A REVIEW OF THE INVESTMENT AND SECURITIES ACT 2025: KEY HIGHLIGHTD AND COMPARATIVE ANALYSIS WITH THE INVESTMENT AND SECURITIES ACT 2007

Contributors: 

Elekwe Jennifer Somadina Esq.(Associate)

Sandra Chukwuemeka Esq (Associate)

Kelechi Ugochukwu Esq(Associate Partner)

Introduction

An important turning point in the development of Nigeria’s capital market has been reached as President Bola Ahmed Tinubu signed the Investment and Securities Act 2025 (ISA 2025) into law in the month of march 2025. The Investment and Securities Act of 2007 (ISA 2007) is repealed by this new law, which also makes extensive reforms to improve investor protection, bolster market supervision, and bring Nigeria’s financial markets into line with international best practices.

This article outlines the salient features of ISA 2025, contrasts them with ISA 2007, and identifies the main legislative clauses that underpin these modifications.

Key Reforms Introduced by ISA 2025

• Regulation of Securities Exchanges, Financial Market Infrastructures, and Other Self-Regulatory Organizations

The Investment and Securities Act 2025 lays out a thorough framework for registering and overseeing security exchanges. This is stated under Section 3(3)(d) of the Investment and Securities Act of 2025. It additionally includes specialized rules for establishing and running Financial Market Infrastructures (FMIs) as well as acknowledging Self-regulatory Organizations (SROs) and trade alliances as stipulated under Section 59 of the same Act. New market entities must adhere to the guidelines set forth when seeking permission to function. Simultaneously, existing operations will undergo periodic reviews to ensure ongoing conformity. Though comprehensive, there is room for clarification and expansion on certain technical points to further bolster transparency and standardization across the financial sector.

To promote stability, the Act establishes a clear regulatory framework for entities such as Clearing Houses, Central Counter parties, and Trade Depositories. These entities play a crucial role in ensuring secure and transparent transactions in the capital market.

The Act specifies the roles and responsibilities of these organizations, such as the need for securities exchanges to keep accurate books of accounts, the need for SROs to act in the public interest and safeguard investors, and the requirement that listing rule amendments be approved. (See The Investment and Securities Act of 2025, Part I, Sections 4 and 60.)

The Act also gives the Securities and Exchange Commission (SEC) the authority to review disciplinary actions taken by securities exchanges, issue directives to them, and, in certain situations, revoke their certificates of registration. 

• Recognition and Regulation of Virtual Assets

By this new Act, Cryptocurrencies and other virtual assets are now officially recognized as securities under Nigerian law for the first time.This provided under the definition section of the Act, Section 355 which defines ‘securities’ to include virtual and digital assets This ensures adherence to investor protection standards by placing Digital Asset Operators (DAOPs), Virtual Asset Service Providers (VASPs), and Digital Asset Exchanges under the Securities and Exchange Commission’s (SEC) regulatory supervision.

Since Cryptocurrencies and virtual assets are not specifically covered by ISA 2007, this new provision by the ISA 2025 is definitely an innovative move meant to adjust to the changing financial environment.

• Improved Investor Protection Mechanisms

In Part XIV, Sections 197–222 of ISA 2007, the Investor Protection Fund (IPF) is established, outlining its goals, makeup, and administration. Investor confidence in the capital market is bolstered by the improvements in ISA 2025, which broaden the scope of the IPF to cover losses resulting from the cancellation or revocation of a brokerage firm’s license. Additionally Section 3(4)(u) of the ISA Act 2025 greatly expands the Commission’s authority to safeguard investors. 

The Act also includes safeguards to prevent market abuse, insider dealing and other fraudulent trading practices. (See Section 136 & 138 of the ISA Act 2025).

The definition of “insider dealing” is also expanded and the Act also introduces additional disclosure requirements for insiders. The Act goes further to protect whistle-blowers who provide information on insider trading to SEC.

• Control of New Market Products and Infrastructures

Specific rules for regulating new market infrastructures, such as funding platforms and schemes, alternative trading systems, and derivatives, are introduced by ISA 2025. 

The Act also provides for the registration and regulation of derivative products and the derivatives market as seen under Section 3(3)(I) of the ISA Act 2025.

It also covers the manner in which collective investment plans and private equity are handled under Section 3(3)(g) of the ISA Act 2025.

• Enhanced Measures Against Unlawful Investment Schemes

Operators of Ponzi schemes and other fraudulent investment programs face harsher penalties under the Act. In an effort to protect investors from financial fraud, promoters of such schemes are now subject to fines of up to NGN 5 million, jail sentences of up to 10 years, or both. This is sufficiently dealt with under section 195 of the new Act.

Formerly, ISA 2007 contained provisions aimed at preventing fraudulent activities in the securities market. For instance, Part XI addresses offenses such as false trading and market rigging (Section 105), securities market manipulation (Section 106), and fraudulently inducing persons to deal in securities(Section 108). The introduction of stricter penalties in ISA 2025 for operators of Ponzi schemes and other fraudulent investment programs builds upon these existing provisions to further deter financial fraud.

• Expansion of SEC’s Regulatory Authority

The Securities and Exchange Commission (SEC), whose duties are described in Part II, Section 13, is the highest regulatory body for the Nigerian capital market under ISA 2007. These duties include safeguarding investors, registering and overseeing securities exchanges, and regulating the securities and investment industries. The SEC’s capacity to reduce systemic risks and maintain market stability is improved by the ISA 2025 expansion of its authority to include supervision of financial market infrastructures like clearinghouses and central counter-parties.

The objective of this improvement is to guarantee the stability and integrity of the capital market, protect investors, while reducing systemic risks.

These expanded powers include the authority to:

• Participate in the administration and oversight of public companies and capital market operators. This is found in Section 3(4)(a) of the Investment and Securities Act 2025, which is an expansion of Section 13(V) of the 2007 Act. Its purpose is to give the Commission more authority to step in and protect investors and prevent the collapse of institutions by intervening in the affairs of regulated entities when necessary. 
• Put directors on probation and appoint independent directors. Provided under (Part I Section 3 (4)(b), the Commission now has the authority to designate Independent Directors to temporarily manage a public company’s operations. This authority is required to fully implement the Commission’s intervention in a publicly traded company, particularly when the company’s directors are under investigation or have been suspended. Furthermore, Section 3(4)(c) gives the Commission the authority, under appropriate circumstances, to order directors of publicly traded companies who are either under investigation or have been found guilty of a violation to resign for a predetermined amount of time.
• Remove individuals involved in misconduct or mismanagement (Part I Section 3(4)(d).
• Direct regulated entities, request information, and carry out investigations (Part I Section 4(e).
• Obtain subscriber information, freeze assets, and enter and close down locations that are used for illicit capital market activities. This new provision is contained in Section 3(4)(j) of the ISA Act 2025 giving the Commission the authority to obtain phone, internet, and electronic records, which will greatly aid in its investigation and enforcement efforts.
• Under Section 3(4)(g) of the ISA Act 2025 any outstanding disputes regarding the Commission’s authority to request documents or records from public companies and other regulated entities and to audit their operations have been settled.
• Disqualify unfit individuals from participating in the securities industry. This provision contained in Section 3(4)(o) of the ISA Act 2025, amends Section 13(b) of the ISA 2007 in order to highlight the crucial authority of the commission.
• Promote investor education and innovation in the capital market. This provision contained in Section 3(4)(x) of the ISA Act 2025, highlights the Commission’s current mandate to promote and support innovations that have the potential to quicken the growth of the Nigerian capital market.
• Address the issue of unclaimed dividends, including those of defunct public companies.   

• Reclassification of Securities Exchanges

A classification system for securities exchanges into Composite and Non- Composite Exchanges is introduced by ISA 2025. Sections 28–37 of Part V of ISA 2007 address the registration and regulation of capital trade points and securities exchanges. It does not, however, distinguish between Composite and Non-Composite Exchanges.

Non-Composite exchanges concentrate on particular financial instrument types, whereas Composite exchanges are able to list and trade all kinds of securities and products. By varying the range of activities among exchanges, the reclassification implemented in ISA 2025 seeks to encourage specialization, efficiency and proper accountability within the market.

• Mandatory Use of Legal Entity Identifiers (LEIs)

To improve transparency and traceability, the Act mandates that all market participants Legal Entity Identifiers (LEIs) when engaging in securities transactions. This aligns Nigeria’s capital market with international best practices.

• Establishment of the Investments and Securities Tribunal

ISA 2025 establishes the Investments and Securities Tribunal, which has exclusive jurisdiction to adjudicate disputes arising from investments and securities transactions. (See Section 320(1) of the ISA Act 2025). The Act outlines the composition, functions, and powers of the Tribunal, as well as the procedures for proceedings before it. 

• Corporate Governance and Reporting Requirements 

ISA 2025 emphasizes corporate responsibility and introduces enhanced reporting requirements for public companies. 

The Act further mandates the filing of annual and periodic reports with the SEC, requires public companies to establish internal control systems, and mandates the registration of auditors of public companies with the SEC.

• Greater Access to Capital for Sub-National Entities

Previously, states and government agencies faced legal and regulatory restrictions when trying to raise funds from the capital market. The ISA 2025 provides greater flexibility for sub-national entities to access financing through securities offerings.

• Strengthening the Commodities Market

While ISA 2007 includes provisions related to securities exchanges, it offers limited guidance on commodities exchanges. The establishment of a robust framework for commodities exchanges and warehouse receipts in ISA 2025 is designed to facilitate the trading of commodities contracts, thereby supporting sectors such as agriculture and mining.

The Act aims to support the development of the commodities market and promote sustainable economic growth. (See Section 3(3)(l) of the ISA Act 2025).

Comparative Analysis: ISA 2025 vs. ISA 2007

1. Regulatory Scope

Although it lacked provisions for new financial instruments and technologies, ISA 2007 offered a fundamental framework for the regulation of Nigeria’s capital market. By including rules for virtual assets and digital asset operators, ISA 2025 fills in these gaps and reflects the changing financial market environment.

1. Enforcement and Penalties

Under ISA 2007, penalties for fraudulent activities were less stringent, which may have contributed to the proliferation of Ponzi schemes. ISA 2025 introduces more severe sanctions, including substantial fines and longer prison terms, to deter fraudulent practices and enhance market integrity.

1. Market Infrastructure

While ISA 2007 recognized the importance of market infrastructures, it did not provide a comprehensive regulatory framework for entities like central counter-parties and clearinghouses. ISA 2025 explicitly defines and regulates these infrastructures, aligning with international best standards to ensure a more resilient financial system.

1. Commodities Trading

ISA 2007 had limited provisions for commodities exchanges and warehouse receipts. ISA 2025 introduces detailed regulations to support the development of the commodities market, aiming to diversify the economy and promote sustainable growth.

1. Investor Protection

The investor protection mechanisms in ISA 2007 were foundational but not as expansive. ISA 2025 enhances these protections by broadening the coverage of the IPF and implementing measures to prevent systemic risks, thereby boosting investor confidence.

Conclusion

ISA 2025 represents a significant advancement over ISA 2007, addressing previous shortcomings and introducing reforms that position Nigeria’s capital market for increased competitiveness and resilience in the global financial landscape. By expanding regulatory oversight, strengthening investor protection, and modernizing financial market infrastructure, ISA 2025 paves the way for a more robust and transparent investment environment which sets the tone for a safer capital market landscape in the Nigerian economy.

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