By signing into law the 2025 Investment and Securities Act (ISA, 2025), President Bola Ahmed Tinubu has given Nigeria’s financial regulators a fresh set of teeth — bigger, sharper, and particularly interested in the fast-evolving tech sector. Eighteen years after the last major update, this legislation marks a fundamental shift in how fintech, digital assets, and electronic trading platforms are governed. For tech firms that enjoyed the relative gray areas of the past, the new law is a wake-up call. Below is a breakdown of the most impactful provisions and what they mean for the sector.
The Digital Frontier Gets a Border: Regulation of Digital Securities and Crypto Assets
Finally acknowledging that the digital world extends beyond social media trends, the new Act squarely addresses digital securities and crypto assets. Section 3 and, crucially, Section 86 now mandate SEC registration for all securities, including the increasingly prominent digital tokens, asset-backed crypto assets, and security tokens, before any public offering. For those tech innovators who envisioned a world where tokens could materialize and multiply with minimal oversight, this legislation serves as a firm reminder that the SEC expects a formal introduction.
Non-compliance carries a hefty sting: a potential three-year prison sentence or a fine of ₦5 million (approximately $3,249.07), a sum that could certainly dampen the spirits of even the most optimistic initial coin offering (ICO) founder. To add a persistent financial nudge, ongoing violations will incur a daily administrative fine of ₦20,000 (approximately $12.99). One might wryly observe that the SEC appears to have discovered a novel revenue stream, or perhaps simply seeks to bring a semblance of order to the often-chaotic digital frontier.
Section 87 does permit the electronic issuance of securities, opening doors for blockchain-based tokens and other digital advancements. The SEC, ever the meticulous rule-maker, will subsequently define the regulations for these digital issuance platforms, promising a fresh wave of legal pronouncements that will undoubtedly keep legal eagles in high demand.
Implications for Tech Firms: ICOs, STOs, and DeFi projects must now navigate the SEC’s registration labyrinth. Crypto exchanges listing securities will face the imperative of stringent disclosures. The era of launching a crypto venture on little more than a whitepaper and fervent hope appears to have reached its regulatory sunset.
Fintech and Digital Trading Platforms: Welcome to the Regulatory Arena
Sections 26 to 30 and 41 to 44 zero in on the rapidly evolving landscape of fintech and digital trading platforms. Section 27 formally recognizes “alternative trading systems” (ATS), encompassing digital trading platforms, peer-to-peer (P2P) lending platforms, and, of course, the ever-present crypto exchanges. The message is unambiguous: facilitating securities trading necessitates SEC registration. The penalty for non-compliance is severe: operational shutdown coupled with a five-year jail term for company directors. It seems legislators intend to enforce these rules with considerable vigor.
Sections 41 to 44 further detail the regulation of “Financial Market Infrastructures” (FMIs), which include crypto exchanges, stablecoin issuers, and blockchain-based clearing systems. The SEC now wields the authority to revoke licenses if these platforms are deemed detrimental to the public interest. This broad provision grants the regulator significant discretionary power, a prospect that could be viewed with either reassurance or trepidation, depending on one’s regulatory posture.
Implications for Tech Firms: Fintech entities engaged in lending, digital asset trading, and other securities-related activities will need to secure the SEC’s official stamp of approval to operate legally. Crypto exchanges and stablecoin issuers will find themselves under heightened scrutiny, with the ever-present possibility of license revocation for non-compliance or perceived threats to the public good.
Big Brother is Watching (Your Data)
Sections 3(4)(j) and 72 to 81 tackle the increasingly critical domains of data and cybersecurity. Section 3(4)(j) empowers the SEC to demand subscriber records from Internet Service Providers (ISPs), telecom providers, and a spectrum of digital platforms, including crypto exchanges and fintech applications. The stated rationale, naturally, is to combat the persistent scourges of fraud, insider trading, and Ponzi schemes. While the objective is undoubtedly noble, the implications for data privacy and the operational burden on tech companies are considerable.
Sections 72 to 81 further authorize the SEC to audit the financial records of tech firms, demand the unveiling of their algorithmic secrets (a potential source of considerable anxiety for those guarding proprietary technology), and even seize digital records. Failure to comply attracts a fine of ₦5 million (approximately $3,249.07) plus ongoing daily penalties. The SEC appears determined to gain comprehensive visibility into the digital workings of these enterprises.
Implications for Tech Firms: Tech companies, particularly those handling sensitive financial data, will need to significantly bolster their data security measures and be prepared to furnish information upon the SEC’s request. The requirement to disclose algorithmic details could prove particularly contentious for firms that consider these algorithms core to their competitive edge.
Grown-Up Rules for Tech Companies: Corporate Governance
Sections 88 to 92 introduce more stringent corporate governance standards for tech firms issuing securities. Sections 88 and 89 mandate the implementation of robust internal controls for financial reporting, with CEOs and CFOs of listed fintech firms now required to personally vouch for the accuracy of their financial statements. False reporting will be met with a fine of ₦5 million (approximately $3,249.07) plus a daily penalty of ₦25,000 (approximately $16.25). This signals a move away from the potentially more laissez-faire approach of some tech startups towards greater financial accountability.
Sections 90 to 92 stipulate that tech firms must engage SEC-registered auditors, who will now also be tasked with assessing the adequacy of cybersecurity controls. This reflects an increasing awareness of the intertwined nature of financial integrity and digital security in the modern business environment.
Implications for Tech Firms: Tech companies that issue securities will need to adopt more formalized corporate governance frameworks, including establishing robust internal controls and engaging SEC-approved auditors with expertise in cybersecurity.
Playing with Fire: Systemic Risk and Fintech Oversight
Sections 82 to 85 address the potential for systemic risk within the rapidly expanding fintech sector. Section 83 grants the SEC the authority to immediately suspend trading on any crypto exchange or digital trading platform deemed to pose a systemic threat. They can even freeze the assets of implicated firms without prior warning. This provision introduces a significant element of regulatory uncertainty for platform operators.
Section 84 enables the SEC to share data collected from fintech firms with a range of other regulatory bodies, including the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC), and even international counterparts, signaling a move towards greater collaborative oversight of the fintech space.
Implications for Tech Firms: Crypto exchanges and other digital trading platforms deemed to harbor systemic risk face the prospect of sudden operational halts and asset freezes. Fintech firms should also anticipate their data being shared across a broader spectrum of regulatory agencies.
Expanding the Definition: More Instruments Under the Microscope
The Act astutely broadens the definition of “securities” to encompass digital assets, tokenized offerings, and other technology-driven financial instruments, conveniently captured under the umbrella of “other instruments” in Section 95(1)(2). This implies that tech companies issuing crypto tokens, asset-backed digital securities, or equity crowdfunding tokens will likely fall within the SEC’s regulatory purview, unless a specific exemption applies.
Implications for Tech Firms: A wider array of digital assets and fundraising methodologies will now be subject to securities regulations, necessitating registration with the SEC unless an exemption can be successfully claimed.
Funding the Dream (Legally): Crowdfunding and Public Offers
Section 95 specifically addresses the burgeoning area of crowdfunding and public offers by tech startups. These platforms will now be required to adhere to SEC rules. However, a potential reprieve exists for small and medium enterprises (SMEs), venture capital, and private equity funding, which may qualify for exemptions under Section 95(2). The penalty for conducting unauthorized public offers is a substantial fine of up to 10% of the gross value of the securities offered.
Implications for Tech Firms: Startups seeking to raise capital through crowdfunding platforms will need to navigate the SEC’s regulatory framework. The potential exemptions for SMEs and venture capital suggest a more nuanced approach to regulating different scales and types of funding.
Prospectus Requirements for Tech IPOs
Sections 101 to 108 outline the detailed prospectus requirements for tech firms aspiring to go public. These companies will need to disclose critical information such as the inherent risks in their business models (scalability, cybersecurity vulnerabilities, etc.), the ownership status of their intellectual property, and comprehensive financial statements, including those often substantial Research and Development (R&D) expenditures. Encouragingly, Section 103(3) permits the digital delivery of prospectuses, acknowledging the inherently digital nature of these businesses. However, Section 114 underscores the gravity of accurate disclosure, stipulating that misleading statements in prospectuses can lead to severe penalties, including up to five years of imprisonment or a fine of ₦10 million (approximately $6,498.11). Transparency, it appears, remains a paramount expectation when engaging with the SEC.
Implications for Tech Firms: Tech companies preparing for an Initial Public Offering (IPO) will face rigorous disclosure obligations, emphasizing the need for comprehensive transparency regarding their unique operational risks and financial standing.
Playing Fair: Insider Trading and Market Abuse
Sections 136 to 138 address the enduring challenge of insider trading and market abuse. Tech executives privy to material non-public information (such as impending financial results or groundbreaking product announcements) are now explicitly barred from trading on that knowledge. On a more positive note, Section 138(5)-(11) introduces whistleblower protections, incentivizing employees to report potential violations. The penalty for engaging in insider trading is a significant fine of up to ₦50 million (approximately $32,490.67) or a five-year prison term.
Implications for Tech Firms: Executives and insiders within tech companies must maintain strict adherence to insider trading regulations. The introduction of whistleblower protections could lead to increased internal scrutiny and reporting of potential misconduct.
Mergers and Acquisitions in the Tech Space: SEC Gets a Seat at the Table
Sections 141 to 148 address the dynamics of takeovers and mergers, common occurrences in the rapidly consolidating tech industry. The Act mandates that acquisitions resulting in an acquirer holding 30% or more of a tech firm’s shares will trigger a mandatory takeover bid. Furthermore, foreign tech firms seeking to acquire Nigerian startups will now be required to obtain the SEC’s approval, indicating a desire to oversee and potentially influence the consolidation of the Nigerian tech market.
Implications for Tech Firms: Mergers and acquisitions involving tech companies will now be subject to SEC oversight, potentially adding another layer of regulatory considerations to these transactions.
Pooling Resources: Collective Investment Schemes
Sections 149 to 196 govern collective investment schemes, encompassing venture capital (VC) funds, private equity (PE), and even investment pools specifically targeting fintech ventures. These entities will now be required to register with the SEC. Intriguingly, Section 167(2)(k) suggests that funds focused on crypto assets may be classified as “alternative asset collective investment schemes.” Notably, Section 195 explicitly prohibits Ponzi schemes, including those masquerading as legitimate crypto investments, with promoters facing potential ten-year prison sentences. This serves as a clear deterrent to those who might seek to exploit the allure of digital assets for illicit gain.
Implications for Tech Firms: Venture capital, private equity, and other investment funds focusing on the tech sector will need to comply with the SEC’s regulations for collective investment schemes. The explicit prohibition of crypto Ponzi schemes is a significant step towards enhancing investor protection.
Going Digital: Dematerialization and Legal Entity Identifiers
Section 122 mandates that all secondary market securities transactions must be dematerialized, meaning they must be held electronically via a Central Securities Depository. This necessitates that tech firms ensure their shareholder records are digitized. Section 123 introduces the requirement for a Legal Entity Identifier (LEI) for all entities involved in securities transactions, including tech firms. Failure to obtain an LEI could result in suspension from participation in the capital markets.
Implications for Tech Firms: Tech companies operating within the securities sphere will need to ensure their processes align with the requirements for dematerialized securities and obtain the necessary LEI.
A Glimmer of Hope for Innovation: The Regulatory Sandbox
While not explicitly detailed, the Act alludes to the possibility of a regulatory sandbox under Section 95(6), which would allow the SEC to grant exemptions from strict regulations to certain fintech and blockchain firms to encourage innovation. This approach, mirroring models adopted globally, could provide eligible tech startups with a controlled environment to test novel financial products without the full burden of immediate compliance.
Implications for Tech Firms: The potential establishment of a regulatory sandbox offers a promising avenue for fintech and blockchain startups to experiment and develop innovative solutions under a more flexible regulatory framework.
Regulation of Digital Assets & Virtual Assets (Securities Definition)
Section 350 (Definitions) significantly broadens the definition of “securities” to include:
- Virtual assets (e.g., cryptocurrencies, tokenized assets).
- Investment contracts (potentially encompassing ICOs, STOs, and DeFi tokens if they meet the definition of a security).
- Derivatives (including crypto derivatives and other digital financial instruments).
This expanded definition means that technology companies issuing digital tokens or blockchain-based securities will now be subject to SEC regulations.
Commodity Exchanges & Warehouse Receipts (Tech-Driven Trading)
Sections 222–229 govern commodity exchanges, including those leveraging digital trading platforms.
Sections 230–257 introduce electronic warehouse receipts, providing digital proof of ownership for stored commodities, a development particularly relevant for agritech and supply chain technology companies.
Section 238(2) mandates that commodity exchanges and depositories establish connectivity with electronic warehouse receipt systems, promoting the integration of blockchain and digital ledger technologies.
Investor Protection Fund (Tech-Related Claims)
Section 198 allows for compensation to investors who suffer losses due to:
- Insolvency, negligence, or fraud by dealing member firms (including fintech brokers).
- Defalcation (misappropriation) by firms or their representatives (relevant for crypto exchanges and digital asset platforms).
Section 212(1)(c) specifically covers losses arising from defalcation related to money or property entrusted digitally.
Technology in Securities Issuance & Trading
Section 267(1) mandates the use of dematerialized (electronic) securities and digital registration with depositories.
Section 291 requires digital signatures on certificates, aligning with the technological advancements in fintech and blockchain-based securities.
Derivatives & Fintech Regulation
Section 348(1)(m) empowers the SEC to formulate rules governing derivatives markets, including crypto derivatives, algorithmic trading, and digital trading platforms.
Section 350 (Definitions) explicitly includes “derivatives” as tradable instruments, encompassing smart contracts and blockchain-based derivatives.
Market Abuse & Cybersecurity
Section 339(5) penalizes fraudulent schemes, deceptive practices, and market manipulation, provisions highly relevant to addressing crypto scams, pump-and-dump schemes, and insider trading in digital assets.
Section 342 mandates whistleblower protections for employees reporting misconduct, a safeguard applicable to tech firms handling investor funds.
Regulatory Sandbox & Innovation Flexibility
While not explicitly delineated, the SEC’s rule-making authority (Section 348) provides a foundation for establishing regulatory sandboxes, enabling fintech and blockchain startups to test their innovations within a controlled environment.
Cross-Border Offerings & Foreign Tech Firms
Section 348(1)(h) grants the SEC the power to regulate cross-border securities offerings, impacting foreign tech firms seeking to list in Nigeria or offer digital securities to Nigerian investors.
Key Implications for Tech Companies
Crypto & Digital Asset Firms: Must adhere to securities laws if their tokens are classified as “investment contracts.”
Fintech & Trading Platforms: Must secure appropriate licensing, prioritize investor protection, and implement robust anti-fraud measures.
AgriTech & Supply Chain Tech: Can leverage electronic warehouse receipts to facilitate commodity financing.
AI & Algorithmic Trading: Are subject to regulations governing derivatives and market abuse.
Key Takeaways
The SEC Act 2025 marks a significant stride towards modernizing Nigeria’s investment and securities framework, finally drawing the dynamic tech sector into a more clearly defined regulatory orbit. While the enhanced scrutiny and compliance obligations may present initial challenges for tech entrepreneurs, the resulting clarity could ultimately foster greater investor confidence and sustainable long-term growth. One might observe with a touch of irony that it took the government nearly two decades to fully acknowledge the digital revolution, but at least they’ve now formally joined the digital dance floor. The question that remains is whether the tech companies will gracefully waltz to the new regulatory rhythm or attempt a more improvisational (and hopefully still legal) routine. Regardless, the relationship between Nigeria’s tech industry and its regulators has undoubtedly entered a more complex and compelling phase.
