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SEC to register, monitor brokers selling stocks to foreign firms


Securities and Exchange Commission

The Securities and Exchange Commission (SEC) has unveiled a plan to register and actively monitor brokers selling stocks for foreign companies in line with its investors’ protection and market transparency mandates.
Executive Commissioner Operations of the SEC, Dayo Obisan, said SEC intends to license firms offering foreign stocks under a ‘digital sub-broker regulation, which should provide a form of clarity to their activities adding that the requirement will ensure regulatory responsibilities in on-boarding clients, custody of assets among others.
He said the commission is mindful that the platforms expose investors to both local and foreign stocks and is mooting registration of these platforms under the digital sub-broker regulations, which should provide some form of legitimacy for their activities.
He said the registration would ensure that only genuine platforms target retail investors, adding that one of the platforms is already at a very advanced stage in the registration process.
“SEC has rules on foreign investments and cross-border transactions, which specify the requirements for foreign investors seeking to invest in Nigeria as well as issuers of securities. Broadly speaking, all capital market instruments are registrable – equities, bonds, units of investment funds and derivatives.
“The Nigerian market has been open to a listing of securities by foreign issuers and there are no restrictions in that regard. As mentioned earlier, ‘Part H’ of our rules deals with the regulation of foreign investments and cross-border securities transactions,” he said
According to him, most foreign issuers take advantage of the reciprocity agreements, which exist between Nigeria and the country of the issuer, especially where the securities regulator of that country is a member of the International Organisation of Securities Commissions (IOSCO).
He said this was quite distinct from the activities of the online platforms, which are brokering secondary deals in securities that have been issued in another country and essentially performing a function for which they have not been registered or licensed, which is what necessitated the circular by the commission.
Obisan disclosed that Nigerians, like other citizens across the globe, have the liberty to trade across borders but said that what has become a growing trend, however, is the participation by retail investors in cross-border transactions, which had hitherto been undertaken by institutional and high net worth investors.
He pointed out that these investors have the resources and skills to undertake independent evaluations of potential cross-border investments beyond disclosures made to them.
“What we can confirm, based on our interactions with some of the online platform operators, which are facilitating these trades, is that there has been a sharp increase over the last 18 months in the number of users of these platforms.”
He said about 400,000 Nigerians invested in foreign stock through online brokers in the last 18 months adding that there appears to be increasing interest among the younger population.
According to him, this of interest to the commission primarily because it creates an avenue for exploitation if it is not properly monitored and regulated, especially as this interest is not mirrored on the traditional and core asset class. 


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