POWER OF SEC TO REGULATE THE SECURITIES CAPITAL INDUSTRY

1
OLUYEMISI O. DANSU
ARGYLE & CLOVER, 1st Floor (West Wing) City Hall Catholic Mission Street Lagos Island
Tel: 07025239755; 07098504751
Email: yemisi.dansu@argyleandclover.com; Website: www.argyleandclover.com
EXTENT OF POWER OF THE SECURITES AND EXCHANGE
COMMISSION TO REGULATE THE SECURITIES AND CAPITAL
MARKET INDUSTRY IN NIGERIA
The Investment & Securities Act 2011 (ISA) is the primary legislation governing the
Securities and Capital Market industry in Nigeria.
PART I; Section 1 ISA establishes the Securities and Exchange Commission (SEC).
Part II of the ISA provides for the Functions and Powers of SEC. Section 13 ISA provides
as follows:
“The Commission shall be the apex regulatory organisation for the Nigerian capital
market and shall carry out the functions and exercise all the powers prescribed in this
Act and, in particular, shall-
(a) regulate investments and securities business in Nigeria as defined in this Act;
(b) register and regulate securities exchanges, capital trade points , futures, options
and derivatives exchanges, commodity exchanges and any other recognised
investment exchange;
(c) regulate all offers of securities by public companies and entities;
(d) register securities of public companies;
(e) render assistance as may be deemed necessary to promoters and investors
wishing to establish securities exchanges and capital trade points;
(f) prepare adequate guidelines and organise training programmes and
disseminate information necessary for the establishment of securities
exchanges and capital trade points;
(g) register and regulate corporate and individual capital market operators as
defined in this Act;
(h) register and regulate the workings of venture capital funds and collective
investments schemes in whatever form;

2
OLUYEMISI O. DANSU
Tel: 07025239755; 07098504751
(i) facilitate the establishment of a nationwide system for securities trading in the
Nigerian capital market in order to protect investors and maintain fair and
orderly markets;
(j) facilitate the linking of all markets in securities with information and
communication technology facilities;
(k) act in the public interest having regard to the protection of investors and the
maintenance of fair and orderly markets and to this end establish a nationwide
trust scheme to compensate investors whose losses are not covered under the
investors protection funds administered by securities exchanges and capital
trade points;
(l) keep and maintain a register of foreign portfolio investments;
(m) register and regulate securities depository companies, clearing and settlement
companies, custodians of assets and securities, credit rating agencies and such
other agencies and intermediaries;
(n) protect the integrity of the securities market against all forms of abuses
including insider dealing;
(o) promote and register self-regulatory organisations including securities
exchanges, capital trade points and capital market trade associations to which
it may delegate its powers;
(p) review, approve and regulate mergers, acquisitions, takeovers and all forms of
business combinations and affected transactions of all companies as defined in
this Act;
(q) authorise and regulate cross-border securities transactions;
(r) call for information from and inspect, conduct inquiries and audit of securities
exchanges, capital market operators, collective investment schemes and all
other regulated entities;
(s) promote investors' education and the training of all categories of intermediaries
in the securities industry;
(t) call for, or furnish to any person, such information as may be considered
necessary by it for the efficient discharge of its functions;
(u) levy fees, penalties and administrative costs of proceedings or other charges on
any person in relation to investments and securities business in Nigeria in
accordance with the provisions of this Act;

3
OLUYEMISI O. DANSU
Tel: 07025239755; 07098504751
(v) intervene in the management and control of capital market operators which it
considers has failed, is failing or in crisis including entering into the premises
and doing whatsoever the Commission deems necessary for the protection of
investors;
(w) enter and seal up the premises of persons illegally carrying on capital market
operations;
(x) in furtherance of its role of protecting the integrity of the securities market, seek
judicial order to freeze the assets (including bank accounts) of any person
whose assets were derived from the violation of this Act, or any securities law or
regulation in Nigeria or other jurisdictions;
(y) relate effectively with domestic and foreign regulators and supervisors of other
financial institutions including entering into co-operative agreement on matters
of common interest;
(z) conduct research into all or any aspect of the securities industry;
(aa) prevent fraudulent and unfair trade practices relating to the securities industry;
(bb) disqualify persons considered unfit from being employed in any arm of the
securities industry;
(cc) advise the Minister on all matters relating to the securities industry; and
(dd) perform such other functions and exercise such other powers not inconsistent
with this Act as are necessary or expedient for giving full effect to the provisions
of this Act.”
Section 14 ISA further provides that SEC may establish specialised departments for the
purpose of regulating and developing the Nigerian capital market.
Part V ISA 2011 regulates the Registration and Regulation of Securities Exchanges, Capital
Trade Points and Other Self-Regulatory Organizations.
Section 28 (1) ISA provides thus:
“No securities exchange or capital trade point as defined in section 315 of this Act
shall commence operation unless it is registered with the Commission in accordance
with the provisions of this Act and the rules and regulations made thereunder.”

4
OLUYEMISI O. DANSU
Tel: 07025239755; 07098504751
Section 315 ISA is the definition and interpretation section of the Act. Relevant definitions of
specific terms are reproduced below:
"Capital trade point" means a mini exchange registered by the Commission pursuant
to this Bill, which constitutes, maintains or provides market place or facilities for
bringing together purchasers and sellers of securities or for otherwise performing,
with respect to securities, the functions commonly performed by a securities
exchange;”
“Depository or Custodian company” means a company acting as a custodian of
securities in connection with a system of central handling of securities whereby all
securities of a particular class of an issuer deposited within the system are treated as
fungible and may be transferred, loaned or pledged by bookkeeping entry without
physical delivery of certificates;
“Securities” means—
(a) debentures, stocks or bonds issued or proposed to be issued by a
government;
(b) debentures, stocks, shares, bonds or notes issued or proposed to be issued
by a body corporate or unincorporated;
(c) any right or option in respect of any such debentures, stocks, shares, bonds or
notes; or
(d) any interest as defined in section 106 of the Companies and Allied Matters Act;
(e) futures contracts;
(f) bills of exchange;
(g) promissory notes or certificates of deposit issued by a bank which has a
tenure of not less than nine months,
and the term securities in this Act includes those securities in the category of the
securities listed in (a)–(g) above which may be transferred by means of any electronic
mode approved by the Commission and which may be deposited, kept or stored with
any licensed depository or custodian company as provided under this Act;

5
OLUYEMISI O. DANSU
Tel: 07025239755; 07098504751
“securities exchange" means an exchange or approved trading facility such as a
commodity exchange, metal exchange, petroleum exchange, options, futures
exchanges, over the counter market, and other derivatives exchanges;”
Section 28 (2) ISA provides that an application for registration as a securities exchange or
capital trade point shall be made to the Securities and Exchange Commission (“SEC”) in the
prescribed form and in the manner specified by SEC.
Section 29 ISA provides further:
“
(1) Every securities exchange or capital trade point shall be a body corporate
incorporated under the Companies and Allied Matters Act.
(2) The Commission may register a body corporate as a securities exchange or
capital trade point if it is satisfied that the rules of the body corporate make
satisfactory provisions-
(a) for the exclusion from its membership persons who are not of good character
and who do not possess a high degree of business integrity;
(b) for the expulsion, suspension or discipline of members for conduct
inconsistent with just and equitable principles in the transaction of securities
business or for contravention of or failure to comply with the rules of the
securities exchange or capital trade point or the provisions of this Act;
(c) with respect to the conditions under which securities may be listed for
trading on that particular securities exchange or capital trade point;
(d) with respect to the conditions governing dealings in securities by the
members;
(e) with respect to the class or classes of securities which may be dealt in by
members; and
(f) with respect to a fair representation of persons in the selection of members of
the Board of the securities exchange or capital trade point and the
administration of its affairs and provided that listed companies and investors
shall each be represented by one or more members on its board.

6
OLUYEMISI O. DANSU
Tel: 07025239755; 07098504751
(3) The Commission, in granting approval to register a securities exchange or
capital trade point under this section, shall ensure that the interest of the public
will be served by the grant of the approval.
(4) The Commission shall issue a certificate of registration to a body corporate
registered pursuant to this section.”
Section 305 ISA provides for offences and penalties thus:
“
(1) Where an offence under this Act has been committed by a company, every
person who at the time the offence was committed was in charge of, and was
responsible to, the company for the conduct of the business of the company, as
well as the company, shall be deemed to be guilty of the offence and shall be
liable to be proceeded against.
(2) Notwithstanding anything contained in subsection (1), where an offence under
this Act has been committed by a company and it is proved that the offence has
been committed with the consent or connivance of, or is attributable to any
neglect on the part of, any director, manager, secretary or other officer of the
company, such director, manager, secretary or other officer shall also be
deemed to be guilty of the offence and shall be liable to be proceeded against.
(3) If the Commission is satisfied that a person (corporate or individual)-
(a) is engaged or has engaged in any form of market abuse or other violations
under this Act; or
(b) by taking or refraining from taking any action, has required or encouraged
another person or persons to engage in behaviour which if engaged in by a
market participant or company would amount to market abuse or violation
under this Act, it may impose on the person a penalty of such amount or of
such nature as it considers appropriate.
(c) where the Commission is entitled to impose a penalty on a person, it may
impose a penalty on the person, or in addition, publish a statement to the
effect that the person has engaged in market abuse or violation under this
Act.”

7
OLUYEMISI O. DANSU
Tel: 07025239755; 07098504751
Section 313 ISA empowers SEC to make rules and regulations thus:
“
(1) The Commission may, from time to time, make rules and regulations for the
purpose of giving effect to the provisions of this Act and may in particular and
without prejudice to the generality of the foregoing provisions, make rules and
regulations-
(a) to alter or modify, from time to time, in consultation with the Minister, the
provisions of the Second Schedule to this Act;
(b) prescribing the forms for returns and other information required under this
Act;
(c) prescribing the procedure for obtaining any information required under this
Act;
(d) requiring returns to be made within the period specified therein by any
company or enterprise to which this Act applies;
(e) prescribing the procedure and criteria for approval of mergers, take-overs,
acquisitions and business combinations under this Act;
(f) prescribing any fees payable under this Act;
(g) prescribing the procedure and criteria for regulating cross border offerings,
listing and trading of securities by foreign issuers;
(h) prescribing that the provisions of this Act shall not apply or shall apply with
such modifications (if any) as may be specified in the regulations to any
person or class of persons or any securities or class of securities or to any
transaction;
(i) prescribing the information to be contained in any prospectus or offer
documents filed under this Act;
(j) prescribing the procedure, criteria for the authorisation, revocation and
operation of collective investment schemes including prudential and product
regulation;
(k) prescribing the activities which constitute "insider dealings" the rules
governing dealings in securities by insiders and defining the term "insider
dealings";
(l) without prejudice to the provisions of the Companies and Allied Matters Act
specifying for the protection of investors-

8
OLUYEMISI O. DANSU
Tel: 07025239755; 07098504751
(i) the matters to
(ii) be disclosed relating to the public issue of securities, transfer of securities
of public companies and other matters incidental thereto;
(iii) the returns that are required to be filed by all public companies;
(iv) the form, manner and procedure for obtaining proxies including the
information to be disclosed to investors before proxies are given by any
person; and
(v) the manner in which such matters shall be disclosed by the companies.
(m) prescribing the requirement for the identification of persons doing business
with capital market operators;
(n) prescribing as it deems appropriate, necessary rules for dealing with
unclaimed dividends and unclaimed certificates by public companies and
their agents;
(o) providing for anything requiring to be prescribed under this Act; and
(p) generally for carrying out the principles and objectives of this Act.
(2) The Commission shall in the exercise of powers to make rules in this section
consult with stakeholders.
(3) Any instrument issued under subsection (1) of this section shall be under the
signature of the Director-General of the Commission and the Secretary or any
two members as may be authorised.
(4) Any regulation under this Act shall be deemed made fifteen days after receipt by
the Minister unless the Minister, before the expiration of the fifteen days, directs
that it be modified, amended or rescinded.
(5) Every regulation made by the Commission shall be published in the Gazette or
any official document.
(6) Notwithstanding the provisions of subsection (1) of this section the Commission
may, from time to time, amend or revoke rules or regulations for purposes of

9
OLUYEMISI O. DANSU
Tel: 07025239755; 07098504751
giving effect to the provisions of this Bill and the rules and regulations made
thereunder.
(7) Any regulations or rules made under this Act may, where appropriate, prescribe
penalties for default.”
Further to Section 313 ISA empowering SEC to make rules, the SEC Rules and
Regulations were made for regulation of the Securities Industry. SEC Rules provides
participants in the capital market with more precise notice of what is expected of them, what
conduct will be sanctioned and also promotes fairness and equality of treatment among
similarly situated persons. The Rules are applicable to securities exchanges; capital market
operators; securities offered for sale or subscription; mergers, acquisitions and
combinations; collective investors protection fund; borrowing by states, local government
and other agencies amongst other things.
The power of SEC to make rules and regulations is continuous and the rules may be
amended from time to time. SEC also issues interpretative rules and general statements of
policy which guides participants in the industry.

POWER OF SEC TO REGULATE THE SECURITIES CAPITAL INDUSTRY

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POWER OF SEC TO REGULATE THE SECURITIES CAPITAL INDUSTRY