The Securities and Exchange Commission (SEC) is the Nigerian Government regulatory agency responsible for registering and regulating the activities of the participants in the Nigerian capital market.
Established by the Investments and Securities Act 2007 (“the ISA 2007”), the Securities and Exchange Commission is the Apex regulator of the Nigerian Capital Market and is charged broadly with the regulation and development of the market.
Historical Context
The Commission originates from the ad hoc, non-statutory Capital Issues Committee established in 1962 as an arm of the Central Bank of Nigeria. The committee became the Security Exchange Commission in 1977, and then the Securities and Exchange Commission was chartered with SEC Decree No.
With market capitalization of N4.46 billion in 1980, by the end of 1997 the Nigerian securities market had a market capitalization of N281.8 billion. During the first half of the 2000s, the Central Bank of Nigeria instituted reforms that led to a reduction in the number of banks but a great increase in their size.
In September 2010 it was reported that the SEC was considering converting the stock exchange to a private company rather than a mutually owned enterprise.
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Legal Framework
On March 25, 2025, the Investment and Securities Act 2025 (“the Act”) came into effect, repealing the Investments and Securities Act, No. 29 of 2007, and establishing the Securities and Exchange Commission (“the Commission”) as the apex regulatory authority for the Nigerian capital market.
Sections 1 to 2 of the Act established the Commission as an independent body corporate with perpetual succession and a common seal. It may sue and be sued in its corporate name. It shall have the power to acquire, hold, or dispose of any property, movable or immovable, and to perform any of its functions under the Act.
The Act recognises the Commission as the apex regulatory authority for the Nigerian capital market and shall perform the functions and exercise all the powers prescribed in the Act.
Objectives of the Commission
Before considering the functions and powers of the Commission, it must be noted that the Commission has what could be considered as six objectives contained in Section 3(2) of the Act, but absent in the repealed 2007 Act. These objectives are different from the preambles of the 2007 Act and the 2025 Act.
Functions of the Commission
The functions of the Commission as contained in the Act can be classified into four, namely supervision, regulation, registration, and advisory.
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The Commission, according to section 3(3)(a) of the Act, shall regulate investments and securities business in Nigeria as defined in the Act.
The 2025 Act abridged the 30 (Section 13(a) to (dd)) functions of the Commission in the 2007 Act into 20 (Section 3(3)(a) to (t)) functions.
In section 3(3)(c) to (o) and (q), the Commission has expanded functions of supervision, registration and regulation of securities of public companies; register, securities offered to the public as defined in this Act; corporate and individual capital market operators as defined in the Act; workings of collective investment schemes and such other schemes as may be approved by the Commission; credit enhancement services in the capital market; securities depository companies, clearing and settlement companies, custodians of assets and securities, collateral managers, credit rating agencies, virtual asset service providers, digital asset operators, credit enhancement facility providers, and such other agencies and intermediaries as may be approved by the Commission; derivative products and the derivatives market; operations of the National Savings Scheme or any other similar scheme as may be established; self-regulatory organisations, and capital market trade associations to which it may delegate its powers; collateral management companies, warehouse operators and warehouses which issue warehouse receipt concerning commodities to be traded on a registered exchange.
The Act in Section 3(3)(e), (p), and (r) to (t) allows the commission to render assistance as may be deemed necessary to promoters and investors wishing to establish securities exchanges. It is to register, review, and approve takeovers and all forms of business combinations and affected transactions of public companies.
It is to review and approve takeovers and all forms of business combinations and affected transactions of public companies. Prevent and sanction unauthorised and illegal dealing in securities and investment schemes.
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The enactment of the Act with expanded functions of the Commission is a great step towards bringing investment and securities to a global standard, present realities, and demands, and creating an assured environment for stakeholders, local and international.
Powers of the Commission
The Act gives the Commission the power to intervene in the management and control of capital market operators, public companies and regulated entities that it considers to have acted in a manner detrimental to the interest of its investors and shareholders, to have committed grave corporate governance violations, or to have failed, to be failing, or to be in crisis, including entering the premises and doing whatsoever it deems necessary in the interest of the public and for the protection of investors.
Regulatory Activities Flowing from the provisions of Section 13 of the ISA 2007, the general regulatory activities of the Commission may be summarized under the following headings:
- Registration
- Monitoring
- Investigation
- Enforcement
- Rule Making
Market Regulation
The Nigerian SEC exercises supervisory functions which includes inspection, surveillance and investigation of the activities of licensees to ensure that they comply with the requirements of the applicable laws, guidelines and regulations regulating their operations in the Nigerian capital market.
The licenses issued by the SEC allows the licensed persons and companies to operate in the Nigerian capital market. Failure to obtain necessary licenses before operating in the Nigerian capital market is a sanctionable offence.
Registration
At SEC Nigeria, individuals and institutions seeking entry into the market are meticulously assessed. Whether it's securities, exchanges, futures, options, or more, the bar for market participation is set, ensuring only fit and proper entities join the fray.
Inspection
Transparency and accountability are at the heart of SEC Nigeria's mission. To maintain market integrity, regular information calls, inquiries, and comprehensive audits of market participants are conducted. These rigorous inspections serve as a cornerstone of trust in the financial ecosystem.
Surveillance
To maintain a level playing field, vigilant surveillance is maintained over exchanges and trading systems. By doing so, potential breaches of market rules are thwarted and manipulative practices detected. This ensures a fair and orderly marketplace.
Investigation
When the integrity of the market is called into question, a dedicated investigative arm springs into action, diving deep into alleged breaches of market laws and regulations. When required, sanctions are enforced to uphold the rule of law.
Enforcement Actions
At SEC Nigeria, there is no room for compromise when it comes to market integrity. Actions are swiftly taken against market operators found in breach. These actions may include fines, bans, suspensions, or legal proceedings. These robust enforcement measures are the bedrock of trust and confidence in the market.
Rule Making
In an ever-evolving financial landscape, SEC Nigeria remains adaptable, continually aligning regulations with international best practices, ensuring the market remains competitive and attuned to global standards.
Licenses Obtainable from the Nigerian Securities and Exchange Commission
Some of the licenses or registration that may be obtained from the SEC to operate in the Nigerian capital market include the following:
- Broker/Dealer: A licensed broker is allowed to engage in the sale and purchase of securities on a recognized securities exchange on behalf of its clients. A dealer on the other hand is allowed to engage in the sale and purchase of securities on his own account. That is, the transactions are done for its own purposes. It is however possible to obtain registration with the SEC to act as a broker-dealer.
- Sub-broker: A sub-broker is allowed to engage in the purchasing and sale of securities, receiving and making payments to clients in any sale and purchase of securities transactions through its sponsoring broker/dealer. Qualified individuals or corporate entities may be registered by the SEC as sub-brokers. It is important to note that SEC can also register a sub-broker to provide its services digitally provided it meets the requirements of operating as a digital sub-broker in Nigeria. Thus, a sub-broker registration is separate and distinct from a digital sub-broker registration.
- Market maker: A registered market maker is a specialist in designated securities that engages in the buying and selling of securities for its own account on a regular or continuous basis. A market maker facilitates smooth trading atmosphere and serve as a source of information for the designated securities. Only corporate entities are eligible to be registered as a market maker in Nigeria.
- Issuing Houses: They are registered by the SEC to provide financial advisory services for schemes and the issuance of securities, act as agents of issuers and prepare the registration statement, prospectus, scheme document and any other relevant transaction documents. It is important to note that only corporate entities are eligible to apply for registration as an issuing house. Copies of the corporate documents are made available to the SEC in the course of applying for registration in addition to other documents required.
- Fund/Portfolio Managers: These are corporate entities registered to provide investment advisory services, select securities for the fund/portfolio and manage the funds and portfolios on behalf of investors. They are required to keep and maintain the records of their activities as fund/portfolio managers upon registration with SEC.
- Investment Adviser: Qualified individuals and corporate entities may apply to the SEC for registration as investment advisers. The capital and other requirements for registration as an individual investment adviser are usually not the same with that of a corporate investment adviser. An investment adviser generally provides investment advisory services including recommending the securities to buy or not to buy. However, investment advisers are not allowed to manage investors’ funds.
- Registrar: Registrars provide the services of maintaining the registers of members of a company and unit holders of collective investment schemes, issuing debenture, share and bond certificates, distributing rights circulars and public offer documents, verifying the authenticity of share certificates, etc. To provide these services, an applicant which must be a Nigerian company must apply to be licensed as such by SEC upon meeting the registration requirements.
- Trustees: The license to provide services as a trustee is only open to corporate entities registered with the Nigerian Corporate Affairs Commission (CAC). Trustees are licensed to provide the services of monitoring the activities of fund manager and custodians in the interest of unit holders and fund contributors, ascertaining and ensuring compliance with applicable laws, executing documents necessary to secure acquisitions or disposals made by a fund manager, holding and administering sinking funds, protecting the interest of investors and lenders in debt instruments, etc.
Cryptocurrency, Virtual and Digital Assets Registration and Licensing in Nigeria
The SEC Rules on Issuance, Offering Platforms and Custody of Digital Assets 2022 regulates the registration and licensing of virtual and digital assets service providers. The registrations that may be obtained under the SEC Rules are as follows:
- Digital Asset Offering Platforms (DAOPs): A DAOP license allows the holder to deploy electronic platform for offering digital assets in Nigeria. An applicant of a DAOP license is required to be a Nigerian company registered with the CAC. A DAOP usually works with a Digital Assets Custodian (DAC) in its offering of digital assets through electronic platform as the DAC usually have custody of the digital assets.
- Digital Assets Custodians (DACs): A DAC license allows the holder to provide the services of seakeeping, storing, holding or maintain custody of virtual assets or digital tokens for the account of another person. The applicant must be a corporate body registered by the CAC.
- Virtual Assets Service Providers (VASPs): VASPs are corporate entities licensed to conduct one or more of the following activities for or on behalf of another person:
- Exchange between virtual assets and fiat currencies;
- Exchange between one or more forms of virtual assets;
- Transfer of virtual assets’ Safekeeping and /or administration of virtual assets or instruments enabling control over virtual assets;
- Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.
- Digital Asset Exchange (DAXs): This license allows the holder to operate an electronic platform which facilitates the trading of virtual or digital assets. The applicant of a DAX license is also required to be a corporate entity registered with the CAC.
The Nigerian Securities and Exchange Commission (SEC) regulates and issues licenses to players in the capital market and virtual and digital asset (cryptocurrency) business in Nigeria. Every applicant of a licence from SEC is expected to comply and meet the requirements for obtaining the specific license. It is also important to note that the requirements for licensing is not the same for all the categories of licenses that may be obtained from SEC. Operating in Nigeria without being registered/licensed by SEC is a sanctionable offence.
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