04/04/2025
A REVIEW OF THE INVESTMENT AND SECURITIES ACT (ISA), 2025
INTRODUCTION
The Investment and Securities Act is the legal framework which regulates the activities of the capital market in Nigeria, it establishes the Securities and Exchange Commission as the apex regulatory body for capital market investment in Nigeria. The Act strengthens regulatory oversight, enhances investor protection, promotes market transparency and fairness, as well as encourages corporate governance.
The first direct formal effort of regulating the capital market in Nigeria was the Capital Issue Committee set up by the Central Bank of Nigeria (CBN) to assist it in the regulation of dealings in company securities. In 1973, statutory support was given to this arrangement through the Capital Issue Commission Act, 1973. This was followed by the Securities and Exchange Commission Act, the Companies and Allied Matters Act, the Investment and Securities Act, 1999, the Investment and Securities Act 2007 and now the Investment and Securities Act, 2025 was the regulating statute for capital market in Nigeria.[1]
The Investment and Securities Act 2025 is a new enactment and was brought about to better regulate investment and securities. It repealed and replaced the Investment and Securities Act 2007. The introduction of the Investment and Securities Act is a deliberate effort to ensure that the capital market in this country is effectively regulated, it provides for the regulation of not only the existing institutions and facilities but also those that are not yet in place in a bid that it will enhance the growth of the economy and the capital markets. The Investment and Securities Act 2025 came about due to the need to ensure transparency and fairness in capital market and securities operation. The Act was passed into law by President Bola Ahmed Tinubu which has marked a major milestone in Nigeria’s capital market reform. The ISA 2025 is aimed at strengthening the legal and regulatory framework for investments and capital market activities in the country.
REVIEW OF THE ISA 2025
On the 29th of March, 2025, President Bola Ahmed Tinubu passed the Investment and Securities Act 2025 into law. The passage of this law repeals the ISA 2007 while amending and introducing new and pivotal reforms for the regulation of the capital market and protection of capital investors. The Act introduces a legal framework for the establishment of the Securities and Exchange commission, classification of commodity exchanges and warehouse receipts, digital asset space, the operation of the investment and securities tribunal and many more.
The ISA 2025 is expected to spur renewed interest in Nigeria’s capital markets from both local and international investors. By creating a clearer regulatory framework for emerging asset classes, especially digital assets and commodities, and by improving investor protection mechanisms, the Act sets the stage for deeper capital formation and economic diversification. It also provides a more level playing field for issuers, exchanges, and operators, while giving regulators the tools they need to clamp down on bad actors and illegal schemes that have dented the credibility of the market in the past. With the signing of the ISA 2025 into law, Nigeria takes a significant leap forward in its journey toward building a world-class capital market that is inclusive, innovative, and resilient.[2]
The general legal framework for the regulation of businesses and investment in Nigeria are the Companies and Allied Matters Act, Investment and Securities Act, and the Nigeria Investment and Promotion Commission Act. The Companies and Allied Matters Act regulates businesses. It provides all the regulations necessary to give a business life and make all the necessary provisions for the operation such businesses and returns required to be made to the Corporate Affairs Commission. The Investment and Securities Act establishes the Securities and Exchange Commission as the apex regulatory authority for the Nigeria Capital Market, as well as regulates the market to ensure the protection of investors, maintain the fair, efficient and transparent market. The Nigerian Investment and Promotion Commission Act establishes the Nigerian Investment and Promotion Commission (NIPC) is concerned with the encouragement and promotion of investment in the Nigerian economy and other related matters.[3]
Key Provisions of the Act
Prior to the enactment of the ISA 2025, the ISA 2007 was the primary law regulating the capital market in Nigeria. The Act of 2007 repealed the ISA 1999 and established the SEC as the apex regulatory authority for the Nigerian capital market as well as regulation of the market to ensure the protection of investors, maintain fair, efficient and transparent market and reduction of the systemic risk. Upon the passing of the ISA 2025 into law on the 29th day of March, 2025, the Act repealed the ISA 2007 with newer provisions making the section a total of 351 unlike the ISA 2007 which was a total of 316 sections. The ISA 2025 also amended the preamble of the Act.
Establishment of the Securities and Exchange Commission
Section 1 of the Act is amended to include a new subsection 4 which was not existing in the repealed 2007 Act, the subsection 4 provides that; “Except as otherwise provided in this Act, the Commission shall be independent in the discharge of its functions and objectives under this Act”. This new provision is designed to emphasize the independence of the Commission in line with the requirements of the International Organization of Securities Commissions (IOSCO).
Section 3 of the Act introduces a refined framework for the objectives, powers, and functions of the Securities and Exchange Commission (SEC). It establishes SEC as the apex regulatory authority overseeing the Nigerian capital market and outlines its core objectives, which include:
Acting in the public interest, with a focus on investor protection and the maintenance of fair, efficient, and transparent markets;
Safeguarding the integrity of the securities market by preventing market abuse and insider trading;
Combating unauthorized, illegal, fraudulent, and unfair trade practices in securities and investments;
Contributing to the mitigation of systemic risk and the promotion of financial stability;
Facilitating the development of the capital market and enhancing capital formation to drive economic growth; and
Pursuing additional objectives aligned with the overarching regulatory and developmental mandate of SEC.
This provision strengthens SEC’s role in fostering a transparent, resilient, and investor-friendly capital market in Nigeria.
The section also provides for the function of the commission, maintaining some of the function as provided in the ISA 2007 while also adding newer function for the commission, amplifying some of the functions already in existence. The functions of the commission as provided under the new Section 3(3) provides thus; to regulate investments and securities business in Nigeria; registering and regulating securities exchanges, commodities exchanges and other market venues; registering securities of public companies, etc.
The Act under Section 3(4) provides for the powers of the Commission to include; intervening in the management and control of capital market operators, public companies and regulated entities; appointing Independent Directors into the Board of Public Companies in which the Commission has intervened or taken a regulatory action; placing directors of public companies on probation for a period of time considered reasonable by the Commission; removing any person associated with misconduct and/or mismanagement of a public company or capital market operator, etc.
The new Section 4 establishes a new composition for the board of the commission, which shall include; a part-time, non-executive Chairman; a Director-General who shall be the Chief Accounting Officer, Three full-time Commissioners one of whom shall be a legal practitioner qualified to practice in Nigeria with a minimum of twelve years post call to bar experience; the Director-General of the National Pension Commission, a representative of the Central Bank of Nigeria not lower than the cadre of a Director, a Director of the Federal Ministry of Finance, and Two part-time Commissioners with proven integrity and knowledge of capital market matters, one of whom shall be a legal practitioner qualified to practice in Nigeria with a minimum of twelve years post call to bar experience. Unlike the ISA 2007, the 2025 Act establishes the board with the responsibility for the policy and general affairs of the commission.
Section 5 provides that the entire board shall be appointed by the president of the federation provided that the Director-General and the three full-time Commissioners shall be appointed by the President upon the recommendation of the minister and confirmation by the Senate. This provision is unlike the 2007 Act where only the Director-General and the three full time Commissioners are appointed by the President upon the recommendation of the Minister and confirmation by the Senate.
By Section 20, the Commission shall not accept any gift if the conditions attached by the donor are inconsistent with the functions and objectives of the Commission or if the acceptance of the gift would compromise the observance and maintenance of proper conduct and professionalism in the discharge of its duties and functions.
Registration and Regulation of Securities Exchanges, Financial Market Infrastructures and Other self-regulatory Organizations
The Act modifies the provision for the registration and regulation of Securities exchanges, financial market infrastructures and other self-regulatory organizations. Section 26 of ISA 2025 provides that no person shall establish or operate a securities exchange unless it has obtained a certificate of registration from the Commission and where any person contravenes this provision, the Commission shall halt all of its operations immediately or within such timeframe as determined and each of the directors, promoters or any person who can reasonably be regarded as being in control of the company shall be deemed to have committed an offence and is liable on conviction to a term of imprisonment of not less than (5) years. This new development is unlike the 2007 Act which does not prescribe any punishment for the contravention of the provision to establish and operate a securities and exchange operation which has not gotten approval from the commission.
The Act further provides for the classification of securities exchanges into Composite and Non-composite categories. Section 27 provides that a securities exchange may be registered by the Commission as composite securities exchange or non-composite securities exchange. A composite securities exchange shall permit the listing, quotation and of all types of securities, commodities. While a non-composite securities exchange may be registered by the Commission as a mono securities exchange which specialises in the listing, quotation and trading of a particular security, commodity, and/or financial product or instrument; or an alternative trading system which provides trading systems that bring together orders from buyers and sellers and could be set in either a physical location or be made available for trading activities on-the internet.
Responsibilities of the Securities and Exchange Commission
The ISA 2025 introduces a new Section 30 which provides for the responsibilities of the securities and exchange commission. A securities exchange is charged with the following responsibilities;
to conduct its business in a fair and transparent manner with due regard to the rights of members or participants and their clients;
to ensure compliance by its members or participants and issuers of securities listed, quoted or admitted on that exchange, report any non-compliance to the Commission and assist the Commission in enforcing the provisions of the Act;
to develop and enforce rules, listing requirements and directives as applicable;
to inform the Commission of any matter that may pose a systemic risk to the financial markets as soon as it becomes aware of such matter;
to notify the Commission as soon as it commences an insolvency proceeding or when such proceeding is commenced against it, or when it has received a notification regarding insolvency proceedings against members or participants;
and do all other things that are necessary for, incidental or conducive to the proper operation of an exchange and that are not inconsistent with this Act.
Also the Commission shall carry out inspections and conduct enquiries or audit of any member or participant of a securities exchange.
Securities exchange or an exchange holding company
The commission introduces new provisions as regards to securities exchange and exchange holding company. This is a new introduction to the Investment and Securities Act, the new provisions stipulate modalities for the listing of a securities exchange or an exchange holding company on another securities exchange, specify the duties of exchange holding companies and outline modalities for the disposal of assets of exchange holding companies and securities exchanges.
Section 38 of said Act ensures that the commission issues appropriate directives and makes rules and regulations to govern the listing of the securities of a securities exchange or exchange holding company which shall cover possible conflicts of interest, corporate governance & administration matters, etc.
Section 39 of the Act provides for the responsibilities of the exchange holding company which shall ensure the prudent risk management of its business, an orderly and fair market in relation to securities, etc.
Section 40 of the Act provides that where an exchange holding company, a securities exchange, or other similar body intends to enter into an agreement or arrangement, to dispose of or acquire assets, which value threshold has been specified by the Commission, it shall obtain the Commission’s prior written consent.
Section 41 provides for the establishment or operation of a financial market infrastructure through obtaining a certificate of registration from the commission. It prescribes punishment for any person who establishes or operates a financial market infrastructure without approval in accordance with the laid down regulation by the commission.
Section 43 provides for the power of the Commission to withdraw or revoke the approval granted to a financial market infrastructure with effect from the date specified in the notice; or to direct the financial market infrastructure to cease to operate or provide such services with effect from the date specified in the notice.
Provisions relating to Insolvency of Financial Market Infrastructures
Section 45 modifies the general insolvency laws making it of no effect in relation to; (a) market contracts; (b) action taken under the rules of a securities exchange with respect to market contracts; (c) action taken under the rules of a financial market infrastructure with respect to market contracts, etc.
Section 47 provides clarity on insolvency laws and eliminates any contradiction with the provisions of Bankruptcy Act and the Companies and Allied Matters Act on issues relating to; a market contract; a disposition of property pursuant to a market contract; the provision of market collateral; a contract effected by a financial market infrastructure for purposes of realizing property provided as market collateral; a disposition of property in accordance with the rules of a financial market infrastructure as to the application of property provided as market collateral; a market charge; the default rules of the financial market infrastructure; and the rules of the financial market infrastructure for the netting and settlement of market contracts.
Section 58 also provides that a court shall not, pursuant to any enactment or rule of law or otherwise, recognize or give effect to; any order of a court exercising jurisdiction in relation to the law of insolvency in a place outside Nigeria; or any act of a person appointed outside Nigeria to perform any function under the law of insolvency in a place outside Nigeria, insofar as the making of the order or the doing of the act would be prohibited in the case of a court within Nigeria or an official receiver or liquidator by provisions.
Inspections and Investigations
The Act establishes a new Section 79 & 80 which provides for the powers of an examiner to carry out inspection and investigation into the affairs of a regulated entity. The Act introduces a new Section 82 which empowers the Commission by a request in writing or by any notice to request any capital market participant to submit any information or document which the Commission considers necessary for the purpose of monitoring, mitigating and managing systemic risks in the capital market; or where the Commission receives a request from a financial sector regulator.
Section 83 provides that The Commission may issue a directive in writing requiring a capital market participant to take such measures as may be deemed necessary in the interest of monitoring, mitigating or managing systemic risk in the capital market or in the interest of the public. A “systemic risk” means a situation where one or more of the following events occur or is likely to occur in the capital market: (a) financial distress in a significant market participant or in a number of market participants; (b) an impairment in the orderly functioning of the capital market; or (c) an erosion of public confidence in the integrity of the capital market. (d) a major market disturbance characterized by or constituting sudden fluctuations of securities prices that threaten fair and orderly dealing in the capital market.
Treatment of Unclaimed Dividends of Public Companies
Section 93 of the ISA 2025 is a new provision which creates a framework for the treatment of unclaimed dividends under the regulatory purview of the Commission, this provision was not found in the repealed Act. The provision prescribes punishment for the contravention of this provision with a term of imprisonment and fine.
Conduct of Securities business
By the provision of Section 122, All Securities to be transacted in the secondary market shall be deposited with a Central Securities Depository. This provision was inserted to ensure that only dematerialized securities are traded in the secondary market.
Section 123 introduces a new provision for a legal entity identifier. It provides that there shall be a Legal Entity Identifier for any entity involved directly or indirectly in securities transactions in Nigeria to ensure proper monitoring and minimization of systemic risks arising from parties and counter-parties’ activities. All participants in securities transactions shall obtain the Legal Entity Identifier from an authorized issuer. A Legal Entity Identifier means a code that uniquely identifies every distinct entity or structure that is a party to a financial transaction. This provision makes it mandatory for every party in a financial transaction to own a Legal Entity Identifier (LEI) and disclose same in every securities transaction it is involved in. This is proposed for accuracy of financial data and risk management.
Trading in Securities
Section 136 makes prohibition against insider trading, it provides thus that a person who is an insider shall not buy or sell, or otherwise deal, directly or indirectly in any securities if he has material non-public information in relation to those securities. Also, no person in a relationship with an issuer shall with the knowledge of a material fact of the issuer that has not been publicly disclosed, inform, recommend or encourage another person to purchase or sell securities of the issuer. A person who becomes an insider in a public company or any other issuer, other than a mutual fund, shall within 14 days of becoming an insider or of carrying out an insider transaction or within such other period as may be prescribed by regulation, file a report disclosing, in the prescribed manner and form, any direct or indirect beneficial ownership of or control or direction over securities of the public company or other issuer and any interest in, or right or obligation associated with, a related financial instrument and the insider shall make such other disclosure as may be required by the regulations.
This new provision seeks to improve on the existing framework in regulating insider trading under the Nigerian securities laws. It proposes additional disclosure requirements for insiders and expands the scope of the applicability of the law.
Section 138 provides for civil and criminal liability against violators of the provisions of the Act, it prescribes punishment of fine and term imprisonment for anyone who violates any of the provisions of the Act.
Mergers, take-over and Corporate Restructuring
Section 141 empowers the commission to regulate and govern the conduct of all persons involved in take-overs, mergers or compulsory acquisition, including an acquirer, offeror, offeree and their officers and associates.
The Act also establishes a new provision to prohibit payment for loss of office to a director, Section 145 which provides that; No payment for loss of office may be made by any person to a director of a company in connection with a transfer of shares in the company, or in a subsidiary of the company, resulting from a merger, takeover, or other form of corporate restructuring unless the payment has been approved by a resolution of the relevant shareholders.
Collective Investments Schemes
Section 191 prohibits any person who invites the public to invest in a foreign collective investment scheme, which is not approved by the Commission, and such person on contravention of the provision shall be liable to a penalty of not less than 10% of the gross value of the securities or units of the scheme or deposits received in the case of a body corporate and not less than N2,000,000 in the case of an individual.
By the provision of Section 195, the Commission shall have the power to enter and seal up all prohibited schemes and shall obtain an Order of court to freeze and forfeit all assets of such schemes to the Federal Government of Nigeria. In response to the proliferation of financial scams and Ponzi schemes in Nigeria, the Act introduces stronger enforcement mechanisms. It expressly prohibits unlawful investment schemes and prescribes stiffer penalties, including lengthy jail terms, for those found guilty of promoting or operating them. This provision is a clear signal of the government’s commitment to cleaning up the investment landscape.
Commodity exchange and warehouse receipts
The Act introduces a new Part XVI which provides for commodity exchange and warehouse receipts. It establishes commodity exchange, revocation of registration for commodity exchange, registration of clearing houses for exchange commodity, registration of commodity broker and offences for illegal commodity exchange, registration of warehouses for storing commodities and related provisions. Section 222 provides that; no person shall establish or maintain or hold himself out as providing or maintaining a commodity exchange unless such exchange has been registered by the Commission. Also, section 230 provides that no person shall operate a warehouse storing commodities linked to an exchange or issuing warehouse receipts tradable on an exchange without registration of the warehouse by the Commission. This is expected to stimulate growth in agriculture, mining, and other commodity-dependent industries by enabling more structured financing and reducing risks for market participants.
Issuance of Securities
By the provision of Section 289 no action shall lie against the issuer in respect of any securities- (a) redeemed on or after the date on which payment of the principal amount becomes due, after the lapse of six years from that date; (b) for which a duplicate certificate is issued after the lapse of six years from the date of the issue of such duplicate or from the date of the last payment of interest on such securities, whichever date is later; (c) for which a renewed certificate is issued or consolidated or subdivided under this Bill, after the lapse of six years from the date of the issuance. The above provision is new and is intended to ensure that legal actions in respect of matter dealt with under this part of this Act are brought timeously.
Issuance of Debt Securities by Body Corporate and Supranational Bodies
The Act under Sections 301-306 also establishes provisions for the issuance of debt securities by body corporate and supranational bodies. It establishes provisions for; Issuance of Debt securities subject to prior review and approval; mismanagement or diversion of proceeds, administrative sanctions, cessation of office.
Establishment, Jurisdiction, Authority and Procedure of the Investments and Securities Tribunal
The Act also amends the provisions relating to the establishment, composition and jurisdiction of the Investment and Securities Tribunal. Section 312 provides that The Tribunal shall have and exercise jurisdiction throughout the Federation, and for that purpose, the Chairman shall, for administrative purposes, divide the entire Federation into such number of divisions as may be deemed appropriate. The creation of divisions is for ease of operations, each panel being headed by a legal practitioner in line with existing practice.
Section 320 provides for the jurisdiction of the tribunal, it provides thus; the Tribunal shall have exclusive jurisdiction to adjudicate on disputes arising from investments and securities transactions in Nigeria. The Tribunal shall exercise exclusive original jurisdiction, where; the complaint is against a direct action of the Commission; or a matter had been referred to the Commission and the Commission failed to act within sixty days. The Tribunal shall exercise appellate jurisdiction on matters; relating to disputes between- the Commission and any person (individual or corporate) in respect of any capital market matter, capital market operators and securities exchanges or financial market infrastructure, capital market operators and their clients, public companies and the Commission or the securities exchanges or investors, an investor and a securities exchange or financial market infrastructure, capital market operators and self-regulatory organisations, a capital market operator and the Commission, an investor and the Commission, an issuer of securities and the Commission; b. arising from the administration, management and operation of collective investment schemes; c. relating to the review, approval and regulation of mergers, takeovers and restructuring of public companies. The Tribunal shall also exercise jurisdiction on any other matter as may be prescribed by an act of the national assembly.
CONCLUSION
The enactment of the ISA 2025 marks a significant advancement in strengthening investor protection, enhancing market transparency, and fostering sustainable growth. The Act introduces comprehensive reforms that align Nigeria’s capital market with international best practices, reinforcing its credibility on a global scale.
A key achievement of the ISA 2025 is the expansion of the SEC’s regulatory authority to meet the rigorous standards of global financial institutions such as the International Organization of Securities Commissions (IOSCO). This alignment is a critical step in positioning Nigeria as a credible player in international financial markets. Additionally, the Act implements structural reforms and innovations that impact various aspects of the capital market, including securities exchanges, digital asset operators, commodities trading, and systemic risk management.
To enhance market stability during financial distress, the Act incorporates provisions that exempt transactions involving key market infrastructure; such as clearing houses and central counterparties from general insolvency laws. Furthermore, it grants the SEC the authority to proactively monitor and mitigate systemic risks, reducing the likelihood of market disruptions caused by financial shocks.
Finally, the Act strengthens the framework governing the Investments and Securities Tribunal, enhancing its independence and operational efficiency. By amending provisions related to its composition, jurisdiction, and appointment processes, the Act aims to bolster the tribunal’s capacity to resolve capital market disputes expeditiously and uphold investor rights.
These reforms collectively reinforce Nigeria’s capital market, making it more resilient, transparent, and globally competitive.
FRANCIS O. OKOYE ESQ ACIArb (UK)
ASABA, DELTA STATE.
5TH APRIL, 2025
[1] Naujili Nwachukwu, ‘THE ROLE of SECURITIES and EXCHANGE COMMISSION (S.E.C.) in PUBLIC ISSUE of SECURITIES and the STRUCTURE of the NIGERIAN CAPITAL MARKET’ (2013) accessed 1 April 2025.
[2] Nairametrics, ‘Tinubu Signs Investment and Securities Act 2025 into Law’ (Nairametrics29 March 2025) accessed 1 April 2025.
