The newly enacted Investment and Securities Act (ISA) 2025 marks a significant milestone in Nigeria's capital market regulation. Recently signed into law by President Bola Tinubu1, the Act repeals the Investments and Securities Act 2007 and introduces several reforms aimed at strengthening regulatory oversight, protecting investors, and fostering market growth. This article highlights key provisions of the new Act below:
1. Strengthening the Regulatory Powers of the SEC Under the Investment and Securities Act 2025:
One of the most significant updates in the Investments and Securities Act 2025 is the expansion of the regulatory powers of the Securities and Exchange Commission (SEC) over capital market operators, including digital asset service providers and imposing stringent sanctions on operators engaging in unethical practices. The Act aligns Nigeria's capital market regulations with international best practices and standards, ensuring that the SEC retains its "Signatory A" status under the International Organisation of Securities Commissions (IOSCO)2 Enhanced Multilateral Memorandum of Understanding (EMMoU), enhancing Nigeria's attractiveness to international investors.
2. Classification of Securities Exchanges:
Section 273 of the Investments and Securities Act 2025 introduces a broad categorisation of security exchanges for ease of registration and operation. Securities exchanges are now categorised into Composite and Non-composite Exchanges. A Composite Exchange allows the listing and trading of all categories of securities and products, while Non-composite Exchanges are limited to specific asset classes (e.g., commodity or derivatives markets). This classification ensures better market segmentation, encouraging specialisation and improved regulatory oversight, making it easier for investors and companies to navigate the market.
3. Criminalising Ponzi Schemes and Unlawful Investment Practices:
In response to the rising number of Ponzi schemes defrauding investors in the country, the Investments and Securities Act explicitly criminalises such operations, prescribing severe penalties, including imprisonment and hefty fines, for individuals and entities involved in these fraudulent investment schemes4. This provision aims to deter bad actors and protect investors from financial loss. The Director-General of the SEC, Mr. Emomotimi Agama, confirmed this when he stated that the commission has all it needs now to come against bad operators in the industry and ensure that people are more confident and happier to invest in the Nigerian market,"knowing fully well that the investor protection responsibility of the SEC has now been enhanced."5
4. Recognition and Regulation of Digital Assets and Virtual Asset Service Providers (VASPs):
Virtual and digital assets are now explicitly recognised as securities under the Investments and Securities Act.6 This is a landmark innovation in the Nigerian capital market, bringing Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the SEC's regulatory purview. This move follows global trends in integrating cryptocurrencies and blockchain-based assets into the formal financial system and requires all Digital Asset Operators (DAOPs) to obtain SEC licenses before conducting business. By regulating virtual and digital assets, Nigeria seeks to curb fraudulent schemes while promoting innovation in financial technology (FinTech).
5. Access to Telecommunication and Electronic Communication Data:
The Securities and Exchange Commission has been granted the power to obtain user data from all telecommunications and electronic communication companies in Nigeria7 in the process of implementing the law. This provision is designed to empower the Commission to have access to the content of communication including phone, internet, and electronic records, in case of any violation of the law which would immensely facilitate its investigation and enforcement process.
6. Systemic Risk Management and Market Stability:
The Act also incorporates provisions for managing systemic risks within the capital market8, particularly to safeguard against crises that could undermine investor confidence. It mandates the SEC to establish mechanisms for monitoring and mitigating systemic risks such as requiring capital market participants to submit relevant documents or information for monitoring and mitigating systemic risks. This request is enforceable regardless of any contractual obligations, and non-compliance attracts financial penalties prescribed by the commission. SEC is also empowered to issue written directives for managing systemic risks, including suspending trading if necessary for market stability. These measures align with global financial stability initiatives, ensuring Nigeria's capital market remains resilient against external shocks.
7. Regulatory provisions for Financial Market Infrastructures:
A regulatory framework is established under the Act for financial market infrastructures (FMIs)9 in Nigeria, including Central Counterparties, Clearing Houses, and Trade Depositories. Individuals and companies intending to establish or operate a financial market infrastructure (FMI) must obtain a certificate of registration from the Commission. The Commission retains the authority to revoke approvals or direct an FMI to cease operations in the public interest or to protect investors. However, the concerned entity must be given an opportunity to be heard before such action is taken.
8. Comprehensive Insolvency Provisions for Financial Market Infrastructures:
Insolvency Provisions are introduced, exempting transactions facilitated through or otherwise involving Financial Market Infrastructures from the application of general insolvency laws.10 General insolvency laws do not apply to market contracts, securities exchange actions, FMI actions related to clearing and collateral transfers, and other specified transactions. If insolvency proceedings commence against an FMI member, the market contracts and related actions take precedence over general insolvency laws. Debts arising from default proceedings cannot be included in insolvency proceedings until the FMI's default procedures are complete.
9. Expansion of the Category of Issuers to the Public:
The categories of issuers to the public has been expanded11 as a key step towards the introduction of a wide range of innovative products and offerings such as crowdfunding as well as the facilitation of commercial and investment business activities, subject to the approval of the Commission and other controls stipulated in the Act.
10. Regulation of Commodities Exchanges and Warehouse Receipts.
Strict regulations are introduced to govern the establishment and operation of commodity exchanges12, clearing houses, and warehouses requiring mandatory registration with the SEC. Individuals or entities operating without registration face severe penalties, including imprisonment of up to 5 years, or a minimum fine of N10 million or N3 million for warehouse operators; or both. The Commission also has the power to impose additional daily fines for continued violations. To maintain market stability, the Commission has emergency powers to intervene in cases of market manipulation or disturbances. Furthermore, only registered entities may use titles such as Commodity Exchange, Clearing House, Broker, or Trading Adviser, with unauthorised use incurring a N10 million fine, plus N20,000 per day for continued violations.
11. Mandatory use of Legal Entity Identifiers:
Every market participant is mandated to own and use a unique identification code known as the Legal Entity Identifier (LEIs)13 in all securities transactions. LEIs are globally recognised tools used to improve traceability and transparency. The essence of this is to make it easier to monitor the flow of funds and identify potential risks or irregularities.
12. Avenue for sub-national Fundraising:
The Act further grants flexibility to State and local governments to raise funds through the capital markets for public projects like infrastructure or healthcare14. This reform could open new financing windows for infrastructure development, especially for states seeking alternative means to fund projects without over-relying on federal allocations or commercial borrowing.
Conclusion:
The Investments and Securities Act 2025 marks a significant advancement in Nigeria's capital market regulatory framework. By enhancing the oversight authority of the Securities and Exchange Commission (SEC), criminalising fraudulent investment schemes, regulating digital assets, and establishing robust provisions for financial market infrastructures, the Act reinforces transparency, accountability, and investor protection, setting a new benchmark for market integrity in the country.
Footnotes
1 Tinubu signs Investment Securities bill into law – Punch Newspaper
2 Section 1(4), 3(4)(l), (n), (q) and (r) of the ISA Act 2025
3 Section 27 of the ISA Act 2025
4 Section 3 of the ISA Act 2025
5 ISA 2025: Ponzi schemes promoters in Nigeria now face 10 years jail term – Nairametrics
6 Section 350 of the ISA ACt 2025
7 Section 3(4)(j) of the ISA Act 2025
8 Section 82 -84 of the ISA Act 2025
9 Section 42 -44 of the ISA Act 2025
10 Section 45 – 51 of the ISA Act 2025
11 Section 95 of the ISA Act 2025
12 Section 222 – 229 of the ISA Act 2025
13 Section 123 of the ISA Act 2025
14 Section 259 – 264 of the ISA Act 2025
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