The Investments and Securities Act 2025 (ISA 2025) repeals and replaces the Investments and Securities Act 2007 (ISA 2007), introducing a revised statutory framework for capital market regulation.
The ISA 2025 codifies several principles that had previously existed primarily in Securities and Exchange Commission (SEC) rules and regulations 2013 (as amended) (SEC Rules), including those applicable to private equity (PE) and venture capital (VC) funds.
The Act aims to expand regulatory coverage, formalise the treatment of private capital vehicles, and introduce new compliance standards across fund structuring, offering documentation, custody, and permissible investments to reflect developments in international regulatory approaches and to broaden the legal foundation for financial products and investment vehicles.
While the ISA 2025 reflects an evolution of existing regulatory trends – many foreshadowed by exposure drafts issued by the SEC in 2024 – it also raises new considerations for Nigerian and Nigeria-focused PE and VC participants operating in or accessing the Nigerian market.
In this update, Folake Elias-Adebowale, Damilola Adedoyin, Aanuoluwapo Odunaike, Solomon Adegboyo, Ayomide Soretire and Omotayo Ogunnaike of Udo Udoma & Belo-Osagie's Private Equity and Venture Capital team review the key changes introduced by the ISA 2025 and its implications for fund formation, investor protection and regulatory oversight in Nigeria's dynamically evolving private capital landscape.
1. Statutory Recognition of Private Capital Vehicles
The ISA 2025 explicitly brings PE and VC funds within the scope of regulated collective investment schemes (CISs). Sections 150 and 151 of the Act expand the legal definition of what qualifies as a CIS to accommodate a wider array of pooled investment vehicles, including closed-ended schemes and those offered to qualified investors. These provisions remove the ambiguity that characterised the ISA 2007, under which many private funds fell outside the statutory definition of a CIS unless the SEC determined otherwise by regulation.
Under Section 150, any scheme or arrangement (open-ended or close-ended) involving the pooling of investor contributions and collective portfolio management may now be deemed a CIS, including schemes offered to qualified investors, as well as those offered to the general public, unless expressly exempted. PE and VC structures are now presumed to be CISs unless expressly exempt.
Section 151 empowers the SEC to recognise a broader range of fund structures, such as limited partnerships and contractual schemes, subject to its regulatory oversight.
This is a significant departure from the repealed ISA 2007 under Section 153(1) of which, the CIS definitions were narrower – focusing mainly on open-ended investment companies – and did not explicitly capture closed-ended funds, PE/VC vehicles, or offerings limited to sophisticated investors.
The ISA 2007 had also excluded any scheme authorised under another Act, a carve-out that had created uncertainty and limited SEC oversight of certain structures. PE and VC fund sponsors must now assume that their fund vehicles are CISs under Nigerian law and comply with the attendant registration and reporting requirements, unless specifically exempted.
2. Expanded Definition of CISs, Permitted Investments, and Structural Flexibility
In tandem with the definitional change, the ISA 2025 broadens the investment scope for CISs. expanding the permissible legal forms that CISs can take. Section 151 empowers the SEC to approve a broader variety of fund structures than was previously allowed under the ISA 2007, which had limited recognition to a narrow list of schemes.
The new provision accommodates formats such as limited partnerships, unit trusts, and contractual arrangements, subject to regulatory approval. This change reflects the evolution of investment vehicles and potentially facilitates innovation in fund structuring, especially for sponsors seeking to align with international market practice.
Under the ISA 2007, the SEC's power to approve novel fund formats had been constrained by a finite list of recognised schemes. Now, fund managers may adopt structures such as limited partnerships, unit trusts, or contractual schemes (among others), subject to SEC approval. Although SEC approval is still required for any selected structure, the statutory framework appears more open to accommodating internationally familiar models, provided they meet the regulator's criteria.
The broadened investment scope under Section 151 offers a comparatively clearer regulatory footing for limited partnership structures, which are commonly used by PE and VC funds globally. Although SEC approval is still required for any selected structure, the statutory framework appears more open to accommodating internationally familiar models, provided they satisfy the regulator's criteria.
This should enable more tailored fund vehicles – for example, limited partnership funds (a common structure for PE/VC globally) – to operate on a comparatively clearer regulatory footing. For fund sponsors, this suggests that the framework may be more accommodating of international-standard structures, although SEC approval processes will require that any chosen format meets regulatory expectations.
Under Section 168, fund assets may now be deployed into infrastructure, private debt, unlisted equity, commodities, derivatives, and digital assets. These asset classes are now expressly permitted under Nigerian law, aligning the regulatory framework with market practices and supporting the investment strategies typical of PE/VC funds.
Section 168 also introduces portfolio composition limits for certain instruments - such as a 20% cap on foreign securities listed in IOSCO member jurisdictions - subject to SEC guidance.
3. Oversight of Foreign CISs
Section 193 of the ISA 2025 introduces a significantly strengthened framework for foreign collective investment schemes (CISs) targeting Nigerian investors. Under the prior regime in Section 195 of the ISA 2007, foreign schemes were required to obtain SEC approval before soliciting Nigerian investors; however, enforcement was limited.
The new Act adopts a more stringent posture, imposing tougher sanctions for non-compliance. Under Section 193(2), any foreign CIS that markets to Nigerian investors without SEC approval faces a penalty of ₦10 million or 10% of the gross value of interests offered - whichever is higher. This represents a substantial increase from the ₦100,000 base fine and daily penalties under the ISA 2007.
The revised penalty structure is aimed at discouraging circumvention of regulatory controls and strengthening investor protection, particularly in light of the increased marketing of foreign schemes through online channels.
These changes are intended to close longstanding enforcement gaps and ensure that foreign offerings undergo appropriate scrutiny.
The ISA 2025 also introduces new statutory remedies for investors. Section 193(3) grants investors the right to rescind any investment made in an unauthorised foreign CIS and to claim compensation for losses.
This is a notable departure from the ISA 2007, which relied primarily on administrative penalties without affording investors a direct civil remedy.
This development is complemented by Section 155(3), which enables private rights of action for violations of CIS provisions.
Together, these provisions materially increase the liability risk for foreign fund operators and their intermediaries. Offshore promoters and local brokers marketing foreign PE or VC funds without regulatory approval now face both regulatory sanctions and civil litigation exposure.
In practical terms, foreign fund managers must ensure strict compliance - either by securing SEC approval prior to any form of solicitation in Nigeria or by refraining from approaching the Nigerian market altogether. For investors, the revised regime provides enhanced protection: not only through deterrent fines but also via enforceable legal rights.
Going forward, more proactive regulatory oversight is expected. The SEC is likely to increase surveillance of online promotions and coordinate with other agencies to monitor cross-border marketing, reflecting the Act's broader emphasis on market integrity.
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The authors are grateful to Omotayo Ogunnaike for her editorial contributions to this update.
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.
