The Securities and Exchange Commission (SEC) remains Nigeria’s apex regulatory body overseeing the capital market. With the enactment of the Investment and Securities Act (ISA) 2025 on March 31, 2025, by President Bola Ahmed Tinubu, the regulatory framework governing Nigeria’s investment and capital markets has been thoroughly modernized. This legislation repeals the ISA 2007 and introduces comprehensive reforms designed to reflect global best practices, encourage innovation, improve investor protection, and strengthen regulatory oversight across the board.
This Act marks a transformative shift in the Nigerian capital market as it officially recognizes developments that have taken place in the Capital Market over the past 18 years. Among other significant changes, the ISA 2025 notably gives the SEC more regulatory powers and oversight over capital market operators and ensures compliance with the new provisons of the law.
Expansion of SEC’s Powers
One of the most consequential reforms in the ISA 2025 is the significant expansion of the powers of the SEC. These enhanced powers are aimed at boosting transparency, accountability, and investor protection.
Mergers and Acquisitions: The SEC is now the primary authority responsible for approving mergers and acquisitions involving public companies. This replaces the previous practice where the Federal Competition and Consumer Protection Commission (FCCPC) held this power.
Board Interventions: The Commission now has the authority to appoint Independent Non-Executive Directors to the Boards of public companies where it has intervened or taken regulatory action. It also has the power to place directors of public companies on probation for a duration it considers appropriate, ensuring that governance breaches are addressed promptly.
Cross-Border Offerings: Companies seeking to sell or offer Nigerian securities on global capital markets must first obtain the SEC’s approval.
Unclaimed Dividends: To ensure accountability, the Act reaffirms the requirement for all unclaimed dividends to be transferred to the Unclaimed Dividend Trust Fund under SEC supervision. Handling these dividends contrary to the Act attracts a direct penalty of N10 million plus N50,000 for each day of continued default.
Below are some of the other key new provisions of the law:
Penalties for Ponzi schemes and other unlawful investment practices.
The new law takes a firm stance against unlawful investment practices and criminalising ponzi schemes that were prevalent in the Nigerian Capital Market. It imposes huge penalties on the promoters of the schemes, including a minimum fine of N20 million, or a 10-year prison sentence, or both. These penalties will deter bad operators in the industry and restore trust in the Nigerian Capital Market.
Recognizes Digital Assets.
Under the new Act, virtual and digital assets are now officially recognized as securities for the first time. The Act essentially brings Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the SEC’s regulatory oversight. This new development puts Nigeria in the emerging areas of financial technology and innovations, encouraging SEC-licensed Fintech companies to develop innovative financial products within a clearly defined regulatory framework. It also brings cryptocurrency-related operations into the formal sector, mitigating fraud risks and boosting investor confidence in blockchain-enabled financial services.
Modernizing Financial Market Infrastructures (FMIs).
The ISA 2025 introduces a refined structure by categorizing securities exchanges for ease of registration and operation. It is categorised into the Composite Exchange and the Non-Composite Exchange. The Composite Exchange allows for listing and trading of all types of securities, while the Non-Composite Exchange focuses on trading specific asset classes.
In addition, Financial Market Infrastructures (FMIs) such as Clearing Houses, Central Systems, and Trade Depositories are now under SEC regulation. These entities must be registered and certified by the Commission. The Act grants the SEC the authority to revoke registrations or direct FMIs to cease operations if it serves the public interest or protects investors.
To enhance systemic stability, FMI transactions are now exempt from general insolvency laws. This means if an FMI participant becomes insolvent, market contracts will be prioritized over insolvency proceedings.
Raising of capital for local and state governments.
Local and State governments are now allowed to raise funds through the capital market for infrastructure projects such as roads, healthcare, and education without solely relying on federal allocations and commercial loans, as long as they comply with SEC guidelines for market funds.
Strengthened Regulation of Commodities Trading.
The new Act provides a comprehensive framework for commodities exchanges, warehouses, and clearing houses. These entities must be registered with the SEC and comply with strict operational standards.
Companies operating without the necessary licenses face severe sanctions. Commodity exchange operators can be fined a minimum of N10 million or face up to 5 years imprisonment. Unlicensed warehouse operators risk fines of at least N3 million, imprisonment, or both. This regulation enhances transparency and investor trust in agriculture, mining, and other commodity-focused sectors, driving growth and attracting more institutional investment.
Access to Telecommunication and Electronic Communication Data.
To ensure compliance more effectively, the SEC is now empowered to obtain user data from telecommunications and internet service providers. This includes access to phone and internet records when needed for investigations relating to misconduct in the capital markets, particularly in complex cases involving digital and cross-border financial crimes.
Investors’ Protection Fund (IPF).
The ISA 2025 expands the mandate of the IPF, which now covers compensation for investors affected by the revocation or cancellation of a market operator’s registration. Previously, compensation was limited to bankruptcy, negligence, or insolvency.
Investment and Securities Tribunal Composition.
The Tribunal responsible for resolving capital market disputes has been restructured. The ISA 2025 introduces improvements to ensure faster, more effective resolution of disputes. This reform guarantees that aggrieved investors and operators can access justice promptly and transparently, further bolstering market integrity.
Legal Entity Identifier (LEI).
A significant innovation under the Act is the use of Legal Entity Identifiers (LEIs) in the capital market. All companies issuing securities or engaging in significant market activities are now required to obtain LEIs. This unique code enhances transaction traceability, improves market transparency, and helps Nigerian capital markets integrate seamlessly with international systems.
Alternative Investment Mechanisms.
The Act introduces a regulatory framework for alternative investments, such as private equity, venture capital, and crowdfunding platforms. This aims to provide startups and businesses with access to diverse funding sources and empower entrepreneurs through market inclusivity.
Global standard practices.
Perhaps one of the most strategic features of the ISA 2025 is its alignment with global standards. The Act ensures Nigeria retains its Signatory A status under the IOSCO Enhanced Multilateral Memorandum of Understanding (EMMoU), which facilitates international cooperation in securities regulation.
This alignment boosts Nigeria’s attractiveness to global investors and increases the chances of cross-border partnerships. It also opens doors to new capital flows from new investment opportunities, expanded investment portfolios, and increased investor confidence in Nigeria’s capital market.
Conclusion
The ISA 2025 is more than just a legal reform. It is a bold declaration of Nigeria’s commitment to building a resilient, transparent, and forward-looking capital market. Whether you’re a regulator, issuer, investor, or fintech innovator, the new law sets the stage for informed investment decisions, as well as a safer, more dynamic, reliable, and more inclusive financial future in Nigeria.
References
Investment and Securities Act 2025
Taiwo D. Adedoyin
Executive Associate.
Marvellous Alonge
Associate