The enactment of the Investment and Securities Act, 2024 (ISA 2024) represents a landmark development in the evolution of capital market regulation in Nigeria. The Act repealed the Investment and Securities Act, 2007 and introduced a robust, modern, and forward-looking legal framework towards aligning Nigeria’s capital market with international best practices. It comes at a time when investor confidence, regulatory clarity, and technological innovation are increasingly vital for market competitiveness and national economic growth.
ISA 2024 strengthens the regulatory mandate of the Securities and Exchange Commission (SEC), expands the scope of regulated products and services, and provides enhanced protection mechanisms for investors. The Act also responds to the realities of digital finance, global market integration, and the proliferation of unregulated investment schemes by granting broader intervention powers to the SEC, introducing a formal investor compensation scheme, and regulating emerging asset classes such as derivatives and commodity exchanges.
This article highlights key investor-facing provisions in the new Act by examining the core innovations of ISA 2024 as they relate to investors.
Some Key Reforms Impacting Investors
- Strengthened SEC Powers to Safeguard Market Integrity
The Investment and Securities Act, 2024 reaffirms the Securities and Exchange as an autonomous and independent regulatory body. Section 1(4) affirms the Commission’s independence, enabling it to function without undue interference and reinforcing its role as the primary authority for supervising and regulating Nigeria’s capital market. This legislative clarity strengthens regulatory integrity and aligns with global standards for capital market governance.
In addition to reaffirming its autonomy, the Act expands the SEC’s enforcement powers, allowing it to intervene decisively in the affairs of failing, mismanaged, or non-compliant market operators. The Commission may now appoint independent directors, suspend or replace management, and impose sanctions without the delay of court processes. These powers are designed to ensure timely responses to emerging risks, protect investors from harmful practices, and uphold market stability.
The SEC is also empowered to obtain subscriber information from telecommunications and internet service providers during investigations. This enhancement enables it to track down individuals or entities involved in fraudulent activities, especially those operating anonymously online or through digital investment schemes. Collectively, these provisions strengthen the SEC’s capacity to act swiftly and effectively in its oversight role. For investors, this represents a significant step toward a more transparent, accountable, and secure investment environment.
- Enhanced Oversight of Derivatives and Market Infrastructure
ISA 2024 introduces comprehensive regulations designed to elevate the sophistication of Nigeria’s financial markets. Among the key innovations are specific provisions governing derivatives, financial market infrastructures (FMIs), and alternative trading systems (ATS). These changes aim to provide a clearer legal framework for complex financial products to enhance transparency and security in the market.
For derivatives, the Act includes provisions for netting and set-off; these are critical mechanisms that allow parties to offset their obligations in the event of a default to reduce risk. The Act also makes significant modifications to the general insolvency rules concerning market transactions to ensure that the resolution of financial disputes is streamlined and predictable.
The Act addresses the functioning of alternative trading systems (ATS), which facilitate the trading of securities outside traditional exchanges. By ensuring that these platforms operate within a structured and secure environment, the Act encourages innovation in financial products while maintaining investor protection.
- Tackling Fraudulent Investment Schemes to Protect Retail Investors
The Act takes a strong stand against Ponzi schemes and unregistered investment operations. Section 3(3) (q) gives the SEC the authority to track, investigate, and shut down these illegal schemes, including sealing premises and freezing assets in the public’s interest. This move protects the less experienced investors from fraudulent schemes.
- Strengthened Corporate Governance for Public Companies
Public companies are now subject to stringent corporate governance requirements under the Act. PLCs are now mandated to implement comprehensive internal control systems to ensure the accuracy of their financial reporting. In addition, they must submit regular and detailed periodic reports to the Securities and Exchange Commission (SEC) and ensure that these reports comply with the highest standards of transparency.
Auditors engaged by public companies must be registered with the SEC, and they have an added responsibility of evaluating and reporting on the adequacy of a company’s internal controls. Auditors are now accountable for any misstatements or failure to comply with regulatory standards. These provisions reduce the risk of corporate fraud, misreporting, and other financial malpractices that can undermine investor confidence.
- Rules for Collective Investment Schemes Protect Investors
The Act significantly strengthens the regulatory framework for Collective Investment Schemes (CIS), including private equity funds, real estate investment schemes, and other pooled investment vehicles. The Act provides clearer definitions of what constitutes a CIS, alongside more stringent disclosure requirements and enhanced governance obligations for fund managers, trustees, and custodians.
Fund managers and related parties are now subject to stricter oversight, with clearly defined responsibilities and liabilities for any losses stemming from negligence, misconduct, or failure to adhere to regulatory standards. With detailed reporting requirements and clear governance structures, investors can make more informed decisions when entering the collective investment space.
- Introduction of the Investor Protection Fund for Financial Security
The Act established an Investor Protection Fund (IPF) under Part XV to shield investors from financial losses caused by the insolvency or regulatory failure of capital market operators. The fund will be maintained by the Securities and Exchange Commission (SEC) through contributions from levies, penalties, and gifts.
The introduction of the IPF represents a significant advancement in investor protection, offering a financial safety net for investors who may experience losses due to a market operator’s failure to meet their obligations. With the SEC overseeing the administration of claims, the fund ensures timely compensation for affected investors to foster greater trust in the market.
- Strengthening the Legal Framework for Commodities Trading
ISA 2024 creates a comprehensive legal framework for commodity exchanges and the issuance of warehouse receipts. This includes provisions for the negotiability and transferability of receipts, along with clear legal processes to address wrongful delivery or misrepresentation in the commodities market. By establishing a formal regulatory structure for commodities trading, the Act fosters growth in sectors such as agriculture and real estate. This shift offers investors a wider range of financial instruments beyond traditional equity or debt, while providing greater security in commodity transactions. The expansion into the commodities market not only creates fresh investment opportunities but also contributes to the diversification and deepening of Nigeria’s capital markets.
- Merger Notification by Public Companies
A significant modification introduced by the Act is the adjustment of SEC’s regulatory oversight regarding mergers. Under the previous ISA, the SEC had broad oversight over mergers and restructuring of all companies. However, following the enactment of the Federal Competition and Consumer Protection Act (FCCPA), which grants the FCCPC oversight over mergers for all companies, the SEC’s authority now focuses solely on public and listed companies.
In addition, the Act gives the SEC the authority to ensure fairness and transparency in the treatment of all shareholders during mergers or takeovers. It mandates that shareholders are adequately informed about the identity of the acquirer and offeror, and have enough time to assess the takeover offer.
- Classification of Exchanges
The Act introduces a new classification of securities exchanges, It categorises them into composite and non-composite exchanges. A composite securities exchange allows the listing of all types of securities, while a non-composite exchange is limited to a single type, such as shares or virtual assets. The Act also sets strict registration requirements for those intending to operate a securities exchange, with penalties including imprisonment, fines, or daily penalties for non-compliance.
- Virtual Assets Regulation
ISA 2024 strengthens the regulation of virtual assets, marking a departure from the previous ISA, which was silent on cryptocurrency and digital assets. SEC now has explicit authority to regulate virtual assets, which includes defining such assets as securities. This provides a legal framework for cryptocurrency transactions to improve investor protection in this emerging space.
- Empowering Self-Regulatory Organisations to Strengthen Market Integrity
The Act vests the Securities and Exchange Commission (SEC) with clear authority to register and regulate Self-Regulatory Organisations (SROs) and trade associations within the Nigerian capital market. These entities are now subject to enhanced oversight and are expected to act in the public interest to uphold market integrity and investor protection. By formally recognizing the role of SROs and imposing higher standards of accountability, the Act reinforces a collaborative regulatory environment where industry bodies contribute meaningfully to compliance, transparency, and the stability of the financial system.
- Regulation of Unclaimed Dividends
The Act mandates companies to implement clear timelines for dividend claims, and where dividends remain unclaimed, they must be held in trust or redirected to a designated fund. Companies that fail to adhere to these requirements face penalties, ensuring that investors’ interests are safeguarded and administrative inefficiencies are minimised.
Impact of These Changes on Investors
The updates introduced by ISA 2024 represent a significant move towards a more secure, transparent, and dynamic capital market. Investors will now experience:
a) Stronger and more proactive oversight
b) More effective action against unregulated and high-risk schemes
c) Clear regulations and governance for collective investment vehicles
d) Access to a dedicated compensation fund for retail investors
e) Improved regulation of new asset classes, including commodities and derivatives
These reforms collectively create a more resilient and appealing investment environment to increase informed participation and long-term financial confidence.