SEC clamps down on firms dealing in illegal foreign investments – Capital market regulator Securities and Exchange Commission (SEC) yesterday warned willing investors against patronising unregistered online investment and trading platforms, which boast of facilitating access to securities, listed in foreign markets.
In a circular yesterday, the Commission noted the proliferation of such unregistered online platforms, which are contrary to Nigerian capital market rules, luring Nigerians into securities listed in foreign markets.
According to the circular, SEC has noted the existence of several providers of online investment and trading platforms which purportedly facilitate direct access of the investing public in Nigeria to securities of foreign companies listed on securities exchanges registered in other jurisdictions.
The commission stated that these unregistered platforms also claim to be operating in partnership with capital market operators (CMOs) registered with the Commission, warning such CMOs to desist henceforth.
SEC stated that by the provisions of Sections 67-70 of the Investments and Securities Act (ISA), 2007 and Rules 414 & 415 of the SEC Rules and Regulations, 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 Commission enjoins the investing public to seek clarification as may be required via its established channels of communication on investment products advertised through conventional or online mediums,” SEC circular stated.
The latest circular came on the heels of recent efforts by SEC to strengthen issuance process and protect investors from bogus offers.
SEC recently introduced a major amendment to disclosures and information to be included in a prospectus for any public offering as part of efforts to further safeguard the investing public from false claims and bogus offerings.
With the new amendment, companies offering equities or debt issues to the general public will have to include SEC’s contact telephone number and email address conspicuously in the introductory part of the prospectus in order for interested members of the investing public to confirm the veracity of the offer.
According to the regulator, the introduction of the confirmation segment was part of efforts to enhance investor protection and promote transparency in the operations of the Nigerian capital market.
SEC noted that issuers should display prominently in the introductory part of the prospectus that “investors may confirm the clearance of the prospectus and registration of the securities” with the Commission through provided email and telephone numbers. The new requirement took effect on June 18, 2020.
“The investing public is encouraged to utilise the contact information provided in a prospectus to contact the Securities and Exchange Commission where they require information regarding the clearance of a prospectus or registration of securities,” SEC stated.
The new requirement came on the heels of enforcement of a new investors’ identification regime also aimed at enhancing transparency in the capital market and forestall the recurring incidence of unclaimed dividend.
On April 1, the local market began a new identification regime under which no transactions shall be effected on any existing investor’s account without updated and validated information as required under the approved know-your-customer (KYC) format for the market. Any stockbroking firm that trades on any such incomplete account shall be sanctioned.
SEC had directed stockbrokers to capture full information in respect of new clients and update information of their existing clients. The required information include bank account details, bank verification number (BVN), telephone number and email address.
“Such information should be validated against the Nigerian Interbank Settlement Systems Limited (NIBSS) BVN validation portal. Brokers should update their Order Management System to enable the system flag off accounts with incomplete KYC information,” the SEC stated.
According to the Commission, the clearing house for the stock market, the Central Securities Clearing System (CSCS) should an editable format of lists clients with incomplete records to stockbrokers for them to update and return such to CSCS.
The apex regulator mandated the CSCS to ensure transmission of full information to the registrars following transactions while registrars must ensure that new or updated shareholders information transmitted to them are properly captured in the relevant company’s register of members.
“The relevant capital market operators are hereby advised to note that monitoring and enforcement of strict compliance with the foregoing will commence on April 1, 2020,” SEC stated.
SEC noted that the new enforcement regime was in furtherance of its investor protection and market development mandate with a view to ensuring ensure accountability, transparency and stability in the capital market.
The Commission stated that the new regime is aimed at forestalling, reducing and eventually eliminating the incidence of unclaimed dividend and to ensure that investors receive the benefits accruing to their investments immediately without any stress.