Review Of The Investment And Securities Act Of 2025 (2025)

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Introduction

The Investment and Securities Act (ISA) of 2025 was signed intolaw on March 31st 2025 by President Bola Ahmed Tinubu, repealingand replacing the Investment and Securities Act (ISA) of 2007 whichwas the Act previously regulating the Nigerian investment andcapital market. The new ISA marks a pivotal advancement in theNigerian investment and capital market, coming at a time when theinvestment market has changed dramatically and the Nigerian capitalmarket has evolved rapidly. The new ISA covers and addresses thecontemporary developments in the capital market previouslyunaddressed under the ISA 2007. In this article, we have thoroughlyreviewed the new Investment and Securities Act, highlighting itspurpose and significance, key provisions, implications for theNigerian Market, amongst others. For ease of reference, we havestructured this review under the following heads:

• Purpose and Significance of the Investment and SecuritiesAct
• Analysis of Key Provisions
• Implications for Capital Markets
• Implications for the Nigerian Economy
• Conclusion

Purpose and Significance of The Investment and SecuritiesAct

The ISA 2025 is an Act that is up-to-date with the contemporarydevelopments in the investment and capital market. Hence, it servesas a robust legal framework for the Nigerian Capital market,offering wider protection to investors, introducing criticalreforms that promote market integrity, transparency, sustainablegrowth, and alignment with globally recognized standards in theinvestment and capital market, making the Nigerian capital marketmore attractive to investors.

Analysis of Key Provisions

The Investments and Securities Act (ISA) 2025 brings aboutsignificant revisions to the Nigerian financial market regulatoryframework. To enhance clarity and ease of
understanding, we have provided a tabular comparison highlightingthe key changes between the ISA of 2005 and ISA of 2007. Inaddition, this section features a comprehensive analysis of thesecritical provisions.

I. Recognition and Regulation of Virtual Assets:

In contrast to its predecessor from 2007, the ISA 2025 clearlyclassifies investment contracts and virtual/digital assets assecurities. Section 357 of the Act defines "securities"to include" virtual and digital assets" as well as"investment contract".

The ISA 2007 did not categorize virtual or digital assets assecurities, which created a significant regulatory vacuum in theNigerian capital market, particularly as the fintech andcryptocurrency industries have expanded and become globallyrecognized. The ISA 2025 addressed this by modernizing theframework to reflect contemporary developments, ensuring that theseemerging financial tools and platforms are recognized and properlyregulated in the same manner as traditional securities.

i. Unlawful Investment Schemes:

Compared to the ISA 2007, the ISA 2025 takes a more aggressiveapproach to combating fraudulent investment programs. Section 357of the ISA 2025 specifically defines "prohibited schemes"to include Pyramid and Ponzi schemes. Section 196 of the Actprovides the Securities and Exchange Commission (SEC) with powerfulenforcement tools against these prohibited schemes including theauthority to ask Courts for orders freezing and forfeiting theassets of such illegal schemes to the Federal Government ofNigeria.

The Act prescribes prescribes punishments for promoters of suchillegal schemes with severe penalties, including a hefty fine ofnot less than N20,000,000 and/or an imprisonment term of 10years.

The ISA 2025 eliminates all doubt as to how these fraudulentschemes will be handled, unlike the ISA 2007, which did notexplicitly address these types of schemes. As a deterrence tocapital market fraud, the ISA 2025 makes it very evident that anyorganization or person involved in such illegal activities willsuffer grave consequences. Thus, fostering a safer and moretransparent investment climate in Nigeria, and safeguardinginvestors.

iii. Enhanced Regulatory Powers of the Securities andExchange Commission

The ISA 2025 markedly expands the SEC's authority. UnderSections 3 and 4 of the ISA 2025, SEC is empowered to regulate andsupervise a wide range of market activities and participants,ensuring market integrity and investor protection at every level.For example:

a. Expanded Registration andOversight:

The ISA of 2025 provides that the SEC has the authority toregister and oversee digital asset exchanges, Virtual Asset ServiceProviders (VASPs), and other new market platforms in addition totraditional securities and exchanges. The SEC's supervision ofsecurities exchanges, collective investment schemes, collateralmanagement firms, and online forex trading platforms.

b. Increased Enforcement and InvestigativeAuthority:

The ISA 2025 gives the SEC a significant authority to protectinvestors and enforce regulation. The SEC can, for example,intervene in the management of businesses and capital marketparticipants who are acting against the interests of investorsunder Section 4(a). This authority can even go so far as to appointindependent directors (Section 4(b)) or place directors onprobation (Section 4©).

c. Licensing and Directives

The Act gives the SEC the authority to provide licenses to newmarket participants and ensures that all organizations, includingthose involved in the digital asset field, adhere to strictregulatory guidelines. This measure ensures that all marketparticipants are subject to the same stringent scrutiny, whichimproves investor trust. Control over market integrity is furtherstrengthened by the SEC's authority to reject unfit individualsfrom engaging in the market (Section 4(q)) and to give directionsto regulated organizations (Section 4(e))

.d. Classification of SecuritiesExchanges:

The ISA 2025 establishes a precise framework for thecategorization of Nigerian securities exchanges. According tosection 27 of the ISA 2025, securities exchanges are now primarilyunder two categories:
Composite Securities Exchanges: These platforms list, quote, andtrade a wide range of securities, commodities, and financialinstruments. They are designed to serve a diverse market andperform functions as prescribed by the Commission.

Non-Composite Securities Exchanges: Theseinclude:

Mono Securities Exchanges; which specialize in a particularsecurity, commodity, or financial product.

Alternative Trading Systems; which bring together buy and sellorders and can operate either at a physical location oronline.
This classification is essential for several reasons:

• It allows the SEC apply tailored regulatory standards andoversight procedures to each type of security exchanges,
• It aids market efficiency as investors will be able to benefitfrom having options that are best suited to their tradingrequirement,
• It encourages healthy competition which will in turn driveinnovation,
• It aligns Nigeria's capital market infrastructure withinternational practices. Such alignment will provide for atransparent and predictable market environment thus attracting moreforeign investment.

e. Introduction of Legal Entity Identifiers(LEIs)

Another section of the ISA 2025 that represents a significantadvancement is section 123 which requires the use of Legal EntityIdentifiers (LEIs) by all entities engaging in securitiestransactions. By this section, the ISA 2025 ensures:

• Improvement in Transparency: In each transaction, each partymust disclose their LEI, which they must have acquired from anauthorized issuer. This criterion guarantees that every entity isidentified accurately, lowering uncertainty and improving theaccuracy of financial data.
• Improved Risk Management: By requiring LEIs the ISA 2025 helpsmarket players and regulators monitor and reduce systemic risks. Itbecomes easy and effective to track exposures and connections wheneach entity is uniquely tagged, enabling the early identificationof possible market instability.
• Standardizes Data Reporting: By using LEIs, financial data fromthe market may be better collected and analyzed. This uniformitypreserves market integrity and supports strong regulatorysupervision.

f. Regulation of Financial MarketInfrastructure

• Sections 42 to 44 of the ISA 2025 establishes a thoroughframework for the statutory regulation of Nigeria's financialmarket infrastructure (FMI). The purpose of these clauses is toguarantee that FMIs uphold market integrity and act in the publicinterest. Here is a brief analysis:
• Approval and Registration of FMI: According to the section 42of the ISA 2025, any organization wishing to establish or operatean FMI must apply in the way the Commission stipulates. TheCommission assesses whether the proposed infrastructure is in thepublic interest when evaluating these applications. This sectionhighlights that establishment of an FMI is subject to regulatoryexamination as well as the more general goal of safeguardinginvestors and maintaining a stable market environment.
• Revocation and Withdrawal of permission: section 43 of the ISA2025 provides that if an FMI's actions endanger investorprotection or the public interest, the Commission may withdraw orrevoke its permission under the ISA 2025. This power of theCommission includes the ability to direct the concerned entity tostop engaging in particular acts. Significantly, the ISA of 2025requires procedural fairness, providing that before any action istaken, the entity must be given an opportunity to be heard. Evenwhere approval is revoked, previously established contractualrights or responsibilities remain intact . This balance allows formaintenance of current market arrangement, even while allowing theCommission to intervene when needed. · Rule-making by FMIs -Section 44 of the ISA 2025 gives FMIs the duty to develop their ownpolicies to carry out their duties/functions efficiently. But thesepolicies must first be approved by the Commission in order toguarantee that they are in line with the public interest and theregulatory framework, thus encouraging consistency, openness, andresponsibility in the way FMIs function.

g. Enhanced Access to State Governments and TheirAgencies to Raise Funds Through the Market:

Section 268 – 269 of the ISA 2025 applies to the Federal,State, and Local Government organizations and their ownedbusinesses, empowering these bodies with the ability to raise moneydirectly from the capital market through the issuing of public debtsecurities such as bonds, promissory notes, and non-interestfinancial instruments. The ISA 2025 goes further to set clearcriteria which these bodies must meet before they can issue debtsecurities. Such criterion include; maintaining a minimum level ofinternally generated revenue and adhering to specified debtsustainability ratios.

By subsection 7 of section 269 of the ISA 2025, "theproceeds of securities issued under this Part shall be utilisedsolely for the purpose for which the securities were issued."This restriction promotes transparency and accountability in publicborrowing, aligning funding with specific developmentalobjectives.

Implications for Capital Markets

• Innovation and Growth: Under the Investment and Securities Actof 2007, digital assets were not explicitly recognised as part ofthe financial and capital market. However, by an explicitrecognition of assets like cryptocurrency, the Nigerian capitalmarket is gradually adopting financial innovation which is capableof expanding the market and bringing about growth. GivenNigeria's youthful population, and since the digital assetsmarket is populated by young people, this initiative entrenched inthe new law is capable of fostering innovation and growth in thecapital markets.
• Strengthened supervision and authority: The increased oversightpower and authority which the new law has bestowed upon theSecurities and Exchange Commission has made way for a better andstronger regulated market. This makes the Nigerian Capital Marketsafer and trustworthy for investments. By virtue of the severalpowers conferred on it, the SEC is able to tighten its grip on theNigerian Capital Markets, and further establish it as an investmentchoice for investors.
• Alignment with global best practices: The signing of this newlaw in itself aligns with the International Organisation forSecurities Commissions (IOSCO) requirement that Investment laws beupdated from time to time. Furthermore, the various amendmentsincluded in the law, took cognisance of the three-pronged objectiveof the IOSCO which are: Investor protection, Fair, efficient andtransparent market, and mitigating systemic risks. Furthermore,with the adoption of tools like the Legal Entity Identifier (LEI)which is like an identification card for financial entities, theNigerian capital markets is aligning itself with international bestpractices.

Implications for the Nigerian Economy

• Attraction of foreign investors: It is well known fact thatstronger and safer markets often attract foreign investments. Asthe new law commences the stipulation of stiffer penalties,enhanced oversight of public companies, innovations that reduce thetime to market, and even the expansion of the scope of theInvestment Protection Fund, all ensure that the Nigerian capitalmarket is made stronger and safer, thereby gaining the favour offoreign institutional and retail investors.
• Increased retail investments and participation: With theexplicit recognition and clarity in the regulation of digitalassets by the new law, it is certain that retail investments aresure to skyrocket as a result of the interest of the teemingyouthful Nigerian population in the trading of digital assets. Thelaw further expands the range of entities allowed to issuesecurities to the public, which could lead to the introduction ofmore diverse financial products and potentially unlock new forms ofcapital raising.
• Increased flexibility for Sub-national capital raising: The lawprovides a benign opportunity for states to access long-termfunding for the purpose of regional development. Under the previouslaw, a number of states could not access funds in the capitalmarket. However, with the increased flexibility created by the newlaw, it is easier to access funds in the capital markets throughbonds, promissory notes, etc. This would reduce the overdependenceof states on federal government allocation for the execution ofregional developmental projects.
• Strengthened regulations around commodity exchanges: TheInvestment and Securities Act of 2025 has also strengthenedregulations around commodity exchanges, making it easier forgovernment enterprises, particularly those in the agriculture andmining sectors like the Nigerian Mining corporation and theNational Agricultural Insurance Corporation to raise funds in themarket, giving easy access to the market and promoting growth ofthe commodities ecosystem.

Conclusion

By introducing very robust reforms, the Act has indeed enabledand strengthened the Securities and Exchange Commission to regulatethe capital markets, ensure capital formation, protect investors,maintain a fair, efficient, and transparent market and reducesystemic risk. This will set the Nigerian capital markets at parwith global capital markets, while ensuring compliance withinternational best practices and the sustainable growth of theNigerian economy. With these new reforms set in place, the Nigeriancapital markets is being positioned as a favoured destination forforeign investors.

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circumstances.