On 25 March 2025, President Bola Ahmed Tinubu signed into law, the Investment and Securities Act, 2025 (the "ISA 2025"), repealing the earlier Investment and Securities Act, 2007 (the "ISA 2007"), and introducing wide-ranging reforms aimed at strengthening Nigeria's capital markets.
This article highlights key innovations under the ISA 2025 that relate to securities exchanges, including registration reforms, regulatory oversight, and governance controls. Where relevant, we draw parallels with similar regimes in other jurisdictions to offer practical context.
Being platforms1 that facilitate the trading of securities such as stocks, bonds, commodities, and derivatives, the focus on securities exchanges is timely. As market activity deepens, and the range of tradable instruments expands, regulatory clarity and flexibility around the operation and supervision of these platforms has become critical.
1. Expanded Definition of Securities Exchanges
The ISA 2025 introduces a broader and more structured definition of what constitutes a securities exchange in Nigeria. Under the new regime, a "securities exchange" is now defined as any organised facility that:
- brings together buyers and sellers of securities, virtual assets, commodities, or financial instruments;
- matches bids and offers from multiple participants; and
- facilitates transactions where matched bids and offers constitute completed trades.
This articulation aligns more closely with international norms, particularly the definition of an "exchange" under South Africa's Financial Markets Act, which also centres on matching systems and transaction infrastructure. Notably, this revised formulation extends beyond traditional securities to include virtual assets and other financial products, reflecting the growing diversification of instruments traded on modern platforms.
The broader definition may have been introduced to provide regulatory clarity as newer asset classes and non-traditional trading systems emerge. With increasing interest in digital asset markets, commodities platforms, and alternative trading systems, a more inclusive statutory definition ensures that such entities do not fall outside regulatory oversight simply due to the novelty of their instruments or the technology they employ.
2. A Redefined Registration Framework
A key innovation under the ISA 2025 is the clear categorisation of securities exchanges into composite and non-composite entities. Composite exchanges can list and trade all types of securities and financial instruments, while non-composite exchanges are limited to either specific asset classes (mono exchanges), or alternative trading systems.
This reclassification provides the regulatory clarity that was
lacking under the ISA 2007, where all exchanges were lumped into a
single undifferentiated category.
Notably, the ISA 2025 also expands the scope of entities eligible to register as securities exchanges beyond traditional corporate structures. Entities registered under Acts of the National Assembly, including free zone legislation or supranational frameworks, are now eligible applicants.
While the ISA 2025 appears to have widened access to market participants, it allows the Securities and Exchange Commission (the "SEC"), set the operational ground rules for proposed market participants, a design choice likely to evolve as market complexity increases. In comparative terms, Kenya, remains prescriptive by mandating that only limited liability companies may apply for exchange status.
3. Strengthened Governance and Oversight
The SEC now plays a more active role in exchange governance, as the ISA 2025 requires SEC approval for the appointment and removal of a securities exchange's Chief Executive Officer, and other principal officers. While the SEC historically had powers to remove officers in limited circumstances (often post-breach), the ISA 2025 introduces a preemptive layer of governance control. Officers may be suspended, or removed for failure to comply with the ISA or the SEC rules, after being given a fair hearing.
The structure creates a quasi-dual board approval model, where both the securities exchange and the regulator share gatekeeping responsibilities over leadership. This development signals a move beyond passive regulatory oversight, into a proactive governance regime where the SEC not only monitors, but also approves the stewardship of capital market infrastructure entities.
This mirrors the regulatory posture in South Africa, where
governance assessments are undertaken for market infrastructure
entities, requiring pre-approval in cases where leadership changes
could impact systemic stability. While the United States SEC does
not mandate prior approval for such appointments, exchanges are
required to notify the regulator, and are expected to demonstrate
that senior officers meet statutory 'fit and
proper' standards.
4. Self-Listing and Regulatory Discretion
The ISA 2025 introduces an important framework for the listing of securities by securities exchanges and their holding companies. While the specifics are currently undefined, the law explicitly mandates regulatory oversight in areas such as conflicts of interest, governance standards, trading integrity, and procedural listing requirements. The objective is to mitigate the risks of self-listing, and ensure that exchanges do not compromise regulatory impartiality by serving as both market operators and listed entities.
Globally, the treatment of exchange listings varies. In the United
Kingdom, the Financial Conduct Authority regulates self-listings
through bespoke requirements in its Listing Rules, while exchanges
like the London Stock Exchange maintain operational autonomy under
close supervision. In South Africa, licensed exchanges may permit
internal listings, provided such listings comply with the
exchange's own listing requirements, which must also be
approved by the Financial Sector Conduct Authority, thereby
ensuring independent regulatory oversight. The Johannesburg Stock
Exchange, for instance, operates under this model and maintains a
structural separation between its regulatory and commercial
functions; a safeguard designed to mitigate conflicts of interest.
In the United States, exchanges such as the New York Stock Exchange
are subject to stringent regulatory oversight, and any self-listing
proposal typically undergoes heightened scrutiny to avoid conflicts
of interest.
Nigeria's approach, being a formal regulatory entry point
without over-specification, offers the SEC flexibility to tailor
listing rules as our capital markets evolve. It also leaves room
for the development of best practice frameworks to address the
unique governance tensions inherent in self-listing scenarios.
Now formally anchored in legislation, Nigeria's approach builds on the precedent2 set under the previous regime. The ISA 2025 introduces a clearer statutory entry point without prescribing detailed mechanics, thereby offering giving the SEC the flexibility to issue fit-for-purpose rules as the market evolves. It also creates room for best practice frameworks to emerge around the governance and conflict-of-interest challenges that typically arise in self-listing scenarios.
5. Oversight on Major Transactions
Another innovation under the ISA 2025 is the introduction of regulatory pre-approval for asset acquisitions and disposals by securities exchanges and their holding companies. Specifically, any transaction that exceeds a value threshold, will require the consent of the SEC prior to execution. While the threshold is yet to be prescribed, the mere inclusion of this provision marks a new era of transactional oversight that could impact market operations or investor confidence.
The provision reflects a growing concern around the operational
risks and systemic exposure that may arise from unregulated
corporate restructurings or asset transfers.
In the United States, material transactions by exchanges must be disclosed to the regulator, and depending on the nature of the change, may trigger antitrust or systemic risk reviews.
On the other hand, South Africa requires its exchange operators to
maintain transparent reporting of material financial positions, but
does not impose explicit pre-approval requirements. Kenya, while
less prescriptive, empowers its Capital Markets Authority to review
restructuring events where public interest may be affected.
Although its full implementation is dependent on further regulations, the inclusion of this requirement signals a deliberate move to bring significant exchange transactions within the SEC's oversight, particularly where such actions could affect market confidence, or operational continuity. By introducing pre-approval for significant transactions, the ISA 2025 brings exchanges under the type of scrutiny typically applied to systemically important institutions — reinforcing accountability without imposing unnecessary rigidity.
6. Sanctions and Market Recovery Measures
Under the ISA 2025, the SEC's sanctioning toolkit has been materially expanded, particularly in relation to breaches involving prohibited trading, or continued violations of regulatory directives. The requirement under the ISA 2007 for a second suspension window prior to deregistration has been eliminated, allowing the SEC to act with greater agility when enforcing market prohibitions. This signals a deliberate pivot toward timeliness in regulatory enforcement.
Perhaps the most transformative addition is the SEC's new
ability to seek court-ordered administration of a non-compliant
exchange, reflecting a shift from punitive action to potential
recovery. This aligns with modern insolvency principles introduced
under the Companies and Allied Matters Act, 2020, which prioritises
business continuity and creditor protection over outright
liquidation. It is important to note that the ISA 2025 clarifies
that administrators need not be court officials, rather, any
qualified professional may be appointed. This flexibility will
definitely increase the SEC's operational range in market
stabilisation efforts.
In comparative terms, administration as a restructuring tool is common in the United Kingdom, the United States, and other African jurisdictions such as South Africa, as company rescue is often prioritised over creditor piecemeal recovery.
Nigeria's incorporation of these elements, within a capital markets context, is both progressive and practical, strengthening the resilience of critical market infrastructure.
7. Directives and Enforcement Reform
Another critical reform introduced by the ISA 2025 relates to
the enforcement mechanics surrounding SEC issued directives. By
removing the requirement for the SEC to be joined as a party in
legal actions involving its guidelines, the ISA 2025 eliminates a
procedural bottleneck that delayed swift adjudication. In effect,
legal challenges to SEC directives may now proceed without a formal
joinder, reducing friction, and insulating the regulator from undue
litigation entanglement.
Also significant is the removal of the 'without reasonable
cause' qualifier. Under the ISA 2007, a regulated
entity's failure to comply with a directive was penalised only
if done without justification. The ISA 2025 drops this subjectivity
entirely, making non-compliance, regardless of rationale, a strict
liability trigger. Securities exchanges must now acknowledge and
respond to all SEC directives, with the monetary penalties attached
to this breach increased in its severity. The regulatory philosophy
here appears to mirror certain aspects of the administrative
enforcement in the United States, where its SEC has a broad
discretion to sanction exchanges and intermediaries for failure to
comply with orders, or reporting obligations.
The ISA 2025's firm stance reflects an increasingly interventionist posture, likely influenced by the urgency of market modernisation and the SEC's evolving role as both regulator and risk manager.
In adopting the ISA 2025, Nigeria joins a growing cohort capital markets jurisdictions that are recalibrating regulations to reflect evolving market realities. The reforms bring Nigerian practices closer to global standards in areas such as registration breadth, governance oversight, enforcement, and transaction monitoring.
The ISA 2025 offers a more coherent and future-facing framework for the regulation of securities exchanges in Nigeria. By redefining registration pathways, enhancing regulatory supervision, and introducing mechanisms such as administration and transactional oversight, the new law signals a deeper understanding of the role exchanges play in safeguarding market integrity and investor confidence.
Rather than replicating foreign models wholesale, it is laudable that the law opts for a hybrid approach; it expands its regulatory reach while allowing the SEC flexibility to respond to specific market realities. This may well position Nigeria's securities exchanges as not just trading venues, but regulated financial infrastructure with systemic relevance.
Ultimately, the impact of these reforms will depend on execution. For securities exchanges and infrastructure players, agility will be key, not only in meeting heightened regulatory expectations, but in capturing the opportunities these reforms are designed to unlock.
Footnotes
1 Traditional stock exchanges such as the Nigerian Exchange Limited (NGX), commodities exchanges, and alternative trading systems.
2 NGX Group PLC was listed on the NGX in 2021.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
