Understanding the Investment and Securities Act 2025

CONTRIBUTOR: JANET UDOKA

Introduction
On March 31, 2025, the President signed into law the Investment and Securities Act, 2025 (ISA), repealing the previous 2007 enactment. This updated legislation reflects the significant developments in global financial markets over the past 18 years and is designed to align Nigeria’s capital market framework with international best practices.

The new Act introduces comprehensive reforms aimed at addressing emerging challenges and opportunities in the financial ecosystem. Notably, it expands the regulatory powers of the Securities and Exchange Commission (SEC) and provides legal recognition for digital assets, such as cryptocurrencies, as securities. This recognition establishes a clearer regulatory framework for fintech companies and digital asset operators, thereby enhancing investor protection, promoting market innovation, and fostering greater confidence in Nigeria’s capital market^[1].

Notable reforms/innovations under the new Investment and Securities Act include:
1. Independence of the Commission:
Section 1(4) introduces a novel provision affirming the independence of the Commission, consistent with the standards prescribed by the International Organization of Securities Commissions (IOSCO). This provision underscores that the Commission shall operate autonomously and shall not be subject to the direction or control of any other authority or person, except as expressly provided under this Act^[2].

2. Classification of Securities Exchanges:

Section 27^[3] The Investments and Securities Act, 2025 introduces a comprehensive framework for the classification of securities exchanges to facilitate more streamlined registration and operational processes. Under the Act, securities exchanges are categorised into Composite Exchanges and Non-composite Exchanges. A Composite Exchange is authorised to list and facilitate the trading of all categories of securities and financial products. In contrast, a Non-composite Exchange is restricted to the listing and trading of specific asset classes, such as commodities or derivatives. This regulatory distinction promotes clearer market segmentation, fosters specialisation, and enhances regulatory oversight, thereby enabling both investors and issuers to engage with the market more effectively and with greater clarity^[4].

3. Composition of the Board of the Commission:
The Act introduces significant amendments to the structure and composition of the Board of the Commission. It expressly defines the core mandate of the Board and provides that the Chairman shall serve in a non-executive capacity. The role of the Director-General has been expanded to include the functions of the Chief Accounting Officer of the Commission. Notably, the Director-General of the National Pension Commission is now included as a member of the Board, a move intended to foster inter-agency collaboration and promote increased pension fund participation in the capital market. Additionally, the Act prescribes minimum seniority requirements for representatives nominated by both the Central Bank of Nigeria and the Federal Ministry of Finance. It also enhances the qualification thresholds for non-executive commissioners, thereby strengthening professional competence and regulatory oversight^[5].

4. Enhanced Investor Protection:

The new Act prioritizes investor protection as a central objective. By expressly prohibiting Ponzi schemes and other unlawful investment operations, it represents a decisive step toward sanitizing the investment landscape. For years, numerous Nigerians have fallen prey to fraudulent schemes offering exaggerated or unrealistic returns. The enactment of this legislation now provides a clear legal framework for the identification, prohibition, and prosecution of such illicit activities. Under the provisions of the Act, individuals found operating illegal investment schemes may face imprisonment for a term of up to ten years. This enhanced regulatory approach is intended to deter fraudulent conduct and bolster investor confidence in the financial market^[6].

5. Recognition of Virtual Assets:
Section 357 of the new Act expands the definition of “securities” to expressly include virtual assets and digital assets. By this legislative innovation, virtual and digital assets—such as cryptocurrencies—are now formally recognized under Nigerian law. Consequently, Virtual Asset Service Providers (VASPs) and Digital Asset Operators (DAOs) are brought within the regulatory purview of the Securities and Exchange Commission (SEC), thereby subjecting their activities to formal oversight and compliance requirements^[7].

6. Criminalizing Ponzi Schemes and Unlawful Investment Practices:

In response to the increasing prevalence of Ponzi schemes defrauding investors in Nigeria, the Investments and Securities Act expressly prohibits the operation of such fraudulent investment schemes, prescribing stringent sanctions—including imprisonment and substantial fines—for any individual or entity found culpable^[8]. This provision is intended to discourage unscrupulous conduct and safeguard investors from financial harm. The Director-General of the Securities and Exchange Commission (SEC), Mr. Emomotimi Agama, affirmed this position, stating that the Commission is now fully equipped to take decisive action against non-compliant operators within the industry. According to him, this development is expected to bolster investor confidence and encourage greater participation in the Nigerian capital market, given the enhanced investor protection mandate of the SEC^[9].

7. Systemic Risk Management and Market Stability:
The Act also incorporates provisions for managing systemic risks within the capital market^[10], In order to safeguard against crises capable of undermining investor confidence, the Securities and Exchange Commission (SEC) is empowered to implement mechanisms for the monitoring and mitigation of systemic risks. To this end, the SEC may require capital market participants to submit relevant documents or information necessary for such monitoring, notwithstanding any existing contractual obligations to the contrary. Failure to comply with such requests shall attract financial penalties as may be prescribed by the Commission. Furthermore, the SEC is authorized to issue written directives aimed at managing systemic risks, which may include, where necessary, the suspension of trading activities to preserve market stability. These regulatory measures are consistent with global financial stability standards and are intended to ensure the resilience of Nigeria’s capital market against external shocks^[11].

8. Insolvency of Financial Market Infrastructures

Sections 45 to 57 of the Act introduce specific provisions addressing the insolvency of Financial Market Infrastructures (FMIs) and related market participants. These provisions establish distinct insolvency procedures that are separate from those set out in the Companies and Allied Matters Act (CAMA) 2020, reflecting the unique structure, operations, and transactions of FMIs and the entities involved. The aim is to shield financial transactions conducted under market rules from disruption by general insolvency laws. For instance, the provisions ensure that certified net sums owed by a defaulting participant are recognized as provable debts in insolvency proceedings, thereby preserving the integrity of financial market operations. Additionally, the Commission has the authority to enforce the repayment of outstanding amounts owed by defaulting participants. Asset holders of defaulting parties are obligated to cooperate with the FMI during the default process, ensuring proper management of assets and minimizing market disruption^[12]. Moreover, secured creditors are entitled to retain their collateral, with their claims taking priority over those of other creditors.

9. Mergers, Acquisitions, and Takeovers:
Following the establishment of the Federal Competition and Consumer Protection Commission (FCCPC) and the transfer of specific merger control responsibilities to the FCCPC, amendments have been made to the provisions governing mergers and acquisitions under the Investments and Securities Act (ISA) 2007. The consolidation of public entities is now subject to the prior approval of the Commission.

10. Regulatory provisions for Financial Market Infrastructures:

A regulatory framework is established under the Act for financial market infrastructures (FMIs)^[13] in Nigeria, entities such as Central Counterparties, Clearing Houses, and Trade Depositories that intend to establish or operate a financial market infrastructure (FMI) must first obtain a certificate of registration from the Commission. The Commission retains the authority to revoke such approvals or direct the cessation of operations of any FMI where it is deemed necessary in the public interest or to safeguard investors. However, prior to taking such action, the affected entity shall be afforded an opportunity to present its case.

CONCLUSION

The enactment of the Investment and Securities Act, 2025 marks a significant milestone in the evolution of Nigeria’s capital market, providing a comprehensive legal framework that addresses contemporary challenges and aligns with global financial standards. The key reforms, including enhanced investor protection, the recognition of digital assets, and improved regulatory oversight, demonstrate the government’s commitment to fostering a more transparent, secure, and innovative financial ecosystem. With the implementation of these provisions, Nigeria’s capital market is poised to attract greater investment, promote market stability, and safeguard the interests of both investors and market participants. As the Act paves the way for a more resilient and dynamic financial market, its successful implementation will play a crucial role in driving economic growth and positioning Nigeria as a leading financial hub in Africa.

REFERENCE

1. New Investment and Securities Act 2025 (ISA) and Your Money; Bravewood Available at https://blog.bravewood.ng/investment-and-securities-act-2025-and-your-money/ accessed in April 2025. ↑
2. Understanding the Investment and Securities Act 2025: Key Innovations and Implications; Punuka Attorneys & Solicitors. Anthony Idigbe SAN, Tobenna Nnamani, Lovelyn Aniekwe, Kent Chima, Ogonna Eziechine, Bestman Chidiebere Nwaokocha. Available at https://punuka.com/wp-content/uploads/2025/04/Understanding-the-Investment-and-Securities-Act-2025-1.pdf. Accessed in April 2025. ↑
3. Section 1(4), 3(4)(l), (n), (q) and (r) of the ISA Act 2025. ↑
4. A Review Of The Investment And Securities Act 2025; MONDAQ, By Yvonne Ezekiel & Gukongozi Ugwuez. Available at https://www.mondaq.com/nigeria/securities/1607978/a-review-of-the-investment-and-securities-act-2025 accessed April 2025. ↑
5. Ibid. ↑
6. KEY HIGHLIGHTS OF THE INVESTMENT AND SECURITIES ACT, 2025; Berkeley Legal By Oluwasayo Oyeti. Available at https://berkeleylp.com/insights/key-highlights-of-the-investment-and-securities-act-2025/ accessed April 2025. ↑
7. Ibid. ↑
8. Section 3 of the ISA Act 2025 ↑
9. ISA 2025: Ponzi schemes promoters in Nigeria now face 10 years jail term – Nairametrics available at (https://nairametrics.com/2025/04/01/isa-2025-ponzi-schemes-promoters-in-nigeria-now-face-10-years-jail-term-sec-dg/#google_vignette ) accessed April 2025. ↑
10. Section 82 -84 of the ISA Act 2025. ↑
11. Ibid. ↑
12. Ibid. ↑
13.  Section 42 -44 of the ISA Act 2025. ↑