SEC Nigeria Sponsored Individual cheat sheet

The Investments and Securities Act (ISA) 2025 replaced ISA 2007 as the principal statute; it establishes the Securities and Exchange Commission (SEC) as the apex regulator of the Nigerian capital market.

SEC rulebooks include the Rules and Regulations on Securities Transactions, the Consolidated Rules on Capital Market Operators, and the Code of Conduct for Capital Market Operators and Their Employees.

The SEC registers capital market operators (CMOs) and sponsors individuals; a sponsored individual is a registered person through whom a CMO firm meets the SEC's fit-and-proper and competence requirements.

Other regulators with overlapping jurisdiction: the Central Bank of Nigeria (banking, payments, FX), NGX Regulation Ltd (exchange rules), NAICOM (insurance), PenCom (pensions), and the NDIC (deposit insurance).

Self-regulatory organisations include the Nigerian Exchange (NGX), NASD OTC Securities Exchange, FMDQ Securities Exchange, and the Chartered Institute of Stockbrokers (CIS) for professional standards.

Rule-making follows consultation with market participants; SEC rules are published in the Federal Gazette and take effect on the stated commencement date.

Enforcement tools available to the SEC include warning letters, fines, suspension or revocation of registration, disgorgement, and referral for criminal prosecution.

The SEC's stated objectives include investor protection, market development, and reducing systemic risk; investor protection is the primary statutory mandate.

Equities confer ownership, voting rights, and residual claim on profits; ordinary shares rank last on liquidation, preference shares rank ahead for dividends and capital.

Debt securities include federal government bonds (FGN), state and corporate bonds, commercial paper, and treasury bills; they promise defined coupon or discount returns and rank ahead of equity.

Collective investment schemes (CIS) pool investor money under a fund manager and trustee; unit trusts, mutual funds, and ETFs are CIS types regulated by SEC rules.

Derivatives are contracts whose value derives from an underlying asset; categories are futures, forwards, options, and swaps, traded on-exchange or OTC.

Money market instruments mature within one year and include treasury bills, commercial paper, bankers' acceptances, and certificates of deposit.

Asset-backed securities and sukuk (non-interest, Shariah-compliant certificates) are recognised SEC-registrable products in Nigeria.

A prospectus must be registered with the SEC before a public offer; it must disclose the issuer's business, risk factors, use of proceeds, and financial statements.

Risk-return relationship: higher expected return generally requires accepting higher volatility, credit risk, liquidity risk, or duration risk.

A sponsored individual is a person sponsored by a registered CMO and registered by the SEC to perform a regulated function; sponsorship is tied to the sponsoring firm.

Typical sponsored functions include dealing, broking, portfolio management, underwriting, registrars, trustees, and investment advisory roles.

Registration requires evidence of relevant qualifications and experience (commonly CIS or equivalent professional certification), fit-and-proper attestation, and payment of prescribed fees.

The sponsored individual must notify the SEC of changes in employment, disqualification, or criminal proceedings; the registration lapses or must be transferred when leaving the sponsor.

Duties include acting in the client's best interest, executing orders on the best available terms, segregating client assets, and maintaining confidentiality.

The SEC Code of Conduct prohibits front-running, churning, unauthorized trading, market manipulation, and misuse of inside information.

A CMO must maintain a compliance officer and adequate internal controls; the sponsored individual is accountable for the activities they supervise or perform.

The SEC may suspend or revoke a sponsored individual's registration for misconduct, with a right of representation before the Administrative Proceedings Committee.

Core ethical duties: integrity, objectivity, competence, confidentiality, professionalism, and compliance with laws and regulations.

Insider information is material, non-public information; trading or tipping on it is prohibited under ISA and SEC rules.

Market manipulation includes wash trades, matched orders, painting the tape, and spoofing; all are prohibited.

Money laundering stages are placement, layering, and integration; the sponsored individual must detect and report suspicious activity.

Nigeria's AML framework includes the Money Laundering (Prevention and Prohibition) Act, the Terrorism (Prevention and Prohibition) Act, and CBN/NFIU regulations applicable to capital market operators.

A suspicious transaction report (STR) goes to the Nigerian Financial Intelligence Unit (NFIU); a currency transaction report (CTR) is triggered by cash transactions at or above the prescribed threshold.

Tipping off a client that an STR has been filed is an offence; the firm must not disclose the report to the subject.

Record retention for AML purposes is generally at least five years after the transaction or end of the relationship, subject to applicable law.

KYC requires identifying the client, verifying identity using reliable documents, and understanding the nature and purpose of the relationship.

For individuals: full name, date of birth, address, photograph, identification number, and source of funds; for corporates: certificate of incorporation, directors, beneficial owners, and mandate.

Beneficial ownership identification requires tracing to the natural persons who ultimately own or control the account; nominee arrangements must be disclosed.

Enhanced due diligence applies to politically exposed persons (PEPs), high-risk jurisdictions, and unusual transaction patterns.

Suitability assessment matches the product's risk profile to the client's objectives, time horizon, risk tolerance, and financial capacity.

Client categorization (retail, professional, eligible counterparty) determines the level of protection and disclosure required.

Account opening requires a signed client agreement, risk disclosure statement, and mandate specifying authorized signatories.

Periodic KYC review and updating are required; dormant or inactive accounts require reactivation procedures before trading resumes.

The NGX operates an automated trading system; trading sessions have defined open, continuous, and close phases with price limits (circuit breakers) on daily movements.

Trade execution follows price-time priority; the best bid and best offer determine the spread, and orders may be market, limit, stop, or iceberg.

Settlement in the Nigerian equities market follows a T+2 cycle; the Central Securities Clearing System (CSCS) acts as central depository and clearing house.

Investors hold securities in a CSCS account through a stockbroking firm; the CHN (Clearing House Number) identifies the investor in the depository.

The NGX and FMDQ operate different segments; FMDQ handles fixed income, currencies, and derivatives, while NGX handles equities and bonds.

Short selling, margin trading, and securities lending are permitted only within SEC-approved frameworks and CMO registration.

Corporate actions (dividends, bonus issues, rights, splits) are processed through the registrar and CSCS; entitlement dates follow the qualification and payment dates.

Failed trades trigger buy-in procedures; the clearing house may close out positions and charge penalties under exchange rules.

The SEC operates an investor protection function and a complaints portal; complaints should first be raised with the CMO, then escalated to the SEC if unresolved.

The SEC's Administrative Proceedings Committee (APC) hears enforcement and disciplinary matters and issues decisions subject to appeal to the Investments and Securities Tribunal (IST).

The IST is a specialized court established under the ISA to hear capital market disputes; appeals from the IST go to the Court of Appeal.

Investor compensation funds and asset segregation protect clients if a CMO becomes insolvent; client assets must be held separately from firm assets.

Dispute resolution routes include internal complaint handling, mediation, arbitration, and litigation; the SEC may order restitution or disgorgement.

A complaint should state the parties, the transaction, the loss, and the relief sought, and be supported by contract notes and statements.

Time limits and limitation periods apply; investors should preserve records of orders, confirmations, and correspondence.

The SEC publishes investor alerts on unauthorised operators and Ponzi schemes; verifying SEC registration is a primary protective step.

The Nigerian Code of Corporate Governance (NCCG) 2018 applies on a 'apply and explain' basis; SEC's Code of Corporate Governance for Public Companies sets additional requirements.

Board composition principles include an appropriate mix of executive and non-executive directors, with independent directors for public companies.

Audit committees for public companies must include shareholder representatives and comply with SEC and CAMA requirements.

Listed companies must file quarterly, half-year, and annual reports with the SEC and the exchange within prescribed deadlines; annual reports include audited financial statements.

Financial statements must comply with IFRS as adopted in Nigeria and be audited by an SEC-registered audit firm.

Continuous disclosure requires immediate announcement of material events such as board changes, major contracts, litigation, and dividend decisions.

Related-party transactions must be disclosed and, where material, approved by the board or shareholders, with the interested party abstaining.

Whistleblowing, internal controls, and risk management frameworks are governance expectations for public companies.