The Investment and Securities Act 2025 ("the Act") marks a comprehensive overhaul of Nigeria's principal legislation governing investments and capital markets. This new law repeals the Investment and Securities Act 2007( "ISA 2007"), aligns Nigeria's capital market framework with global best practices, and addresses regulatory gaps that had emerged over the years.
The Act introduces innovative provisions, including express recognition of the Commission's independence, a clearer articulation of its objectives and functions, and enhanced powers of inspection and enforcement. The Act expands the scope of entities that can offer, sell and invite the public to trade in its securities. It incorporates detailed regulations for securities exchanges and exchange holding companies, introduces a regulatory framework for financial market infrastructures, and protects capital market transactions during insolvency proceedings. In addition, the Act addresses systemic risk management, the treatment of unclaimed dividends, the governance of self-regulatory organizations, and enforcement against prohibited investment schemes. These additions reflect a modern, proactive approach to capital market regulation, positioning the Nigerian market for deeper investor participation and institutional confidence.
Some notable reforms/innovations under the new Investment and Securities Act include:
1. Independence of the Commission
Section 1(4) introduces a novel provision that emphasizes the independence of the Commission in alignment with the requirements set forth by the International Organization of Securities Commissions (IOSCO). The significance of this section lies in its assertion that the Commission will function autonomously, free from interference by other governmental bodies or external influences, except in instances explicitly detailed within the Act.
2. Objectives, Functions and Powers of the Commission
The Act clearly delineated the objectives, functions and powers of the Commission, as opposed to what was obtained in the ISA 2007, where its objectives were merged with the functions. This structural shift in legislative drafting signifies an initiative to establish a more organized and transparent framework for the Commission's roles.
Moreover, the Act provides greater clarity over the Commission's regulatory role. New provisions officially recognize the Commission's authority over the derivatives market and the National Savings Scheme, expand its mandate to cover the broader Nigerian commodities ecosystem, adjust the Commission's role in mergers and acquisitions to align with current law, and introduces a clear mandate for the Commission to combat Ponzi schemes and unregistered investment schemes.
Also, the powers of the Commission now include the authority to appoint Independent Directors to the Boards of public companies where the Commission has intervened or taken any regulatory actions, placing directors of public companies on probation for a reasonable duration as deemed necessary by the Commission, and auditing and demanding the production of records and documents from public companies and other regulated entities. In cases where there are investigations into capital market infractions, the Commission can impose administrative cautions, liens, or pursue judicial orders to freeze assets of individuals or firms. Furthermore, the Commission has the power to address unclaimed dividends of public companies, including those that are defunct or have ceased operations.
3. Composition of the Board of the Commission
The Act clarifies and strengthens the structure and composition of the Commission's Board. It now explicitly outlines the Board's fundamental mandate and clarifies that the Chairman must be a non-executive member. The Director-General's role has been redefined to include "chief accounting officer".
A notable change is the addition of the Director-General of the National Pension Commission to the Board, aimed at enhancing collaboration and increasing pension fund investment in the capital market. Furthermore, the Act now specifies minimum seniority levels for representatives from both the Central Bank of Nigeria and the Ministry of Finance, and tightens the qualification criteria for non-executive commissioners to ensure greater competence and oversight.
4. Recognition of Virtual Assets
Virtual and digital assets are now recognized under the new Act. Section 357 of the new Act has expanded the interpretation/meaning of 'securities' to include virtual assets and digital assets. This innovation officially recognizes virtual assets and digital assets, cryptocurrencies in Nigeria.
From the foregoing, Virtual Assets Service Providers (VASPs) and Digital Assets Operators (DAOs) are now brought under the regulatory control of the Securities and Exchange Commission.
5. Regulation of Securities Exchanges - Sections 26-40
The new provisions in the Act introduce a broad categorization of securities exchanges and prescribe the nature of information the Commission could rely upon in considering an application for registration for ease of registration and operations. Also, the appointment and removal of a Chief Executive Officer and other principal officers of a securities exchange company now requires the Commission's approval so that only fit and proper persons can be appointed to management positions.
A noteworthy addition to the Act is the authority granted to the Commission to issue directives and formulate rules and regulations governing the listing of securities exchanges or exchange holding companies on related securities exchanges. This authority deals with areas such as conflict of interest, corporate governance, administration, and listing and trading requirements, among other matters the Commission deems necessary. Furthermore, the Commission is permitted to exempt a securities exchange or exchange holding company from specific listing requirements of the related securities exchange when deemed appropriate.
Interestingly, the Act creates various responsibilities for securities exchange companies especially in asset acquisition and disposal. Exchange holding companies are mandated to prioritize the public interest and the needs of investors, ensuring that public interests take precedence over their own. It stipulates that any securities exchange, exchange holding company, or similar entity must obtain the prior written consent of the Commission before entering into agreements to acquire or dispose of assets that exceed a value threshold established by the Commission. In determining this threshold, the Commission will consider whether the assets are essential to the entity's operations or significantly impact its business direction.
6. Financial Market Infrastructures - Sections 41-44
Reference to "Capital Trade Points" in the ISA 2007 has been deleted and replaced with "Financial Market Infrastructures" under the new Act. It establishes provisions for the creation and operation of financial market infrastructures, requiring these entities to obtain certification or registration from the Commission per standards prescribed by it. Registration will only be approved if it aligns with public interest, and the Commission retains the authority to withdraw this approval or direct the cessation of operations if necessary to protect investors. Even when approval is withdrawn, the Commission can allow Financial Market Infrastructures (FMIs) to continue specific activities for winding-up operations, thus safeguarding investors during transitions. However, any violations may result in the Commission shutting down operations and imposing liability on directors and promoters, carrying significant penalties like fines and imprisonment.
7. Insolvency of Financial Market Infrastructures - Sections 45 to 57
The Act introduces comprehensive provisions addressing the insolvency of FMIs and market participants. The new provisions are specifically designed to address the insolvency of Financial Market Infrastructures (FMIs) and related participants. These provisions establish distinct insolvency procedures, separate from those outlined in CAMA 2020, due to the unique nature of the structure, operations, and transactions associated with FMIs and the entities involved. They seek to protect financial transactions conducted under market rules from being disrupted by general insolvency laws. For example, it ensures that certified net sums owed by a defaulting participant are treated as provable debts in insolvency proceedings, thus maintaining the integrity of financial market operations. The Commission can enforce the repayment of any outstanding amounts by defaulting participants. Asset holders of defaulting parties are required to assist the FMI during the default proceedings. This ensures effective management of assets and minimizes market disruption during insolvency situations. Furthermore, secured creditors can retain their collateral, prioritizing their claims over other creditors.
8. Retroactive Effects of Insolvency Proceedings - Section 56
This new provision fortifies the protections afforded to financial market participants by safeguarding pre-existing contracts or transactions entered prior to the initiation of insolvency proceedings. Under this section, the terms of such transactions will largely remain intact even after the commencement of insolvency, ensuring continuity and stability for affected parties.
9. Non-application of Insolvency Laws in Other Jurisdictions - Section 58
The Act explicitly prohibits Nigerian courts from recognizing or enforcing orders or actions related to insolvency from foreign courts or officials if these orders would contravene specific provisions within the Act (Parts C and D of Part V). This measure upholds Nigeria's jurisdictional authority, ensuring that foreign insolvency laws do not disrupt the regulatory framework established under Nigerian law.
10. Self-Regulatory Organizations and Trade Associations - Sections 59 and 60
Sections 59 and 60 of the Act empower entities, trade groups, or organizations to operate as self-regulatory organizations, provided they are registered and recognized by the Commission. The duties of these organizations are explicitly outlined and are primarily aimed at acting in the public interest to maintain market integrity and protect investors. They are responsible for supervising members, notifying the Commission of significant issues, informing the Commission of violations, and allowing members an opportunity to express their views before making decisions that could adversely impact their rights.
11. Inspections and Investigations - Sections 79-80
The Act confers powers upon the Commission's staff to act as examiners, granting them the authority to inspect and investigate all regulated entities and other relevant persons to enhance their oversight functions.
12. Management of Systemic Risk - Sections 82-85
This newly introduced section addresses the necessary information and frameworks required for monitoring, managing, and mitigating systemic risk within Nigeria's capital market. It empowers the Commission to issue directives related to systemic risk management and establishes cooperative arrangements with other regulators regarding information required from entities they oversee. In instances where market participants fail to comply with issued notices, penalties will be imposed, thereby reinforcing accountability.
13. Treatment of Unclaimed Dividends of Public Companies - Section 93
The Act, in Section 93, establishes a framework for managing unclaimed dividends by public companies under the Commission's regulatory purview. These dividends must be handled according to the rules and regulations outlined in the Act. The implication is that public companies must adhere strictly to these guidelines to avert potential financial and legal repercussions arising from non-compliance.
14. Sale of Securities and Invitations to the Public - Sections 95-96
The Business Facilitation Act 2022, which sought to amend section 67(1) of the ISA 2007 to permit private companies to make public offers "through any lawful means, as the Commission may by regulation prescribe," has now been effectively dealt with under section 95 of the ISA 2025, which restricts invitations to the public to a defined category of issuers, including public companies, statutory and supranational bodies, entities licensed by the Central Bank to accept deposits and savings, collective investment schemes, and free trade zone entities. New categories of issuers have been recognized, marking an important step toward enabling innovative offerings such as crowdfunding and supporting commercial and investment business activities, all subject to the Commission's approval, likely driven by investor protection concerns and the need to ensure that only entities subject to heightened disclosure and governance obligations can raise funds from the public.
Note that this Act further excludes issuers of securities from the application of section 142 of the Companies and Allied Matters Act 2020, which addresses shareholders' preemptive rights.
15. Mergers, Acquisitions, and Takeovers
Following the establishment of the Federal Competition and Consumer Protection Commission (FCCPC) and the transfer of certain merger control responsibilities to the FCCPC, amendments have been made to the provisions regulating mergers and acquisitions in the ISA 2007, under the new Act. The amalgamation of public entities is subject to the Commission's approval.
16. Takeover Rules and Merger/Compulsory Acquisition– Section 142
Since certain aspects of competition law are overseen by the FCCPC, amendments have been made to create standards for the segments of competition law still under the Commission's regulatory purview. Section 142(1) establishes the comprehensive oversight of the Commission over all entities involved in takeovers, mergers, or compulsory acquisitions, including acquirers, target companies, offerors, offerees, and their respective officers or associates.
17. Prohibited Schemes – Section 196
Section 196 stands as one of the Act's most robust provisions addressing fraudulent investment activities. Subsection 196(1) authorizes the Commission to enter and seal up all prohibited schemes, inclusive of Ponzi schemes, and equips it with the ability to secure Tribunal or court orders to freeze and forfeit the assets of such schemes to the Federal Government.
Moreover, 196(2) mandates that all costs and expenses incurred during this process must be charged as a priority against the scheme's funds and properties. The penalties stipulated in 196(3) for promoters and operators of prohibited schemes are stringent, delineating fines of no less than ₦20,000,000 or imprisonment for up to 10 years—or both—signifying a deterrent against fraudulent practices. Furthermore, 196(4) empowers the Commission to recover investigation expenses through the office of the Attorney-General.
The implications of these subsections are profound, as they ensure the swift dismantling of prohibited schemes—those that mimic Ponzi or pyramid schemes as defined in Section 357—accompanied by substantial financial and legal repercussions for offenders.
18. Section 224 – Establishment of Commodities Exchange
Section 224 prohibits any entity from establishing or operating a commodities exchange without first obtaining registration from the Commission. This provision seeks to ensure that only those who meet regulatory standards are allowed to manage exchanges, thereby safeguarding the market integrity. Any contravention of this requirement carries severe penalties, including fines of not less than ₦10,000,000 or imprisonment for up to five years, or both. The Commission may also impose escalating fines for continuing violations. Furthermore, Section 225 sets out the criteria for registering a commodities exchange with the Commission. These conditions include the requirement for a minimum share capital and the need for the exchange to be incorporated or registered in Nigeria. Additionally, the Commission has discretionary power to request further clarifications during the application process, ensuring that only entities meeting high operational standards are granted registration. These provisions are designed to maintain rigorous oversight, ensuring that commodities exchanges operate transparently and in the best interest of investors.
18. Warehouse Receipts
The Act now recognizes warehouse receipts as legal tender to indicate ownership of commodities, and provides sections for a Warehouse receipt system. The sections describe the provisions of the law on the issuance, recognition, administration, and trading of Warehouse receipts in the country. The section also describes the structure of the Warehouse Receipt System and sets out the punitive measures for violating the provisions contained therein.
Section 240 prohibits any individual or entity from operating a warehouse linked to a commodities exchange without proper registration from the Commission. The section outlines the conditions for registering warehouse operators, ensuring that warehouses meet prescribed standards, and that those operators are fully eligible. Any failure to comply with these requirements attracts severe penalties, reinforcing the integrity of the market infrastructure. By regulating warehouse operations, the Act ensures that investors are protected from potential fraud in the storage and trading of commodities.
19. Part XVI addresses the Issuance of Securities by various government bodies, including Federal and State government agencies, Local Governments, the Federal Capital Territory (FCT), and any companies wholly owned by these governments or guaranteed by them. The section specifies that such bodies may issue debt securities to the public in the form of bonds, promissory notes, or general obligation debt securities, including revenue or project-tied bonds. It provides new sections appointment of Custodians aimed at ensuring that the proceeds of the issuance of securities under the Act are utilized for the stated purpose.
Conclusion
The Investment and Securities Act 2025 introduces a modernized and robust regulatory framework that enhances market transparency, accountability, and investor protection. From the clearer delineation of the Commission's objectives and powers to the stringent regulations surrounding financial market infrastructures and collective investment schemes, each provision reflects a commitment to fostering a safe and stable capital market. The Act also strengthens the legal framework against fraudulent investment schemes, with severe penalties for violators, while enhancing the Commission's ability to manage systemic risks effectively. Ultimately, the Act aims to cultivate investor confidence, ensuring that Nigeria's capital market remains resilient and competitive on the global stage
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