Capital market regulation receives major boost as Senate passes ISB2023

The nation’s capital market received a major boost Wednesday as the Senate of the Federal Republic of Nigeria passed into law, the Investments and Securities Bill 2023.

The Bill which is expected to aid the functioning of the capital market and facilitate the ongoing economic diversification in the country among others, had been passed by the House of Representatives last December.

During plenary Wednesday, Senate President Ahmad Lawan while announcing the passage of the Bill, stated that, it was expected to protect investors, adequately regulate the market to reduce systemic risks as well as provide for more stringent punishment for operators of Ponzi schemes.

According to him, “The Bill for an Act to repeal the Investments and Securitas Act 2007 Act No. 29 2007 and enact the Investments and Securities Bill 2023 to service the SEC as the apex regulatory authority for the Nigerian capital market as well as regulation of market to ensure capital formation, to protect investors, maintain fair, efficient and transparent market and reduction of systemic risk and for related matters is hereby passed.

Chairman of the House Committee on Capital Markets and Institutions, Hon. Babangida Ibrahim had recently stated that the ISB is capable of transforming the capital market, encourage the influx of foreign investors as well as boost investors’ confidence, among others.

Ibrahim said: “the Bill seeks to repeal the existing Investments and Securities Act 2007 and to establish a new market infrastructure and wide ranging system of regulation of investments and securities businesses in Nigeria especially in the areas of derivatives, systematic risk management, financial market infrastructure and Ponzi scheme and platforms.

“Other areas the bill addresses are alternative trading systems, inclusion of National Pensions Commission as part of the board of the Securities and Exchange Commission, deletion of the provisions on merger control in the current Act and amendment of the criteria of borrowing by sub nationals and strengthening and enforcement powers of the Securities and Exchange Commission in line with the requirement of the International Organisation of Securities Commissions (IOSCO).”

According to him, “We owe a duty to Nigerians and Nigeria to make sure that things work well. In the financial market we have the money market and the capital market.

“With the challenges facing the money market, the only option left is the capital market. What we tried to do is to build investors’ confidence and ensure that investors are comfortable.”

Speaking on some highlights of the major innovations and changes in the Bill, Mr Yuguda disclosed that it expands the categories of issuers as a key step towards the introduction of innovations and offerings such as crowd-funding as well as the facilitation of “commercial and investment business activities”, subject to the approval of the commission and other controls stipulated in the bill.

“The Bill expands the definition of a Collective Investment Scheme to include schemes offered privately to qualified investors. Minor reviews on various Sections of the extant law have been carried to provide greater clarity.

“Importantly, the Bill introduces an express prohibition of Ponzi/Pyramid Schemes and other illegal investment schemes. The bill also prescribes a jail term of not less than 10 years for promoters of such schemes.

“This bill contains an entirely new part which regulates Commodity Exchanges and Warehouse Receipts. These provisions are essential for developing the entire gamut of the Commodities ecosystem,” he stated.

The DG also said that a recommendation is made in the bill for the inclusion of the National Pension Commission (PenCom) on the SEC board for increased collaboration between the two agencies, particularly to encourage greater investment of pension funds and in capital market products/instruments.

Also, according to him, a new part on the management of systemic risk has been introduced, covering the following themes: monitoring, management and mitigation of systemic risk in the Nigerian capital market; arrangements with other regulators relating to information required from entities that are regulated by other regulators; sharing of information between financial sector regulatory authorities or government agencies; and use of a legal entity identifier to provide for proper monitoring of systemic risks.

“Securities Exchanges are now classified into composite exchanges and non-composite exchanges. A composite exchange is one in which all categories of securities and products can be listed and traded. In contrast, a non-composite exchange focuses on a singular type of security or product.

“Furthermore, the duties/responsibilities of Exchanges have been expanded, and the conditions for revocation of registration clearly stated. There are also new provisions on Financial Market Infrastructures such as Central Counter Parties, Clearing Houses, Trade Depositories etc,” he added.