Overview
The Investments and Securities Act 2025 ("ISA 2025") introduces a wide-ranging update to Nigeria's capital markets regulatory regime. Replacing the Investments and Securities Act 2007 ("ISA 2007"), the legislation reflects changes in market dynamics and regulatory priorities, with implications for the governance, operation, and oversight of private equity ("PE") and venture capital ("VC") funds. For the first time, Nigerian capital markets law expressly includes PE and VC funds within the broader regulatory framework applicable to Collective Investment Schemes ("CISs").
The responses to these FAQs provide a snapshot analysis of the key changes introduced by the ISA 2025 and their implications for private capital funds, investor protection, and regulatory oversight.
- What is the Investments and Securities Act 2025 (ISA
2025) and why does it matter for private capital
investors?
The Investments and Securities Act 2025 repeals and replaces the 2007 Act and, for the first time, explicitly recognises private equity (PE) and venture capital (VC) funds as Collective Investment Schemes (CISs). Under Sections 150 and 151 of the ISA 2025, these funds fall within the SEC's regulatory remit, enhancing legal certainty, aligning local practices with international standards, and increasing investor protections. - Are all PE and VC funds now considered
CIS?
Yes. Section 150 of the ISA 2025 defines CIS broadly to include both open- and close-ended funds, including those offered only to qualified investors. PE and VC funds are presumptively classified as CISs unless expressly exempted by regulation. - What protections does the ISA 2025 offer investors in
private funds?
Investor protection is significantly strengthened. Section 169 of the ISA 2025 prohibits the misuse or misappropriation of investor funds and imposes penalties of ₦50 million or four times the unlawful gain, plus restitution. Section 193(3) of the ISA 2025 also grants rescission and compensation rights for unauthorised foreign CIS offerings. - What kind of fund structures are now
permitted?
Section 151 of the ISA 2025 empowers the SEC to approve a broader range of legal forms for CISs, such as limited partnerships, unit trusts, and contractual schemes. This offers structural flexibility consistent with global private fund standards. - Can funds now invest in a wider range of
assets?
Yes. Section 168 of the ISA 2025 permits CISs to invest in infrastructure, private debt, unlisted equity, digital assets, commodities, derivatives, and foreign securities (with a 20% cap, unless otherwise approved by the SEC). This supports diversification and aligns with typical PE/VC strategies. - Can a PE or VC fund raise capital from the
public?
Yes. Section 95(1)(d) of the ISA 2025 adds CISs to the list of permitted public issuers, and Section 95(2) includes PE and VC activity within the scope of securities law. However, such offers require SEC approval and full compliance with registration and disclosure obligations. - How are foreign funds treated?
Section 193 of the ISA 2025 requires foreign CISs to obtain SEC approval before marketing to Nigerian investors. Non-compliance may result in penalties of ₦10 million or 10% of the funds raised, and gives investors a right of rescission and compensation. - What does the ISA 2025 require fund managers to
disclose?
Sections 162 to 165 of the ISA 2025 codify the requirement for pre-approved, accurate offering documents and periodic investor reports. Fund managers face liability for misstatements or omissions, reinforcing the emphasis on transparency and investor protection. - How are digital and virtual assets
regulated?
Section 357 of the ISA 2025 classifies digital and virtual assets - including cryptocurrencies and tokenised securities—as regulated securities. Service providers must register and meet the same compliance requirements applicable to traditional CIS operators. - How does the SEC monitor systemic risk?
Sections 82 to 85 of the ISA 2025 empower the SEC to require disclosures from CIS operators on portfolio risks, leverage, and counterparties. These provisions override confidentiality clauses and reflect a macroprudential approach to market supervision. - What if a fund mismanages or diverts investor
funds?
Section 169 of the ISA 2025 criminalises the mismanagement, misappropriation, or diversion of client assets. Penalties include restitution, fines, and revocation of SEC registration, ensuring stricter fiduciary accountability. - How are custodians and trustees held
accountable?
Section 181 of the ISA 2025 retains custodian liability for wilful misconduct or negligence but removes the statutory indemnity to fund managers. Managers must now secure protection through negotiated contract terms. - Are Ponzi schemes addressed in the ISA
2025?
Yes. Section 196 and the definition in Section 357 of the ISA 2025 explicitly prohibit Ponzi and pyramid schemes. Promoters face fines of ₦20 million and/or up to 10 years' imprisonment, bolstering investor confidence and regulatory integrity. - What should investors consider before committing to a
PE or VC fund under the ISA 2025?
Before committing capital, investors should assess:
- SEC registration: Confirm that the fund is registered as a Collective Investment Scheme (CIS) or is expressly exempt. Unregistered operation is subject to severe penalties.
- Fund structure: Understand the legal structure—e.g., limited partnership, trust, or company—as this affects tax treatment, liability, and reporting duties.
- Regulatory compliance: Review offering documents for compliance with the ISA's disclosure requirements (Sections 162–165), SEC pre-clearance, and ongoing reporting obligations.
- Custody and governance: Ensure custodial arrangements include negotiated indemnities (as statutory indemnity to fund managers is no longer provided) and that the fund has appropriate internal controls.
- Permitted investments: Verify that the fund strategy complies with Section 168 on asset classes (e.g., private equity, infrastructure, unlisted debt, digital assets) and that portfolio limits (e.g., on foreign securities) are adhered to.
- Public fundraising: Where the fund seeks public investment, ensure it is fully authorised under Section 95 and compliant with all prospectus and registration requirements.
- Risk readiness: Evaluate whether the manager is prepared to comply with systemic risk reporting (Section 82) and whether procedures exist to manage cyber, leverage, and liquidity risks.
Conclusion
The ISA 2025 sets out a more detailed and prescriptive framework for private capital in Nigeria, with notable changes across fund recognition, registration, investment scope, and investor protection. While the Act offers increased clarity on the treatment of PE and VC funds, it also introduces greater compliance complexity and more extensive oversight by the SEC.
For private capital players, the practical effects will depend on how the SEC operationalises these provisions through future rules, guidance, and enforcement practice. Fund sponsors and investors will need to evaluate whether the evolving regulatory landscape enhances long-term certainty or creates new barriers to capital formation, particularly with regard to public fundraising, systemic risk obligations, and digital asset regulation.
In the interim, stakeholders should assess their fund structures, disclosure protocols, and operational frameworks to anticipate emerging compliance expectations, while continuing to monitor developments that may influence the practical rollout of the ISA 2025.
Read UUBO's detailed analysis of the ISA 2025 and its implications for private capital players here.
The authors are grateful to Omotayo Ogunnaike for her editorial contributions.
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.
