Registrations and Licensing with the Nigerian Securities and Exchange Commission (SEC)

The Securities and Exchange Commission (SEC) is the Nigerian Government regulatory agency responsible for registering and regulating the activities of the participants in the Nigerian capital market. The SEC registers and issue licenses to qualified persons and companies operating in the Nigerian capital market. One of the core functions of the Nigerian SEC is the exercise of supervisory functions which includes inspection, surveillance and investigation of the activities of licensees to ensure that they comply with the requirements of the applicable laws, guidelines and regulations regulating their operations in the Nigerian capital market.

The licenses issued by the SEC allows the licensed persons and companies to operate in the Nigerian capital market. Failure to obtain necessary licenses before operating in the Nigerian capital market is a sanctionable offence.

Licenses Obtainable from the Nigerian Securities and Exchange Commission

Some of the licenses or registration that may be obtained from the SEC to operate in the Nigerian capital market include the following:

1. Broker/Dealer: A licensed broker is allowed to engage in the sale and purchase of securities on a recognized securities exchange on behalf of its clients. A dealer on the other hand is allowed to engage in the sale and purchase of securities on his own account. That is, the transactions are done for its own purposes. It is however possible to obtain registration with the SEC to act as a broker-dealer.
2. Sub-broker: A sub-broker is allowed to engage in the purchasing and sale of securities, receiving and making payments to clients in any sale and purchase of securities transactions through its sponsoring broker/dealer. Qualified individuals or corporate entities may be registered by the SEC as sub-brokers. It is important to note that SEC can also register a sub-broker to provide its services digitally provided it meets the requirements of operating as a digital sub-broker in Nigeria. Thus, a sub-broker registration is separate and distinct from a digital sub-broker registration.
3. Market maker: A registered market maker is a specialist in designated securities that engages in the buying and selling of securities for its own account on a regular or continuous basis. A market maker facilitates smooth trading atmosphere and serve as a source of information for the designated securities. Only corporate entities are eligible to be registered as a market maker in Nigeria.
4. Issuing Houses: They are registered by the SEC to provide financial advisory services for schemes and the issuance of securities, act as agents of issuers and prepare the registration statement, prospectus, scheme document and any other relevant transaction documents. It is important to note that only corporate entities are eligible to apply for registration as an issuing house. Copies of the corporate documents are made available to the SEC in the course of applying for registration in addition to other documents required.
5. Fund/Portfolio Managers: These are corporate entities registered to provide investment advisory services, select securities for the fund/portfolio and manage the funds and portfolios on behalf of investors. They are required to keep and maintain the records of their activities as fund/portfolio managers upon registration with SEC.
6. Investment Adviser: Qualified individuals and corporate entities may apply to the SEC for registration as investment advisers. The capital and other requirements for registration as an individual investment adviser are usually not the same with that of a corporate investment adviser. An investment adviser generally provides investment advisory services including recommending the securities to buy or not to buy. However, investment advisers are not allowed to manage investors’ funds.
7. Registrar: Registrars provide the services of maintaining the registers of members of a company and unit holders of collective investment schemes, issuing debenture, share and bond certificates, distributing rights circulars and public offer documents, verifying the authenticity of share certificates, etc. To provide these services, an applicant which must be a Nigerian company must apply to be licensed as such by SEC upon meeting the registration requirements.
8. Trustees: The license to provide services as a trustee is only open to corporate entities registered with the Nigerian Corporate Affairs Commission (CAC). Trustees are licensed to provide the services of monitoring the activities of fund manager and custodians in the interest of unit holders and fund contributors, ascertaining and ensuring compliance with applicable laws, executing documents necessary to secure acquisitions or disposals made by a fund manager, holding and administering sinking funds, protecting the interest of investors and lenders in debt instruments, etc.

Cryptocurrency, Virtual and Digital Assets Registration and Licensing in Nigeria

The SEC Rules on Issuance, Offering Platforms and Custody of Digital Assets 2022 regulates the registration and licensing of virtual and digital assets service providers. The registrations that may be obtained under the SEC Rules are as follows:

1. Digital Asset Offering Platforms (DAOPs): A DAOP license allows the holder to deploy electronic platform for offering digital assets in Nigeria. An applicant of a DAOP license is required to be a Nigerian company registered with the CAC. A DAOP usually works with a Digital Assets Custodian (DAC) in its offering of digital assets through electronic platform as the DAC usually have custody of the digital assets.
2. Digital Assets Custodians (DACs): A DAC license allows the holder to provide the services of seakeeping, storing, holding or maintain custody of virtual assets or digital tokens for the account of another person. The applicant must be a corporate body registered by the CAC.
3. Virtual Assets Service Providers (VASPs): VASPs are corporate entities licensed to conduct one or more of the following activities for or on behalf of another person:

• Exchange between virtual assets and fiat currencies;
• Exchange between one or more forms of virtual assets;
• Transfer of virtual assets’
• Safekeeping and /or administration of virtual assets or instruments enabling control over virtual assets;
• Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset.

4. Digital Asset Exchange (DAXs): This license allows the holder to operate an electronic platform which facilitates the trading of virtual or digital assets. The applicant of a DAX license is also required to be a corporate entity registered with the CAC.

Conclusion

The Nigerian Securities and Exchange Commission (SEC) regulates and issues licenses to players in the capital market and virtual and digital asset (cryptocurrency) business in Nigeria. Every applicant of a licence from SEC is expected to comply and meet the requirements for obtaining the specific license. It is also important to note that the requirements for licensing is not the same for all the categories of licenses that may be obtained from SEC. Operating in Nigeria without being registered/licensed by SEC is a sanctionable offence.