ISA 2025: What You Should Know About the SEC’s New Powers
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President Bola Ahmed Tinubu has signed the Investments and Securities Act (ISA) 2025 into law, replacing the 2007 version and introducing significant reforms to Nigeria’s capital market.
The new Act boosts the Securities and Exchange Commission’s (SEC) authority, reinforcing its role as the top regulator to ensure investor protection, fair practices, and market stability. It aligns Nigeria’s regulatory framework with international standards, promoting transparency and sustainable growth.
According to SEC Director General Emomotimi Agama, the Act brings Nigeria in line with global best practices and meets the requirements of IOSCO’s Enhanced Multilateral Memorandum of Understanding (MoU), preserving the SEC’s “Signatory A” status and strengthening the market’s global credibility.
Key Takeaways from the ISA 2025
The Investment and Securities Act (ISA) 2025 significantly strengthens the Securities and Exchange Commission (SEC) ‘s regulatory authority, aligning its mandate with international standards set by leading global securities regulators. These enhancements position the SEC to fully comply with the requirements of IOSCO’s Enhanced Multilateral Memorandum of Understanding (MoU), thereby maintaining its “Signatory A” designation and boosting the appeal of Nigeria’s capital market to both local and foreign investors.
Noteworthy features of the ISA 2025 include:
1. Categorization of Securities Exchanges and Introduction of Financial Market Infrastructure Provisions: The Act introduces a classification system for Securities Exchanges, distinguishing between Composite Exchanges, which handle diverse categories of securities and financial products, and Non-composite Exchanges, which are limited to a single type of instrument. It also includes updated regulatory provisions for financial market infrastructures such as central counterparties, clearing houses, and trade deposits.
2. Broadened Definition of Securities: The Act expands the traditional understanding of securities to encompass digital and virtual assets, including investment contracts. It brings Virtual Asset Service Providers (VASPs), Digital Asset Operators (DAOPs), and Digital Asset Exchanges under the regulatory scope of the SEC.
3. Robust Insolvency Framework for Financial Market Infrastructures: New clauses within the Act exempt transactions conducted via Financial Market Infrastructures from general insolvency rules, providing greater legal certainty and operational resilience.
4. Systemic Risk Oversight: The legislation introduces mechanisms for identifying, monitoring, and mitigating systemic risk across the Nigerian capital market, reinforcing market stability and investor confidence.
5. Broadened Scope of Eligible Issuers: The ISA 2025 extends the range of entities permitted to issue securities to the public. This development paves the way for the introduction of a diverse array of innovative financial products and services, supporting commercial and investment ventures, all under the regulatory oversight and approval of the SEC as specified in the Act.
6. Establishment of a Regulatory Framework for Commodities Exchanges: A dedicated section of the Act lays out comprehensive guidelines for the governance of Commodities Exchanges and the use of Warehouse Receipts. These provisions are vital for advancing the full value chain of the commodities sector.
7. Enhanced Transactional Transparency in the Capital Market: To promote accountability and transparency, the Act mandates the use of Legal Entity Identifiers (LEIs) for all capital market participants involved in securities transactions. This measure aims to provide clearer identification and tracking of market activities.
8. Crackdown on Unlawful Investment Operations: The Act takes a firm stance against Ponzi and other fraudulent investment schemes, explicitly outlawing them. It establishes strict penalties, including imprisonment and additional sanctions, for individuals or entities found promoting such illegal activities.
Crackdown on Ponzi and Pyramid Scheme Operators
To safeguard Nigerians from fraudulent investment operations, the ISA 2025 explicitly bans Ponzi and pyramid schemes, along with other unlawful financial ventures. The Act makes it clear that individuals or organizations involved in promoting or operating such schemes are committing a criminal offense. Upon conviction, offenders face penalties of no less than N20,000,000, a prison term of up to 10 years, or both.
Commenting on the development, Agama praised the President’s approval of the Act as a game-changing moment for the capital market. He emphasized that ISA 2025 underscores a strong commitment to fostering a more inclusive, resilient, and forward-looking market environment.
“The SEC expresses deep gratitude to the National Assembly for its patriotic efforts and unwavering commitment in delivering this crucial reform,” he said. “The rigorous legislative process, marked by thorough debate, broad stakeholder consultation, and bipartisan cooperation, reflects a clear dedication to boosting economic development and reinforcing investor trust.”
