Nigerian Senate Passes Investments And Securities Bill For Third Reading

The Nigerian Senate has passed for third reading, the Investments and Securities ( Repeal and Enactment) Bill 2024.

 

Passage of the bill for third reading by the Senate, followed consideration and adoption of recommendations made to that effect by its Committee on Capital Market, Chaired by Senator Osita Izunaso ( APC Imo West) .

 

The Committee in the report, informed the Senate that the repeal and enactment bill when signed into law , will make the Securities and Exchange Commission (SEC), the apex regulatory authority for the Nigerian Capital Market.

 

Objectives of the proposed law as clearly stated in the bill, are strategically streamlined within the contemplation of emerging global best practices in Investments and Securities by protecting the integrity of the security market against all forms of market abuse and insider dealings , preventing unauthorised, illegal , unlawful, fraudulent and unfair trade practices relating to securities and investments.

 

The report reads : “That the extant law as revolutionary as it was at its inception, after many years of its operation, requires systemic substantial updates to align with the evolving financial markets and regulatory frameworks globally, in order to make it more attractive to both local and foreign investors;

 

‘That the enactment of this proposed legislation will undoubtedly provide significant opportunity to drive the growth of the capital market and diversification, thereby creating a conducive atmosphere for investors in the Nigerian Capital Market.

 

“That the Bill contemplates to address modern forms of financial malpractices and reinforce investors’ protection by engendering robust regulations around market abuses, insider trading and governance standards for publicly traded companies

 

” That the Bill envisages regulatory framework for digital currencies and fintech activities, including the supervision of blockchain and cryptocurrency transactions to support the integration of innovative technologies within the scope of the capital market.

 

“That the Bill seeks to set a clear-cut delineation of roles amongst regulatory bodies in order foster transparency and reduce regulatory overlap, thereby enhancing the operational efficiency of Nigeria’s Securities and Exchange Commission;

 

 

“That the Bill seeks to support the introduction and regulation of diversified financial instruments, including derivatives, Exchange Traded Funds (ETFs) and other sophisticated products, which are essential for meeting the needs of a broad investor base and increasing market depth; and

 

“That the passage of the Bill will bring about diversity and growth in the capital market, through market offerings that would form the foundation for economic expansion, thereby creating job opportunities within the Nigerian Capital Market.”

 

The Senate accordingly after clause by clause consideration of the bill, passed it for third reading .

 

Transform the Capital Market

The Chairman of the Senate Committee on Capital Market, Senator Osita Izunaso said that the bill was capable of transforming the capital market, encouraging the influx of foreign investors as well as boost investors’ confidence, among others.

 

Izunaso 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.

 

He said, “It was meant to establish the Securities and Exchange Commission as the apex regulatory authority for the Nigerian Capital Market. It will be a regulation of the Market to ensure capital formation, the protection of investors, maintenance of a fair, efficient and transparent market, and reduction of systemic risk.”

 

Izunaso further said the main objective of the bill was to enact legislation that aligned with global dynamics as they relate to the regulation of the capital market through the provision of an innovative regulatory framework.

 

“It will protect the integrity of the security market against all forms of market abuse and insider dealing. It will prevent unauthorised, illegal, unlawful, fraudulent and unfair trade practices, relating to securities and investments.”

 

He said that the overriding purpose of the proposed legislation was to strengthen the capacity of the Commission for the effective performance of its statutory mandate as well as reposition that vital sector of the economy for national economic transformation.

 

Eliminate Fraudulent Dealings

The bill, according to the Senate Chief Whip, Tahir Monguno, will protect investors and eliminate fraudulent dealings in the capital market.

 

Before declaring the Bill passed, the President of the Senate, Godswill Akpabio said that a lot of people would be happy to infuse funds into the capital market when they know a lot of the risk has been minimised.

 

The Investments and Securities Bill (ISB) 2024, seeks for harsher penalties on Ponzi scheme operators, mandating a minimum fine of N20 million or up to 10 years in prison, or both.

 

The bill explicitly prohibits Ponzi and pyramid schemes, fortifying protections for investors against illegal fund managers adding that it aims to shield Nigerian investors from fraudulent schemes and enhance the capital market’s global competitiveness.

 

A notable amendment in the Bill would allow the Investor Protection Fund (IPF), established by securities exchanges, to cover investor losses linked to the deregistration of brokerage firms, extending beyond the current coverage of bankruptcy or negligence cases.

 

Meanwhile, the Director General of the SEC, Dr. Emomotimi Agama noted the need for updates to the existing ISB 2007 to reduce ambiguities and align Nigeria’s capital market regulations with international standards.

“This bill’s passage would be pivotal in setting Nigeria on the path to a world-class capital market,” he stated, underscoring the role of a robust capital market in economic diversification.