Breaking News

NASS to Further Empower SEC to Sanction Unregistered Schemes, Others

Ebuka Uche

In a bid to combat the menace of Ponzi schemes and ensure that the apex regulator of the capital market is well equipped to stem the tide, the National Assembly is proposing a Bill that will empower the Securities and Exchange Commission to impose stiffer punishment on promoters of Ponzi schemes and other unregistered investment schemes.

This is part of an amendment to the Investment and Securities Act 2007, being proposed by the House of Representatives.

The Second reading of the Bill was done on Thursday at the House of Representatives by Hon. Babangida Ibrahim representing MalumFashi/Kafur Federal Constituency in Katsina State.

The amendment is titled “A Bill for an Act to Repeal the Investments and Securities Act, 2007 and Enact the Investments and Securities Bill to Establish Securities and Exchange Commission as the Apex Regulatory Authority for the Nigerian Capital Market as well as Regulation of the Market to ensure Capital Formation, the Protection of the Market to ensure Capital Formation, the Protection of Investors, Maintain Fair, Efficient and Transparent Market and Reduction of Systematic Risk; and for Related Matters,”

According to Hon. Ibrahim, there has been a lot of complains by Nigerians on the activities of these schemes that promise unreasonably high returns and at the end of the day they fleece Nigerians of their hard earned money hence the need for more regulations to monitor them.

Under the proposed law, ‘A bill to repeal the Investment and Securities Act 2007 and to enact the Investments and Securities Act, 2021’ which passed the second reading at the floor of the House of Representatives yesterday, SEC will be empowered to address the challenges of Ponzi schemes.

Section 195 (1) of the Bill empowers SEC thus: “The Commission shall have the power to enter and seal up all prohibited schemes and shall obtain an Order of court to freeze and forfeit all assets of such schemes to the Federal Government of Nigeria. 

“(2)The cost and expenses incurred under subsection (1) above shall be a first charge from the funds and properties of the illegal scheme including assets of its owners, promoters and or managers, whether acquired legitimately or otherwise.“(3)   For the purposes of this Bill, “prohibited scheme” including those commonly known as a “Ponzi or Pyramid scheme” means: (a)  Any investment scheme that pays existing contributors with funds collected from new contributors to the scheme promising high returns with little or no risk: i)      Whether or not the scheme limits the number of persons who may participate therein, either expressly or by the application of conditions affecting the eligibility of a person to enter into, or receive compensation under the scheme; or ii)  Whether the scheme is operated at a physical address or through the internet or other electronic means. (b)  Any scheme where participants attempt to make money by recruiting new participants usually where: (i)      the promoter promises a high return in a short period of time, and (ii)   no genuine product or service is actually sold; or(iii) the primary emphasis is on recruiting new participants

“(4)   The promoter(s) and operator(s) of any entity engaged in a prohibited scheme commits an offence and is liable upon conviction to imprisonment for a term of ten (10) years or a fine of N5,000,000 or both”.

According to Hon. Ibrahim “The current ISA 2007 is old and we all know a lot has happened between that time and now like technological advancements. The capital market has to be dynamic in today’s world in a bid to contribute its quota to national development and that is one of the reasons why we are pushing this”.

“A lot of things have happened between that time and now hence the need for an amendment. When that Law came into existence we did not have derivatives and commodities markets like we do now, these are some of the issues that are necessitating this amendment. The plan is to make this Bill a little bit flexible so some national government can be able to approach the capital market to source for fund either for developmental projects “he added.

Another part of the amendment is to increase the period within which a claim for compensation could be made for the Investor Protection Fund to six years from the date of occurrence of the defalcation, revocation, cancellation, insolvency or bankruptcy of the dealing firm. The period in the current Act is six months. 

The objectives of an Investor Protection Fund is to compensate investors who suffer pecuniary loss arising from the insolvency, bankruptcy or negligence of a dealing member firm of a securities exchange; defalcation committed by a dealing member firm or any of its directors, officers, employees or representatives in relation to securities, money or any property entrusted to, or received or deemed received by the dealing member firm in the course of its business as a capital market operator; and revocation or cancellation of the registration of a dealing member firm.

About Editor

Check Also

Report to Me Any of My Officials Who Obstruct Progress or Ask for Bribe – President Tinubu to Qatari Investors

President Bola Tinubu has assured the international business community that Nigeria is ready for serious …

Leave a Reply