC is try and fulfil that responsibility that we have been provided to do by Section 13 of the ISA and we try to do this faithfully. But in doing that do we shuffle innovation? No, we don’t.
However, it is better for you to ask questions than do what is wrong and later come and ask for a relief. We are not such regulators; if you violate the rules and regulations as well as the Investors and Securities Act 2007, the full weight of the law will come upon you.
Before even attempting to violate, why don’t you come and ask the SEC if what you want to do can be done. What are the things you need to do and if there are licences regarding the business I want to be involved in.
Most times, young people do not actually read beyond what they have learnt, so they do not know,” he said.
While regulation is important for industry growth, industry players say when it is not well implemented in terms of the measures adopted, the timing and lack of proper engagement with industry players, it can be seen as stifling innovation and development.
Some of the recent regulations by SEC include the introduction of Sub-Broker/Sub-Broker Serving Multiple Brokers licence of tech investment companies, the proposed New Rule on Robo-Advisory Services, Regulatory Incubation programme, cryptocurrency and among others.
The industry regulator on April 22, 2021, released amendments on its regulation of the tech investment companies.
Less than a month after SEC stated that only foreign securities listed on any Exchange registered in Nigeria may be issued, sold, or offered for sale or subscription to the Nigerian public, the regulator instructed investment tech companies to apply for a licence to be able to offer their services of connecting Nigerian investors with foreign investment opportunities.
In a statement on digital assets and their classification dated September 11, 2020 SEC stated that unless proven otherwise, crypto assets are deemed as securities that fall within its regulatory purview as provided for in Section 13 of the Investments and Securities Act 2007.
But after CBN banned crypto transactions in Nigeria, saying the unregulated and anonymous nature of the virtual currencies made them susceptible to abuse by criminals.
SEC in a press statement issued February 11, 2021 on crypto currencies stated that there is no policy conflict between SEC and CBN over the ban placed on crypto currency transactions in the banking industry.