Major Highlights of the Investments and Securities Act, 2025: A New Dawn for Nigeria’s Capital Market

May 5, 2025
By ALF

INTRODUCTION:

The enactment of the Investments and Securities Act, 2025 (“ISA 2025” or “the Act”) marks a significant step towards aligning Nigeria’s capital market with global developments and modern regulatory standards. The Act seeks to ensure that the capital market remains responsive to the rapid changes in the sector, while offering robust protections for market operators. The ISA 2025, repeals the Investments and Securities Act, 2007 (“ISA 2007”), which, despite its foundational role in consolidating capital market regulation, had become inadequate in addressing recent market trends, financial innovation, and the emergence of technologies such as cryptocurrencies, Virtual assets, and blockchain. The ISA 2025, remedies key shortcomings of the ISA 2007 by incorporating global best practices, particularly those set by the International Organization of Securities Commissions (IOSCO), and strengthening Nigeria’s regulatory framework to remain competitive, transparent, and inclusive. The Act recognises virtual assets as securities, expressly prohibits Ponzi schemes, establishes a framework for commodities exchanges, categorises securities exchanges, and enhances the powers and structure of the Investments and Securities Tribunal. These and other innovations underscore the Act’s objective of modernising Nigeria’s capital market.

This article highlights the major provisions of ISA 2025 and outlines what stakeholders in the capital market should know.

NOTABLE PROVISIONS IN THE ISA 2025:

Regulatory recognition of Virtual Assets as Securities:

While the ISA 2007 did not contain explicit statutory provisions recognising virtual assets, the Securities and Exchange Commission (“SEC” or the “Commission”), in the exercise of its powers under Section 13 of the ISA 2007, made commendable efforts to bring virtual assets within the regulatory perimeter. Notably, on 14 September 2020, SEC released its Statement on Digital Assets and their Classification and Treatment (the “Statement”), which classified virtual assets into four categories—Crypto Assets, Utility Tokens, Security Tokens, and Derivatives/Collective Investment Funds involving crypto assets—and outlined the regulatory framework applicable to each.
Despite these efforts, the absence of clear statutory backing created regulatory uncertainty and enforcement challenges, particularly in addressing fraudulent schemes and unlicensed operators in the digital asset space. To cure this gap, align with global standards, and further strengthen investor protection in Nigeria’s rapidly evolving digital economy, the ISA 2025 expands the statutory definition of securities to expressly include virtual assets such as cryptocurrencies, tokens, and other blockchain-based instruments as securities that may be traded on Nigeria’s securities exchanges.[1] This statutory recognition implies that all virtual assets now fall squarely under the regulatory oversight of the SEC, which is empowered to monitor, license, and penalise operators of crypto-based investment schemes that fail to comply with registration or conduct requirements.

Introduction of Composite and Non-Composite Securities Exchanges:

For ease of registrations and operations, the ISA 2025 introduces a new classification of securities exchanges, classifying them as either composite securities exchanges, which may facilitate the listing and trading of all types of securities and products, and non-composite securities exchanges, which are mono-product oriented or act as alternative trading systems.[2] The Act also introduces a new circumstance in which the license of a securities exchange could be revoked. Specifically, it provides that a certificate of registration granted may be revoked by the Commission where the registered securities exchange engages in business for which it is not registered.[3] Additionally, the Act broadly expands the duties and responsibilities of a Securities Exchange to promote market integrity and strengthen regulatory compliance.[4]

Regulation of Financial Market Infrastructures (FMIs):

FMIs were not expressly recognised or regulated under the ISA 2007. However, the ISA 2025 now introduces a robust regulatory framework for Financial Market Infrastructures (FMIs) by expressly outlining the requirements for establishing and operating FMIs in Nigeria.[5] It expressly provides that no person can operate an FMI without first obtaining approval and registration from SEC and stipulates penalties for erring individuals. The Commission is also empowered to withdraw or revoke the approval of an FMI if it poses risks to public interest or investor protection. Additionally, an FMI is required to create rules to guide its operations, subject to the prior approval of SEC.
The Act further introduces new provisions specifically designed to address the insolvency of FMIs distinct from the insolvency procedures outlined in the Companies and Allied Matters Act, 2020 (CAMA 2020). This distinction is due to the unique structure, operations and transactional nature of FMIs.[6]

Sanctions Against Ponzi and Unauthorised Investment Schemes:

The Act explicitly prohibits Ponzi schemes and unregistered investment platforms to safeguard the public from unscrupulous operators and protect investors from potential losses. Under the repealed ISA 2007, enforcement efforts against such schemes were hampered by the absence of a clear statutory basis for classifying them as illegal activities. Under the ISA 2025, SEC is now empowered to prevent and sanction such illegal schemes.[7] This legislative stance is particularly impactful given the prevalence of social-media-based Ponzi schemes in Nigeria.

Explicit Framework for Management of Systemic Risk:

Another key innovation in the ISA 2025 is the statutory power conferred on SEC to request information, issue directives, and take urgent actions, including suspending trading to monitor, mitigate, and manage systemic risk in the Nigerian capital market.[8] The Act also empowers SEC to collaborate with other financial regulatory bodies, such as the Central Bank of Nigeria (CBN), to ensure market and financial system stability.

Mergers, Takeovers, and Corporate Restructuring Oversight:

A salient innovation is SEC’s renewed oversight over mergers and takeovers of public companies. As provided under the Act, public companies are required to obtain prior approval from SEC before undertaking any significant corporate actions such as mergers, takeovers, share reconstructions, spin-offs, carve-outs, or asset disposals that may alter the company’s business direction or involve the issuance of securities.[9] Additionally, SEC is also empowered to oversee compromises, arrangements, and schemes involving the amalgamation of listed companies to ensure transparency and equitable treatment of all shareholders through full disclosures[10] The Act further aligns these provisions with the Federal Competition and Consumer Protection Commission Act, 2018, thereby harmonizing regulatory oversight of mergers and acquisitions.

Regulation of Commodity Exchanges and Warehouse Receipts:

The Act establishes a comprehensive regulatory framework for commodity exchanges and the issuance and trading of warehouse receipts in Nigeria. Under its provisions, entities intending to operate as commodity exchanges are required to register with SEC.[11] SEC is also empowered to revoke such registration under certain circumstances.[12] The Act also prohibits the unauthorised use of designations such as “commodity exchange” “commodity broker” or “clearing house,” with attendant penalties for violations.[13]
Equally innovative is the establishment of a framework for the registration, regulation and operation of warehouses and the issuance, negotiation and trading of warehouse receipts in Nigeria. The Act mandates that warehouses intending to issue warehouse receipts must register with SEC, which is also empowered to suspend or revoke such registrations under certain circumstances.[14] The Act stipulates requirements for insurance, inspection, and collateral management.[15] It grants legal recognition to warehouse receipts as evidence of proprietary rights, sets standards for their form and contents, and establishes procedures for their negotiation and trading.[16]

Unclaimed Dividends of Public Companies:

The Act provides clear guidance on the treatment of unclaimed dividends of public companies under the regulatory oversight of the SEC. It mandates that such dividends must be managed strictly in accordance with the Rules and Regulations issued pursuant to the Act. Furthermore, the Act expressly prohibits for any person or entity from dealing with unclaimed dividends in a manner that is inconsistent with the prescribed regulatory framework.[17]

Strengthening the Investments and Securities Tribunal (IST):

To enhance the effectiveness of the IST in discharging its responsibilities, the Act introduces key revisions to its composition and jurisdiction. Under the repealed ISA 2007, the Investments and Securities Tribunal was composed of ten members appointed by the Minister. The ISA 2025 now expands the membership of the tribunal to twelve (12) members, comprising a chairman, five (5) full members and six (6) part time members, all of whom must be experienced and knowledgeable in capital markets and to be appointed by the President on the recommendation of the Minister.[18] Regarding its Jurisdiction, the Act now clearly spells out the original and appellate jurisdictions of the Tribunal. Specifically, the Tribunal now exercises exclusive original jurisdiction in matters where:

- The complaint is against a direct action of the Commission;
- a matter had been referred to the Commission and the Commission failed to act within sixty days;
  or
- The action arose from a regulatory action taken by the Commission under the provisions of the Act.[19]
  In exercising its appellate jurisdiction, the Tribunal shall adjudicate on matters involving:
- the Commission and any person (individual or corporate) in respect of any capital market matter;
- capital market operators and securities exchanges or financial market infrastructure;
- Capital market operators inter se;
- capital market operators and their clients;
- public companies and the Commission or the securities exchanges or investors;
- an investor and a securities exchange or financial market infrastructure;
- capital market operators and self-regulatory organisations;
- a capital market operator and the Commission;
- an investor and the Commission;
- an issuer of securities and the Commission;
  - arising from the administration, management and operation of collective investment schemes;
  - relating to the review, approval and regulation of mergers, takeovers and restructuring of public companies.[20]

10. Mandatory Use of Legal Entity Identifiers in Securities Transactions:

The Act introduces a mandatory Legal Entity Identifier (LEI) for entities involved in financial transactions within Nigeria, which requires all entities, whether directly or indirectly participating in securities dealings, to obtain and disclose an LEI, which must be acquired from an authorised issuer. This requirement aims to ensure accurate transaction monitoring and minimise systemic risks that may arise from counterparty exposures. The Act also defines an LEI as a unique code that identifies every distinct entity or structure that is a party to a financial transaction.[21]

CONCLUSION:

The ISA 2025 addresses several deficiencies inherent in the repealed ISA 2007 and represents a landmark development for the Nigerian capital market. The Act is expected to enhance investor confidence, attract domestic and foreign investments, improve market efficiency, promote a fair and transparent capital market, and reduce systemic risks. Businesses, investors, and capital market operators are encouraged to familiarise themselves with these new provisions and ensure compliance.

This article is for informational purposes only and does not serve as a legal advice. For tailored guidance on how this new Act impacts your business or investment, please contact info@alliancelawfirm.ng.

FOOTNOTES

[1] Section 357 of the ISA 2025

[2] Section 27 of the ISA 2025

[3] Section 37(1)(d) of the ISA 2025

[4] Section 30 of the ISA 2025

[5] Sections 41-44 of the ISA 2025

[6] Sections 45-57 of the ISA 2025

[7] Section 3(3)(r) of the ISA 2025

[8] Sections 82-85 of the ISA 2025

[9] Section 140 of the ISA 2025

[10] Section 140(2)(3) of the ISA 2025

[11] Section 224 of the ISA 2025

[12] Section 235 of the ISA 2025