SMEs that function in Nigeria for more than 24 months, as the crowdfunding rules proposed by the SEC state, have a right to attract funds through Nigerian crowdfunding portals. Only portals that received approval from the SEC fall under this rule. For this activity, SMEs need to issue bonds, stocks, and other investment vehicles required by the SEC.
As the new rules dictate, ISA requirements do not apply to issuers. In addition, they can sell securities and other SEC-approved investment vehicles without registration, which is usually prescribed by ISA. As for PLCs, banking institutions, and government agencies, they are allowed to:
- Offer securities and accept deposits;
- Issue bonds and shares.
Issuers of securities who would be interested in crowdfunding in Nigeria should remember that the new rules mean some restrictions for their activities:
- A number of securities or other investment vehicles should not exceed the given maximum;
- Issuers must have a Nigerian registration and accreditation with crowdfunding portals that will be used.
Besides having an SEC registration, crowdfunding portals are required to ensure continual communication among investors and fundraisers. This condition applies to portals that:
- Are maintained or operated in Nigeria;
- Are physically present there;
- Are not physically present there but promote themselves in Nigeria and thus attract Nigerian investors.
In Nigeria, alternative trading entities, brokers, or dealers only can be registered as crowdfunding mediators. These mediators participate in transactions involving securities sale through crowdfunding portals.
Those who are about to register a Nigerian crowdfunding portal should take into account these requirements:
- Information disclosure;
- DD performance;
- Provision of information about issuers;
- Complete confidentiality;
- Compliance with data protection legislation.
Are you planning to start a business in Nigeria? Experts from COREDO will provide all needed information regarding the regulation of crowdfunding platforms there.