Representatives act to protect financial market investors

The House of Representatives passed its second reading on Thursday on a bill aimed at protecting investors in the capital market, ensuring and maintaining a fair, efficient and transparent market and reducing systemic risk in the Nigerian capital market.

The Private Member’s Bill seeks to repeal the Investments and Securities Act 2007 and to enact the Investments and Securities Bill which seeks to establish the Security and Trading Commission as the as the supreme regulatory authority for the Nigerian capital market and other related matters.

In his main debate, the Hon. Ibrahim Babangida explained that the current enabling law for the Nigerian capital market, the Investments and Securities Act No. 29 of 2007 (“ISA”), was signed into law by the late President Umar Musa Yar’adua in June. 2007 (14 years ago). ).

According to him, current trends in financial market regulation make it imperative to make major improvements to the Act in order to align our market with international standards.

This bill increases the number of sections in the 2007 ISA from 316 to 351.

Among others, the major essence of this Bill is to: strengthen provisions for effective regulation of investment schemes and effectively combat the proliferation of Ponzi schemes in Nigeria.

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“The bill prohibits Ponzi/Pyramid schemes and other illegal investment schemes and prescribes a prison term of at least 10 years for promoters of such schemes. The Commission would also be empowered to close these prohibited investment schemes.

“Introduction of New Provisions for the Regulation of Trading in Derivatives and Commodities to Deepen the Nigerian Capital Market and Economy

“A derivative is a bilateral contract whose value is derived at a future date from an underlying asset, such as a commodity, a currency, an interest rate, the value of a good, a share of company, etc.

“Derivatives are financial instruments used for hedging and risk management purposes. Although the Commission had previously created rules in this area, the bill contains provisions that strengthen the powers of the Commission to regulate this class of instruments.

“As well, an entirely new part is inserted into the bill as the basis for the regulation of commodity exchanges and warehouse receipts by the Commission. These new provisions are essential to enable the development of the entire range of the Commodities ecosystem.

“Introduction of new provisions to regulate the activities of financial market infrastructures, as well as clearing and bankruptcy provisions to protect investors in derivative contracts.

“There are new provisions on the regulation of financial market intermediaries (FMIs), such as central counterparties (CCPs), clearing houses, commercial depositories, etc.

“General insolvency law would have no effect on market contracts or action taken under the rules of a stock exchange, IMF with respect to market contracts, or action taken to transfer collateral.

“Furthermore, no entity, trade association may operate or hold itself out as a self-regulatory organization (SRO) unless it is recognized or registered as such by the SEC. The responsibilities of SROs are also well defined, while that a new provision has been introduced on netting of financial contracts,” Hon Babangida noted.

Upon ruling on the motion, the bill was referred to the House Committee on Capital Markets and Other Institutions for further legislative action.

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