The National Assembly has granted the Securities and Exchange Commission (SEC) extensive powers to regulate online forex trading platforms, intermediaries, and other financial market infrastructures in a landmark move aimed at tightening oversight of Nigeria’s capital market.
The legislative action, finalized in the passage of a new bill to replace the Investments and Securities Act, 2007, was hailed as a critical step toward enhancing market transparency, investor protection, and systemic risk management.
A Sweeping Reform for the SEC
The bill, which passed its third reading in the House of Representatives last week, represents a major overhaul of the regulatory framework governing Nigeria’s capital markets. It was first introduced in the Senate and has now been confirmed as law, ensuring that SEC will play a more dominant role in monitoring and regulating online forex platforms.
For the first time, SEC has been explicitly empowered to register and regulate online forex trading activities and platforms. This new responsibility is crucial as the Nigerian forex market has witnessed explosive growth, with many online platforms operating with minimal oversight. Clause 3(o) of the new bill directly grants SEC this authority, reflecting the urgent need for stricter regulation.
In his address on the new powers, a member of the National Assembly stated, “The new law positions SEC as the primary watchdog for online forex platforms. This will ensure that Nigerians are protected from fraudulent or unregulated forex schemes.”
Empowering the SEC for Better Investor Protection
The amended bill also gives SEC the authority to impose penalties on non-compliant entities. Under Section 26(2), directors and promoters of companies violating the law could face jail terms of up to five years, a fine of up to N10 million, or both. This stringent penalty underscores the government’s commitment to curbing illegal activities in the financial sector.
“The penalties are designed not only to deter fraud but also to encourage greater accountability and transparency across the market,” said another lawmaker, who applauded the bill’s passage.
Furthermore, SEC is granted the authority to revoke the certification of any securities exchange that operates outside the scope of its registration. Clause 37(d) of the bill emphasizes that exchanges engaging in unauthorized business activities will face dire consequences, including the revocation of their operating certificate.
Regulating Financial Market Infrastructure
Another key provision of the bill focuses on regulating financial market infrastructures, such as securities exchanges. According to Clause 41, any person or entity looking to establish or operate such infrastructures must obtain SEC certification. Those failing to comply will face severe penalties, including immediate shutdown and financial fines.
“This will help bring order to the market by ensuring that only those who meet SEC’s stringent standards are allowed to operate,” explained a financial analyst familiar with the developments.
Strengthening the Capital Market’s Integrity
As part of the bill’s broader objectives, SEC will now be able to organize training programs, disseminate critical information, and provide guidance for the creation of securities exchanges. This is expected to foster more informed participation in Nigeria’s capital markets and improve overall market efficiency.
“The SEC’s new role as the apex regulatory body for capital markets will not only enhance governance but also ensure that Nigeria’s financial ecosystem remains attractive to investors, both local and international,” said the analyst.
New Provisions on Investment and Securities Regulations
In line with its enhanced powers, the SEC will now have the authority to oversee collective investment schemes, government-backed securities, and approved bodies corporate looking to raise capital. Clause 95(1) of the bill stipulates that only entities meeting specific requirements will be allowed to make public invitations for investment in securities.
This provision ensures that all capital-raising activities are fully regulated, protecting investors from fraudulent schemes and ensuring that only approved entities operate in the market.
