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SEC moves to register, monitor online brokers selling foreign stocks

SEC moves to register, monitor online brokers selling foreign stocks
May 10
13:20 2021

The Securities and Exchange Commission (SEC) says it will begin to monitor activities of online platforms selling stocks for foreign companies.


SEC, recently warned the investing public on the proliferation of unregistered online investment and trading platforms, facilitating access to trading in securities listed in foreign markets.

In a statement on Sunday, SEC quoted Dayo Obisan, its executive commissioner of operations, as saying that the commission will register brokers in line with its mandate of ensuring investor protection and market transparency.

He said SEC will license firms offering foreign stocks under a “digital sub-broker” regulation to aid transparency and avoid exploitation.


“Ultimately, we expect that registration will ensure that only genuine platforms target retail investors. We already have one of the platforms at a very advanced stage in the registration process,” he said.

“The 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, derivatives, etc.”

Obisan said the Nigerian market has been open to the listing of securities by foreign issuers with no restrictions.


He, however, added that part H of SEC rules deals with the regulation of foreign investments and cross-border securities transactions.

Obisan said there has been a growing trend of participation by retail investors in cross-border transactions, which had hitherto been undertaken by institutional and high net-worth investors.

He noted that about 400,000 Nigerians invested in foreign stocks through online brokers in the last 18 months.

Obisan said the increasing interest from younger population necessitates proper regulation to curb exploitation.


“This sort of savvy investors have the resources and skillset to undertake independent evaluations of potential cross-border investments beyond disclosures made to them,” he said.

“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.

“There also appears to be an increasing interest among the younger population and this is 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.

“Most foreign issuers take advantage of the reciprocal 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.


“This is 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.”


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