House Passes Bill to Empower SEC to Freeze Assets of Illegal Investment Schemes

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The House of Representatives at the plenary on Thursday passed for second reading a Bill seeking to repeal the Investment and Securities Act 2007 and to enact the Investments and Securities Act, 202.

The bill seeks to empower the Securities and Exchange Commission (SEC) to address the challenges of Ponzi schemes, which include to enter and seal up all prohibited schemes, obtain an Order of court to freeze and forfeit all assets of such schemes to the Federal Government of Nigeria.

The proposed legislation also prohibits Ponzi/Pyramid Schemes as well as other illegal investment schemes and prescribes a jail term of not less than 10 years for promoters of such schemes.

Titled, “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,” the Bill was sponsored by Chairman Committee on capital market, Hon. Babangida Ibrahim.

Leading the debate on its general principles, Ibrahim explained that the Bill seeks enhancement of provisions relating to efficient regulation of investment schemes and to effectively combat the proliferation of Ponzi schemes in Nigeria.

He expressed optimism that the Securities and Exchange Commission would in the nearest future be able impose stiffer punishment on promoters of Ponzi schemes and other unregistered investment schemes, if changes to its laws were passed by the National Assembly.

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Ibrahim said, “The current Act regulating the capital market is the securities and investments act of 2007. It was signed by the late Umaru Musa when he was the president. If you calculate from 2007 to date it’s about 15 years. The current reality in the capital market requires that those regulations be improved to enable the regulators(SEC) to perform their optimum functions. That is why, we are revealing the ACT because that some essential part of the ACT requires amendments and also they is a need to introduce some new sessions of the ACT. The original ACT contains about 316 sections but the current one contains about 351 sections.

“We are enhancing provisions relating to efficient regulation of investment scheme. Recently they is a lot of complains by Nigerians to the extent the FG itself but some embargo on us accounts on Ponzi schemes. So as of the time of signing the current act, the ponzi scheme was not in existence in Nigeria. So we have to put some regulations to monitor them. So we introduced other new provisions and some amendments. There are also areas like investors protection fund, also the collaboration between SEC and other agencies in the financial market is also enhanced in the Bill and it also strengthens the authority and enforcement power of the jurisdiction of the securities and investment tribunal.”

He added, “These are agencies in charge of settling dispute between investors. Sometimes if you look at the CBN during this operation of ponzi schemes, you notice an overlap between SEC and CBN that’s the reason why there is dispute. It is necessary to streamline the position and enforcement power of each regulator. CBN is concerned with financial market not capital market so the SEC are in charge of regulating the capital market and there is not supposed to be an over lap.”

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